Markets Rally as Trade Deal with UK Signals Potential Breakthrough with China

U.S. stocks surged Thursday as President Trump announced a landmark trade agreement with the United Kingdom, fueling investor optimism that similar deals could soon follow with other trading partners, including China. The positive market sentiment extended to cryptocurrencies, with Bitcoin breaking above $100,000 for the first time since February.

This market bounce comes after weeks of volatility triggered by Trump’s aggressive tariff policies implemented in early April, which had sent global markets into a tailspin and raised widespread concerns about potential economic damage.

Major Indexes Rise on Trade Optimism

The Dow Jones Industrial Average climbed 284.97 points, or 0.7%, to close at 41,113.97, while the S&P 500 added 0.43% to finish at 5,631.28. The tech-heavy Nasdaq Composite gained 0.27%, ending the day at 17,738.16, according to CNBC.

Disney was a standout performer, with shares jumping nearly 11% after the entertainment giant reported stronger-than-expected fiscal second-quarter earnings and a surprise increase in streaming subscribers. The company’s performance helped boost the Dow’s overall gains.

Market analysts noted that the UK deal, which maintains a 10% baseline tariff on British goods while reducing duties on vehicles from 25% to 10%, has been interpreted as a template for how the administration might approach negotiations with China and other major trading partners.

“This agreement demonstrates the administration’s willingness to compromise and signals a potential shift away from the maximum pressure strategy initially employed,” said Jennifer Moore, chief market strategist at Global Investment Partners. “Investors are betting that similar pragmatism will prevail in upcoming negotiations with Beijing.”

China Tariff Reduction Speculation Boosts Sentiment

Adding to market optimism, Trump suggested on Friday that his administration is considering significantly reducing tariffs on Chinese goods. In a social media post, the president wrote: “80% Tariff on China seems right! Up to Scott B,” referring to Treasury Secretary Scott Bessent.

This would represent a substantial decrease from the current 145% rate imposed on most Chinese imports, which has disrupted global supply chains and threatened to drive up prices for American consumers.

According to sources cited by Yahoo Finance, U.S. negotiators may be targeting even steeper cuts – potentially below 60% – in hopes of securing matching reductions from China. The report suggested that high-level trade talks could begin as soon as this weekend.

Technology stocks, which have been particularly sensitive to U.S.-China trade relations, showed mixed results despite the positive news. Apple gained modestly, while Alphabet shares fell approximately 7% after reports that Apple is exploring AI-powered alternatives to Google’s search engine in Safari.

Bitcoin Surges Past $100,000

Cryptocurrencies joined the rally, with Bitcoin surging above $100,000 for the first time since February. The leading digital currency has rebounded impressively from its April low of around $75,000, which came in the immediate aftermath of Trump’s “Liberation Day” tariff announcements.

“The retaking of $100,000 must go down as one of bitcoin’s more formidable feats,” said Antoni Trenchev, co-founder of digital asset trading platform Nexo. The rapid recovery demonstrates Bitcoin’s growing status as a hedge against economic and geopolitical uncertainty.

Cryptocurrency analysts noted that institutional investors have played a crucial role in Bitcoin’s recovery, with record ETF inflows exceeding $40 billion. BlackRock’s Bitcoin ETF posted its second-largest inflow since its January launch, highlighting sustained institutional appetite despite recent market turbulence.

Federal Reserve Holds Rates Steady

The market’s positive momentum was further supported by Wednesday’s Federal Reserve decision to maintain its benchmark interest rate in the 4.25% to 4.5% range, where it has remained since December. During his post-meeting press conference, Fed Chair Jerome Powell acknowledged the uncertain impact of tariffs on the economy.

“The effects of tariffs remain highly uncertain, but if they are sustained at high levels, the risks of higher inflation and unemployment will rise,” Powell stated. He emphasized that the central bank can afford to be patient before adjusting policy, given the unpredictable trajectory of trade negotiations.

The Fed’s cautious stance has reassured investors worried about potential economic fallout from tariff-induced inflation or growth slowdowns. However, Powell also noted that the central bank remains vigilant about inflationary pressures that could necessitate policy adjustments in the future.

Market Outlook and Challenges Ahead

Despite the positive market reaction, significant challenges remain. Barclays issued a report Thursday maintaining its view that the U.S. is still heading toward recession, with risks increasing as trade tensions persist.

“While we’re seeing encouraging signs from the administration’s trade strategy, the fundamental economic challenges haven’t disappeared,” said Michael Thompson, senior economist at Horizon Research. “Supply chain disruptions already in motion will take months to resolve, and consumer sentiment remains fragile.”

Data released earlier this week from the Institute for Supply Management showed stronger-than-expected service sector activity in April, though company executives reported rising concerns about tariffs. This mixed economic picture suggests that while immediate market sentiment has improved, underlying economic uncertainties remain.

Investors will be closely watching developments in trade negotiations and upcoming economic data releases, particularly next week’s inflation figures, for further clues about the market’s direction.