Global stock markets received the news with a mixed reaction. Ongoing trade negotiations between the United States and China further complicated domestic politics and shaped responses. The three-day increase in the S&P 500 index marked its third consecutive gain. This increase came just after, and likely as a result of, news of a temporary deal between the two countries to suspend tariffs. On the other hand, futures linked to the S&P 500 and other core major indices pointed to a modest dip in early trading.
As a result, the U.S. markets jumped up significantly on the news of the new trade agreement. This agreement attempts to calm the inflammatory rhetoric that has characterized the current U.S.-China relationship in recent months. In August, the Trump administration announced a three-month break from the escalating tit-for-tat tariff dispute. For these reasons, many consider it a significant inflection point in U.S.-China trade and economic relations. Accordingly, S&P 500 futures sank by 0.2% in overnight trading.
In Europe, European stock market futures were showing a more cautious picture of the future. Germany’s DAX index is expected to open around 0.16% lower, while France’s CAC 40 and Italy’s FTSE MIB are predicted to experience similar declines. The UK’s FTSE 100 index is set to open a touch higher this morning. After several peaks and valleys in the overall market, this movement continues its strength and resilience.
The Dow Jones Industrial Average futures were down 173 points, or just under 0.4%. In Asia, Japan’s benchmark Nikkei 225 fell by 0.90%, with the Topix index down 0.75%. South Korea’s Kospi fell 0.29%, adding to the mixed picture being painted by markets around the world.
The recent flood of UK economic data made the picture even more confusing. We may now be seeing the first signs of this turning around, as the country’s GDP grew by 0.7% in Q1 of 2025. This outpacing of growth is incredible! Analysts noted that a major driver of this increase was stronger domestic spending. They underscored how pre-emptive action taken ahead of long holiday weekends made a big difference.
In a research note by Deutsche Bank, analyst Holly Ellyatt remarked on the unexpected growth trend:
“By all accounts, a surprisingly stronger end to 2024 combined with some strength in domestic spending and front-running of trade ahead of Liberation Day will have led to a bigger jump to start the year.” – Deutsche Bank
Ellyatt warned that this increase was not sustainable.
“The bump higher in activity will likely be short lived, however. We expect GDP growth to reverse in the second quarter of 2025, before slowly edging higher through the course of the year – and eventually returning to its trend growth rate in early 2026,” – Holly Ellyatt
Investors are closely monitoring possible shifts in trade policies. Their concerns over this rule’s potential effect on market stability underscores deeper fears about the economy at large.
Markets are responding positively to these changes. FTA analysts are keeping a close eye on signs from the home-front economy, especially continuing developments in international trade relations. Combined with a recent run-up indiscriminately lifting the S&P 500 and other markets that produced a short-time windfall, there are still unknowns that may lead to more ups and downs shortly.
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