Daily market update: UK market, US-China trade talks, IAG, Rightmove

“With the UK having basked in trade deal glory yesterday, the spotlight has now turned to China,” says Russ Mould, Investment Director at AJ Bell.

“China is America’s biggest rival in the trade war and any sign of a compromise in their tit-for-tat tariff spat could be taken positively by markets. It would help to settle nerves and dial down uncertainty in the markets, something that could easily put investors back in risk-on mode.

“US-China trade talks are scheduled for this weekend and they could be make or break for the Chinese economy. New data shows that China’s exports went bananas in April as overseas manufacturers raced to stockpile materials from the Asian superpower for fear of tariffs getting out of control.

“Failure to convince Trump to ease back on tariffs would mean China has to lean even harder on domestic consumption to prop up its lofty economic growth goals, and that’s already proved to be a challenge even before Trump returned to the White House.

“Yesterday’s UK-US trade deal happened just before the UK market closed which meant quite a few investors won’t have had time to soak it all in and adjust portfolios accordingly. The FTSE 100 shrugged off the event in the heat of the moment, but advanced 0.4% in early trading on Friday as investors belatedly celebrated the agreement.

“Notably, the FTSE 100 top risers’ list was full of UK-listed stocks that do business in the US, such as retailer JD Sports, rat catcher Rentokil and industrial groups Smiths and Spirax.

“The trade deal was smaller than expected but strategically significant as it puts the UK in the friend zone for the US, a status whose importance shouldn’t be underestimated.”

International Consolidated Airlines (IAG)

“IAG, the owner of British Airways, has emerged as the mystery buyer of Boeing aircraft that seemingly helped to secure a sweet deal for Rolls-Royce to send aircraft engines to the US tariff-free.

“It looks like a classic Trump move: tell Keir Starmer that the UK has to buy American and the country will get something in return.

“Interestingly, IAG’s planes acquired from Boeing won’t feature Rolls-Royce engines, but they will be part of 21 Airbus aircraft that the UK airline operator is also buying as part of a bigger order to strengthen its long-haul fleet.

“The news coincides with IAG’s first quarter results which beat expectations. Is this as good as it gets for the near-term? IAG faces the worrying prospect of a reduction in transatlantic travel as tariffs prompt European and Asian companies to look at ways to become less reliant on the US for trade, and a backlash against Trump makes the US less appealing to foreign tourists.

“There are certainly signs of weakness, with softer booking for economy travel to the US. However, premium bookings appear to be holding up, which is a surprise.

“One might have thought a lot of businesspeople might would be looking to postpone or cancel planned trips to the US. IAG and the market will be watching the booking trends closely, particularly around the all-important summer season.

“If there’s one clear benefit to IAG from Trump returning to the White House, it’s that his policies have helped to drive down the oil price amid fears of a slowdown to global economic growth as result of tariffs. That slashes big bucks off IAG’s fuel bill.”

Rightmove

“There is little sign of increased competitive pressures on Rightmove as it updates on first-quarter trading.

“There were fears that US rival CoStar’s takeover of fellow UK property site OnTheMarket in late 2023 would put the company on the back foot, but those fears have proved unfounded so far. A better backdrop is proving helpful although the company is not increasing its full-year guidance.

“Being the market leader creates a virtuous circle for Rightmove. Its site has the most listings and is therefore the one which prospective property buyers will go to when looking for their next home. This reinforces its position as a must-have product for estate and letting agencies and housing developers and provides it with significant pricing power when it comes to securing subscriptions.

“The company cannot afford to be complacent and is looking to provide more insights to its client base. This strategy is about trying to reinforce its worth to agents and upsell premium packages as it aims to boost the key average revenue per advertiser metric.

“Better market conditions are helpful, with mortgage availability and affordability improving, but Rightmove has held up through previous housing market downturns. In this scenario every sale became even more prized to the client base, so Rightmove’s ability to support this process becomes ever more important.”

These articles are for information purposes only and are not a personal recommendation or advice.