U.S. Tightens Trade Measures on China, Escalating Tariff Dispute and E-Commerce Restrictions:

Image Source : Krish Capital Pty Ltd

Index Update: The FTSE 100 index, a key benchmark index for the London stock exchange, went up around 0.19% on 05 February 2025.  

Macro Update:  BP is expected to invest up to $25 billion in redeveloping four Kirkuk oil and gas fields, a significant boost for Iraq’s energy sector, which has struggled with war, corruption, and political instability. If finalized in the coming weeks, this deal could help Iraq regain foreign investment and increase oil production. Meanwhile, Britain's EU negotiator expressed optimism about securing agreements on security, law enforcement, and trade by May, reflecting Prime Minister Keir Starmer's efforts to reset relations with the European Union after years of post-Brexit tensions. In financial markets, British stocks fell for a second consecutive day, with the FTSE 100 closing 0.1% lower after an initial 0.7% decline. However, energy stocks rebounded 0.8% as oil prices rose following reports that U.S. President Donald Trump would speak with Chinese President Xi Jinping, raising hopes for a de-escalation in the ongoing trade war. 

Top Market Movers: Among top gainers on FTSE 100 index, GSK PLC (LSE: GSK) witnessed a rise of 6.05% followed by Fresnillo PLC (LSE: FRES) which gained around 4.94%. 

Commodity Update: On Wednesday, the dollar gave up some of its recent gains as investors perceived increased chances for the Federal Reserve to ease policy later this year, fueling a rally in Treasuries. In the commodities market, gold rose 0.20%, reaching $2,881.10, while silver dipped 0.59% to $32.83, and copper gained 0.05% to $9,182.20. Brent crude fell 0.24% to $76.02, as markets downplayed the impact of China's tariffs on U.S. energy imports. However, President Trump's renewed efforts to curb Iranian crude exports offered some support. Investors await U.S. Non-Farm Payroll data for clearer insights on future rate decision. 

Our Stance: Recent developments have intensified U.S.-China trade tensions, notably the U.S. Postal Service's suspension of parcel deliveries from China and Hong Kong. This action follows President Trump's termination of the "de minimis" exemption, which previously allowed duty-free entry for packages valued under $800—a provision extensively utilized by e-commerce platforms like Shein and Temu. Concurrently, the U.S. has imposed an additional 10% tariff on Chinese goods, prompting China to retaliate with tariffs on select American imports and an antitrust investigation into Google. Amid these trade disputes, China's AI sector has made significant strides, exemplified by DeepSeek's recent advancements, which have bolstered investor confidence in Chinese tech industries. These combined actions have led to market volatility, affecting stock valuations and raising concerns about the future dynamics of U.S.-China trade relations. 

FTSE 100 

The FTSE 100 closed at 8,570.77 on Tuesday, down by 0.12%, forming a bearish candlestick pattern. However, the index remains above the 21-period Simple Moving Average (SMA), indicating a positive short-term outlook. With the 50-period SMA acting as strong support, the potential for upward momentum remains intact. The Relative Strength Index (RSI) is at 61.87, signalling healthy bullish momentum without entering overbought territory, leaving room for further gains. These technical factors suggest continued growth, making the FTSE 100 an attractive option for short-term investors. On the weekly chart, the FTSE 100 gained 2.02%, closing at 8,673.96. The index remains well above the 50-period SMA at 8,186.40, with support at 8,277. Resistance is at 8,700, and a breakout above this level could push the index toward 8,800. However, a drop below 8,020 could signal downside risk. Investors should monitor these levels for insight into future price movements. 

Data Source - Refinitiv