Shares lift after week dominated by trade fears

British Prime Minister Theresa May and Donald Trump during the US President's UK visit yesterday

Global stocks advanced after a torrid week dominated by the threat of an escalating trade war between the US and China and political turmoil in Britain over Brexit.

“The week is ending with the Dow on the cusp of 25,000, a Nasdaq at record highs, decent gains for European markets, and no talk of trade wars in sight,” said Chris Beauchamp, senior market adviser at online broker IG.

“That seems like a satisfactory conclusion to five days of political tension and upheaval. In the UK the Prime Minister remains in place, and, far from enduring a deeply embarrassing press conference with President Trump, has actually come away with a reiteration of the importance of the special relationship and some choice quotes about Brexit that she will no doubt use in the chamber next week to good effect,” he said.

In the US, the S&P 500 Index pushed through the 2,800 level to the highest since February’s market correction as investors took solace from an ongoing pause in trade tensions, outweighing a mixed start to earnings season. 

Mr Beauchamp said US bank earnings were not hailed by “a substantial rally”.

US energy and industrial stocks, which had taken the brunt of selling during the ongoing trade spat, led gains on the benchmark. 

Citigroup shares fell after missing expectations, while JPMorgan Chase’s rose after beating estimates. 

Telecoms weighed on the index as AT&T shares slumped after the US Justice Department said it will appeal an antitrust ruling in favour of the company. 

The dollar headed for its largest weekly gain in a month.

“Investors were at least looking at banks to see if there was going to be something disappointing in their earnings that for them they would say trade talks or anything like that are not only pointing to weakness in the overall global economy, but weakness in the US economy, and I don’t think we saw that,” Shawn Cruz, TD Ameritrade’s manager of trader strategy, said. 

But I think we’re going to have to get a little further into earnings season before we get something meaningful one way or the other in terms of investor sentiment.

In London, as sterling reduced its losses, the Ftse’s dollar-earnings constituents such as consumer stocks Diageo, British American Tobacco and Unilever came off highs. BAT and Unilever ended little changed.

Worries over global trade have kept the Ftse trading in a narrow range throughout June and into July, as investors have weighed the implications for global growth and equity markets of tit-for-tat tariffs imposed by the US and China.

For the week, the Ftse rose 0.6%. Traders will feel some relief as the US earnings season gets under way in earnest, allowing attention to pivot away from trade relations. 

The latter seemed to ease somewhat, with officials in Beijing appearing to moderate their responses to Mr Trump’s tariff threats amid a slowing economy, falling stock market and weakening currency.

“The markets began to flatten out as the week wrapped up, the pound recovering some of its early losses as Trump appeared to row back from the aggressive stance taken against Theresa May’s Brexit plans,” said Spreadex analyst Connor Campbell.

Still, China’s monthly trade surplus with the US rose to a record in June and exports to the nation also soared, underlining the cause of the escalating trade war.

Bloomberg, Irish Examiner, and Reuters staff

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