Market report: Markets unfazed as gloves come off in US-China trade war
Derren Nathan, head of equity research, Hargreaves Lansdown: “Hopes of a trade deal between the US and China faded over the weekend with no sign of a last-minute Mexican-style pullback ahead of today’s implementation of Donald Trump’s blanket tariff of 10% on all Chinese made goods. Beijing’s more selective 10-15% levies on energy commodities, agricultural machinery, high=performance cars and agricultural machinery have also come into force. There’s more to come from Washington today, with a 25% charge being slapped on all steel and aluminium imports, with the rump of those currently being purchased from Canada, China and Mexico.
Markets are largely taking unfolding events in their stride. Stocks in China and Hong Kong were up overnight. Perhaps a mixture of trade restrictions not being as bad as they might have been and hope for further Chinese stimulus. The FTSE’s opened flat, while US futures suggest modest gains for stocks when the opening bell rings on Wall Street. Indices both sides of the Atlantic are still close to record highs, despite differing economic trajectories.
Friday’s US non-farm payrolls report saw 143,000 jobs created in January, less than the 170,000 forecast. Solid but steady job growth feeds the soft-landing narrative, but investors will be closely watching Wednesday’s inflation print. US CPI is expected to show annual price rises of 2.9%. Anything softer could raise hopes for further Fed cuts, with only one fall in rates priced in for 2025 currently. Jerome Powell’s showed he’s not easily intimidated, refusing to tow Donald Trump’s more doveish line. He’s already said he’s in no hurry to cut rates and every word of his bi-annual speech to congress, also on Wednesday, will be eagerly scanned for more direction.
Closer to home UK GDP figures aren’t expected to calm stagflation fears. Economists are expecting to hear that January was another lacklustre month for growth, with output in January forecast to be up just 0.1%, which would be a 0.1% contraction for the quarter. Anything worse than this will make very uncomfortable reading for Chancellor Rachel Reeves, with the government’s approval rating at new lows. That’s a stark contrast to the rapturous reception Donald Trump received at yesterday’s Super Bowl.
Taiwan Semiconductor Manufacturing Company expects a small hit to revenues from January’s earthquake, but investors should take heart that full year guidance of growth in the mid-twenties hasn’t been derailed. It’s a quieter week for tech earnings as thoughts turn to AI champion NVIDIA’s results on 26 February, which are expected to show annual revenue and earnings per share more than doubling to $129bn and $2.95 respectively. The outlook will be key, and renewed capex commitments by Meta, Microsoft and Amazon should help put the perceived threat of DeepSeek into context.
Brent Crude has clawed its way back over $75 per barrel, with US sanctions on Iranian exports providing some support. But tariff talk remains a key driver. While direct Chinese penalties are expected to have a limited impact on US producers, Washington’s import-tax on industrial metals could end up being something of an own-goal when it comes to infrastructure investments into steel drill bits and oil rigs.”