Oil Surges Over 3% as US-China Talks Loom

Oil prices jumped more than 3% on Thursday as optimism grew around US-China trade talks scheduled for Saturday in Switzerland. Despite some upbeat sentiment, market reactions were mixed—Japan’s Nikkei climbed 1.5% while Chinese indices, including Hong Kong’s Hang Seng, fell and Wall Street futures stayed flat. The yuan dipped, the dollar hit a one-month high against the euro, and Bitcoin rallied close to $104,000, with analysts predicting a record high soon.

Equities

The FTSE 100 slipped 0.3% on Thursday, giving up some recent gains after 16 consecutive winning sessions. While initial optimism around the new US-UK trade deal lifted sentiment, losses in major healthcare stocks weighed on the index. AstraZeneca fell 3% and GSK dropped 1%, both among the biggest drags on the day.

The weakness came despite the announcement of improved trading terms for key sectors such as automotive, aerospace, and pharmaceuticals. In contrast, Rolls-Royce climbed 4.5% after US Commerce Secretary Howard Lutnick confirmed that its engines and plane parts would be excluded from tariffs under the new agreement.

Sterling edged up 0.1% to $1.33, supported by the Bank of England’s decision to cut rates by 25 basis points to 4.25%. The vote was split three ways, with two members preferring to hold rates, raising some doubts over further near-term cuts. UK government bonds fell, with the two-year gilt yield rising 11 basis points to 3.93%.

In the US, equities rose after the announcement of the UK trade deal and growing anticipation of substantial talks with China over the weekend. The Dow Jones Industrial Average added 0.62%, the S&P 500 rose 0.58%, and the Nasdaq gained 1.07%.

Boeing led the Dow, jumping 3.3% after the UK confirmed a $10 billion order for its aircraft. Airline stocks rallied broadly as the deal removed tariffs on plane parts made by Rolls-Royce, sending Delta Air Lines up 7.2% and the broader S&P 500 passenger airline index 5.4% higher.

Semiconductor stocks rose 1%, building on Wednesday’s gains following news that the Biden administration may revise rules limiting exports of advanced AI chips. However, chip designer Arm fell 6.2% after forecasting lower-than-expected Q1 revenue and profit.

Consumer discretionary, industrials, and energy stocks led the gains in the S&P 500, while healthcare and utilities lagged. The Russell 2000 small-cap index rose 1.9%, its highest close since early April. Trading volumes remained steady, with 16.85 billion shares exchanged—close to the 20-day average. The number of advancing stocks outpaced decliners on both the NYSE and Nasdaq.

Forex & Commodities

The US dollar was on track to end the week stronger against most major currencies on Friday, supported by optimism over the US-UK trade deal and prospects of reduced tariffs ahead of talks with China. The euro touched a one-month low at $1.1197 and was down around 0.6% for the week. Sterling, which had initially gained on reports of a US-UK agreement, slipped to a three-week low of $1.3220 once the limited scope of the deal became clear. The yen also weakened, hitting 146.18 to the dollar at one point—the lowest in a month—before recovering slightly to 145.48. The Australian and New Zealand dollars posted weekly declines of 0.7% and 0.8% respectively. The Taiwan dollar strengthened sharply, gaining more than 6% against the dollar since the end of April, while the Indian rupee was under pressure at 85.55, heading for its steepest weekly fall since 2022 amid rising border tensions with Pakistan.

Gold prices edged up 0.3% to $3,316.29 an ounce after dipping earlier in the session. Traders bought on the dip, despite fading safe-haven demand after the UK trade deal. U.S. gold futures rose 0.5% to $3,321.60. Silver held steady at $32.48, platinum rose 0.5% to $980.55, and palladium added 0.2% to $978.21.

Oil prices inched higher on Friday, with Brent crude up 23 cents at $63.07 and WTI up 21 cents at $60.12. Both benchmarks had climbed nearly 3% the previous day. Traders were watching for signs of progress in the US-China trade meeting scheduled for Saturday in Switzerland.