Market report: Trump trade spat simmers down but US tech spooked by Chinese rivals
Susannah Streeter, head of money and markets, Hargreaves Lansdown: “The FTSE 100 has started the week lacking in Monday motivation. Investors are navigating global trade while a slightly stronger pound compared to recent weeks is holding back multinationals due to the effect on their overseas earnings. The growing challenge of Chinese AI companies is upsetting the tech apple cart in the US, just as a key week of earnings reports gets underway.
Boeing’s woes are continuing to have repercussions for its customers with Ryanair’s capacity one of the casualties. The airline has revised its passenger capacity for the upcoming 2025-26 financial year, estimating that it will carry 4 million fewer customers. But it had already been forced to revise previous guidance so in total Boeing’s troubles have cost a 9 million passenger shortfall compared to initial expectations for the year. Although appetite for low-cost holidays shows little sign of abating, Ryanair’s wings have been clipped and it can’t fly significantly higher on the upstream of demand. The frustration of the boss Michael O’Leary with Boeing is clear to see but he’s also aimed a shot at the UK government and the increase in air passenger duties, by promising to concentrate growth on countries like Poland, Italy and Sweden where duties are being cut or abolished.
Colombia has backed down to President Trump’s demands for the country to take back migrants, and while a retreat from the potential of punishing tariffs is welcome, it is another sign of unpredictable and capricious policy making from the White House. The fluctuations in foreign exchange rates, as traders navigate the ups and downs of threats and then climbdowns over tariffs, is set to be an ‘uncertainty tax’ weighing on corporates. The uncertainty about future US policy and the impact on the global economy is also weighing on oil prices, with Brent Crude falling to trade around $78 a barrel. Amid the trade noise, investors are keenly awaiting the latest Federal Reserve decision on interest rates. A decision to hold rate looks like a slam dunk, but any signs of extra caution may cause fresh jitters among traders who have already sharply dialled back rate cut expectations this year.
There’s a lot riding on this week’s earnings reports for big tech, with updates due from Meta, Microsoft, Apple and Tesla. There’s a lot of upside already sewn into expectations, which leaves plenty of room for disappointment. The S&P 500 is set to start the week with a case of the jitters, as investors assess the threat from Chinese AI startups. The small Chinese research and engineering firm DeepSeek’s AI Chatbot has proved so popular it jumped into the top spot on US iOS App, usurping Open AI’s ChatGPT. DeepSeek threatens to spook big tech and has already sent shivers through Silicon Valley by releasing details about how to build large language models more cheaply using low-cost Chinese chips. While they don’t offer the cutting-edge tech of Nvidia’s graphics processing units, the efficacy of the budget version and the willingness of DeepSeek to share its know-how may start to chip away at Nvidia’s dominance. DeepSeek has access to deep wells of Chinese data and has deep pockets. It’s funded by hedge fund manager Liang Wenfeng and is believed to be on the hunt for the best AI talent. While Nvidia latest chips are still far superior in terms of performance, with cheaper rivals making progress, there is likely to be a knock-on effect globally, with competing US and Chinese spheres of AI influence set to emerge.’’