Daily market update: Canada trade drama, Trump bill, Shein IPO, WH Smith

“There is a lot going on to influence markets before the summer lull and investors’ animal spirits continue to fuel the equities space,” says Dan Coatsworth, Investment Analyst at AJ Bell.

“Investors seem confident trade deals will be struck, geopolitical tensions ease, and a major economic slump is avoided. The big unknown is whether investors are correct or are simply being too complacent.

“Following yet another bust-up between the US and Canada, the latter has now scrapped its digital services tax aimed at US tech firms and resumed trade talks. This has brought a sense of calm to markets, also helped by an extended deadline for negotiations whereby Canada has an extra week and a bit to agree a trade deal. It also provides some hope that other countries will get extra time to deal with the Trump administration beyond the 9 July cut-off.

“The US Senate is voting on amendments to Trump’s ‘big, beautiful bill’ aimed at lowering taxes, cutting social spending and increasing federal debt. While corporates might welcome lower taxes and certain industry sectors lap up extra spending such as those who work in defence and security, bond markets will be watching the country’s already sky-high debt levels like a hawk.

“Futures prices imply another robust session for Wall Street when it opens later today, with the S&P 500 indicated to open 0.4% ahead.

“The FTSE 100 was flat in early trading. Investors were tempted back to previously strong areas of the market such as defence and utilities, while pharmaceuticals were out of favour.”

Shein

“Most IPOs take six months from agreement in the board room to admit shares to public exchange to doing all the paperwork, marketing and ringing the bell on the first day of trading. Shein is the exception as it has been talking about an IPO for three years.

“A US listing was the first port of call and that didn’t work out; London was next on the list and that also failed to go smoothly. Both IPO attempts were surrounded by regulatory and political concerns. We’re now looking at Hong Kong for its stock market debut, if speculation proves correct.

“Reports suggest Shein is about to file a draft prospectus in Hong Kong and that document should provide important insight into how the business works and associated risks.

“One of the biggest hurdles for potential investors is feeling comfortable about Shein’s supply chain amid accusations that its rock-bottom prices imply widespread use of cheap labour. Investors will want reassurance that the supply chain doesn’t involve a workforce that is being exploited.”

WH Smith

“The buyer of WH Smith’s UK high street business has struck an eleventh-hour deal to get the deal price down.

“WH Smith was previously expecting £52 million from the sale, now it’s getting up to £40 million after Modella demanded a lower price to reflect softer trading conditions and a more cautious outlook.

“It’s a cheeky move, but WH Smith didn’t have a strong case to fight its corner given there wasn’t a long queue of other parties hoping to buy the assets. WH Smith could have risked the deal falling apart completely if it didn’t accept less.

“Ultimately, the money is peanuts to WH Smith and it’s probably happy to wash its hands of the business at any price. Strategically it doesn’t fit with the group’s vision of being a pureplay travel retailer.”

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

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