Lunchtime market roundup: EU-US trade boost stocks; UK inflation cools

European markets found firmer footing on Wednesday as progress on an EU-US trade pact boosted confidence, while softer-than-expected UK inflation data steadied gilts.

The EU reached a deal Wednesday to implement its side of a nearly year-old trade pact with the US, in a major step towards ending a roller-coaster of transatlantic tariff battles with President Donald Trump.

Hailing the ‘good news’, German Chancellor Friedrich Merz said it showed the bloc was ‘delivering on its commitments’ and bringing ‘security and stability’ for European businesses – which faced a new Trump tariff threat unless the deal kicks in by July 4.

Rabobank analysts commented: ‘However, the text now includes a 2029 expiration date (unless both sides agree extension). It also includes a clause that would allow the Commission to suspend the deal if tariffs on products using steel and aluminium surpass 15% after 2026 and a ’pause button’ should the US not keep with its commitments. So let’s see if the US wants to cooperate.’

The FTSE 100 index traded up 11.89 points, 0.1%, at 10,342.44. The FTSE 250 was up 62.31 points, 0.3%, at 22,630.28, but the AIM all-share fell 6.52 points, 0.8%, at 787.10.

The Cboe UK 100 was up 0.1% at 1,028.87, the Cboe UK 250 was up slightly at 19,543.98, and the Cboe small companies edged up 0.1% at 18,477.92.

In Paris, the CAC 40 was up 0.6%, while the DAX 40 in Frankfurt shot up 0.8%.

Negotiators from the EU’s parliament and capitals wrangled late into the night in Strasbourg, finally emerging long after midnight with news of an agreement to move forward.

‘This means we will soon deliver on our part,’ EU chief Ursula von der Leyen said on social media, calling for the implementation process to be quickly finalised as Trump’s deadline looms.

‘Together, we can ensure stable, predictable, balanced, and mutually beneficial transatlantic trade.’

Sterling was largely unmoved at $1.3395 on Wednesday from $1.3396 at the time of the London equities close on Tuesday. Against the euro, it declined to €1.1543 from €1.1549.

The euro was steady at $1.1600 against $1.1598. Against the yen, the dollar fell to JP¥158.99 from JP¥159.14.

A barrel of Brent was lower at $108.22, from $110.72. Gold ebbed to $4,492.51 an ounce from $4,502.96.

UK consumer price inflation was cooler than expected last month, data on Wednesday showed, despite a ‘large increase in motor fuel prices’.

The Office for National Statistics said consumer prices rose 2.8% in April, cooling from a 3.3% surge in March. A loftier rate of 3.0% had been expected for April, according to consensus cited by FXStreet.

The Bank of England has a 2% inflation target.

Consumer prices rose 0.7% in April from March, below expectations of a 0.9% rise.

Lloyds Bank analysts commented: ‘The composition of the data suggests that much of this weakness was driven by volatile and timing-related components rather than a broad-based easing in price pressures. In particular, the sharp fall in services inflation reflected declines in areas such as airfares and package holidays, which are heavily influenced by Easter timing effects and are typically subject to significant month-to-month variability. As in previous years, these categories tend to reverse quickly, suggesting that the April reading is likely to prove a poor signal of underlying momentum.’

The UK 10-year gilt yield cooled to 5.04% on Wednesday afternoon from around 5.13% late Tuesday.

In New York, the Dow Jones Industrial Average is called up 0.2%, the S&P 500 0.4% higher and the Nasdaq Composite up 0.7%. Minutes from the Federal Reserve’s April meeting are out at 1900 BST on Wednesday.

On the corporate front, eyes will be on Nvidia. Shares in the chipmaker, at the heart of an AI craze, are up 2.0% in pre-market dealings. It reports after the closing bell on Wednesday.

‘We expect great earnings from Nvidia again. Demand linked to AI and tech remains extraordinary and the company continues to dominate the most important growth theme in global markets,’ deVere’s Nigel Green commented. ‘However, valuations are becoming harder and harder to justify as bond markets continue to exert pressure on expensive growth stocks. Higher yields change the equation for investors.’

The yield on the US 10-year Treasury narrowed to 4.64% on Wednesday afternoon, from 4.68% at the time of the London equities close on Tuesday. The 30-year yield was at 5.16%, abating from 5.18%. The 30-year yield spiked to 5.20% on Wednesday, the loftiest level since 2007.

In London, Marks & Spencer led the charge on the FTSE 100, rising 4.4%. It reported a sharp fall in annual profit, scarred by disruption from last year’s cyber attack, although the decline was not as marked as forecast.

The London-based clothing, food and homeware retailer said pretax profit dropped 29% to £364.6 million in the 52 weeks to March 28 from £511.8 million the year prior.

Adjusted pretax profit fell 24% to £671.4 million from £881.1 million, but beat Visible Alpha consensus of £640.3 million.

Also supporting the large-cap benchmarks, miners were on the up after successive declines at the start of the week. Anglo American was up 2.1%, while Antofagasta added 2.0%.

In addition to falling on Monday and Tuesday, the duo ended last week with successive slumps also, including an 11% plunge for Anto on Friday, as metal prices came under pressure.

Elsewhere, a move by the Indonesian government put palm oil producers in the spotlight. AEP Plantations was the worst mid-cap, slumped 21%. MP Evans fell 27% and among small-caps, REA Holdings lost 9.4%.

Indonesian President Prabowo Subianto on Wednesday announced commodity export controls to boost tax revenues as the country battles economic headwinds fuelled by the Middle East war. Future sales of all natural resources – starting with crude palm oil, coal and iron-containing alloys – will go through state-owned enterprises appointed by the government, he told parliament.

REA sells its palm oil ‘into the domestic Indonesian market rather than directly into export markets’, so a direct hit will be limited.

‘However, as with any policy affecting Indonesian palm oil trade flows, there could potentially be indirect pricing or market effects, which may be either positive or negative, depending on the eventual implementation details,’ it added.

MP Evans also noted the proposal.

It said: ‘The group’s operations are fully compliant with Indonesian laws and regulations, and it has longstanding relationships with local stakeholders and government authorities. All the group’s output is sold locally in Indonesia, and a significant part of Indonesian production is consumed domestically. Any changes to export mechanisms will not have a direct impact on the group. There may be some indirect impact as prices available for the group’s output adjust to take account of new arrangements.’

Smurfit WestRock rose 0.8% as the packaging firm said it will look to proceed with a London Stock Exchange delisting.

Smurfit WestRock represents the merger of Ireland’s Smurfit Kappa Group and the US’s WestRock Co. The deal was completed in June 2024.

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