Markets Hold Steady as US–China Trade Talks Loom and US–UK Deal Fuels Optimism

Muted futures, AI export shifts, and rising oil prices shape a cautious end to the trading week

As global markets close out the week, investors are treading carefully. Optimism stemming from the recent US–UK trade agreement has provided a modest boost, but attention is now shifting squarely to upcoming trade talks between the US and China—arguably the more decisive event for global economic sentiment.

1. US Futures Flat as Investors Digest Trade Deal Buzz

US stock futures were broadly steady on Friday morning, with markets reacting cautiously to the newly announced US–UK trade framework. By 07:38 GMT, Dow futures dipped by 0.1%, while S&P 500 futures gained 0.1%, and Nasdaq 100 futures rose by 0.2%.

Thursday’s positive market sentiment was driven by the UK agreeing to lower tariffs on US imports from 5.1% to 1.8%. Rolls-Royce parts were exempted from tariffs entirely, boosting airline stocks—Delta Air Lines surged 7.2%, while the broader S&P 500 airline index jumped 5.4%.

Boeing shares also climbed following news of a £10 billion aircraft order from the UK. The US dollar strengthened, with analysts pointing to President Trump’s apparent shift towards more market-friendly policies.

2. US–UK Trade Deal: Symbolic Step or Strategic Win?

While President Trump promoted the deal as a major breakthrough, analysts cautioned that the agreement lacks detailed provisions and may be more symbolic than substantive. Still, it’s seen as a promising sign during the 90-day pause on Trump’s broader tariff plan, which imposed levies as high as 50% on goods from multiple countries in April.

The universal 10% US tariff remains in place, and further negotiations will determine if deeper cuts are forthcoming. Economists warn that prolonged trade barriers could trigger a global demand shock, though strong consumer spending and a resilient labour market offer hope.

3. Spotlight Shifts to Crucial US–China Talks

Eyes are now on this weekend’s trade talks in Switzerland between US Treasury Secretary Scott Bessent and Chinese officials. China remains excluded from the tariff pause and is currently subject to US duties of at least 145%, with Beijing retaliating at 125%.

President Trump indicated that he expects “substantive progress” during the Geneva summit, but China has criticised the tariffs as coercive. Chinese leaders insist they are prepared to manage the pressure, though the situation could escalate without a diplomatic breakthrough.

4. Nvidia to Downgrade AI Chips Amid Export Controls

Technology headlines were dominated by reports that Nvidia plans to release a downgraded version of its H20 AI chip in China to comply with tightening US export controls. The reduced-spec chip is expected to bypass licensing requirements imposed by the Trump administration, which aims to limit high-end tech transfers to China.

The move highlights ongoing tensions in the AI and semiconductor space, particularly as the H20 chip plays a crucial role in Chinese AI development.

5. Oil Prices Tick Up as Trade Outlook Improves

Crude oil prices rose on Friday, building on Thursday’s gains. Brent futures climbed 1.2% to $63.60 per barrel, while West Texas Intermediate gained 1.3% to reach $60.69. Both benchmarks had settled nearly 3% higher in the previous session.

Markets are hopeful that the US–UK agreement signals a broader effort by the Trump administration to reduce trade frictions with key oil importers like China and India. However, prices remain close to four-year lows due to ongoing global demand concerns.

Conclusion: Trade Talks Take Centre Stage

The week closes with cautious optimism. The US–UK trade deal, while limited, suggests a thaw in protectionist rhetoric. But the spotlight now turns to the much-anticipated US–China discussions in Geneva.

As trade tensions, tech restrictions, and geopolitical volatility converge, markets remain delicately poised. The next 72 hours could prove pivotal not just for equities and commodities, but for the broader global economic outlook.

Sources: (SKY.com, Investing.com, Reuters)