FTSE 100 at record high after trade war truce, but pound hits 2018 low - as it happened

UK stock market hits new peak after US Treasury secretary Mnuchin says the trade war with China is 'on hold'

• Latest: FTSE 100 has jumped through 7,800 points
• But the pound has hit a near six-month low
• Introduction: America and China reach consensus on trade
• Breakthough means tariffs won't be imposed
• Experts: This peace may not last

5.27pm BST

The US-China trade truce has given a lift to stock markets at the start of the new trading week. Helped by a weaker pound, the FTSE 100 has hit a new peak, while most European markets managed to move higher.

A notable exception was Italy, where investors are growing increasingly concerned about the new coalition's plans for borrowing and its attitude to the rest of the European Union. Italian bond yields rose sharply and the stock market fell back. Dan Smith, investment analyst at Thomas Miller Investment, said:

The Five Star Movement (5SM) and Lega progression in forming a coalition government has increased the level of political risk in Italy, particularly as both parties are interested in relaxing fiscal policy (government spending and taxes) - a result which will raise tensions between Italy and European institutions and raise question marks over the country's commitment to the European Union.

In #Italy, #FiveStarMovement and #Lega meet president to get go-ahead for populist government. Coalition backed off some controversial proposals but still on collision course with EU. With an ''Italy first'' agenda, Trumpism has arrived in Europe: https://t.co/IGrgs9Hdhi pic.twitter.com/2S2ls2k6r2

4.38pm BST

The FTSE 100 has finished at 7859.17, up 1.03% and a new record closing high. Earlier in the day it touched a new all time intra-day peak of 7868, on relief that the chances of a trade war between the US and China seemed to have receded. A weaker pound also helped, of course.

4.11pm BST

Companies dealing with China are among the gainers in the FTSE 100, not surprisingly. Chris Beauchamp, chief market analyst at IG, said:

The US-China news has been excellent for the stock of Burberry and AstraZeneca, both firms with key operations in China. The fear stalking such companies has been that any wider spat between Beijing and Washington will take a chunk out of economic growth in the former. Now, fears of a hit to middle-class incomes and GDP growth have been reduced, and we have seen six-month highs in the former and an eleven-month peak in the latter. Throw in further declines for the pound and further upside looks likely.

3.46pm BST

Corn prices have hit a two year high following the cooling of the trade dispute. Jasper Lawler, head of research at London Capital Group, said:

The prospect of more US agricultural exports to China if the communist country agrees to open up its markets helped corn prices hit a two-year high. Corn is already in a price-supportive environment of supply shortages in China, Brazil and Argentina, which make up a third of global production.

3.34pm BST

The FTSE 100 could breach the 8000 barrier soon after its boost from the US-China trade news, depending on this week's economic news. Connor Campbell, financial analyst at Spreadex, said:

Investors seemingly haven't been put off by the general lack of specifics surrounding what was actually agreed between the US and China, crucial details like the extent to which America's deficit with its rival will be reduced by and how this new trading 'framework' will be implemented. It helps that there has been little in the way of data or other economic news to challenge these developments for headline-dominance, allowing the markets to indulge in a bit of bullishness.

That bullishness arguably most benefited the FTSE, which piggybacked on this wave of market-relief, alongside the pound's politically fragile Brexit problems, all the way to a fresh record peak. Crossing 7850 for the first time in its history following a 1% surge, the FTSE now has 8000 in its sights - and with a pair of much-anticipated inflation and GDP readings on Wednesday and Friday respectively, the index could just get the boost it needs if sterling is dealt another dovish blow.

3.23pm BST

Here's the AP report on the latest trade developments:

President Donald Trump on Monday hailed his administration's temporary truce with China on trade, even as his Treasury secretary and China struck a note of caution on the latest agreement.

After high-level talks in Washington last week, Beijing has agreed to "substantially reduce" America's trade deficit with China.

2.44pm BST

The trade talks truce has given a lift to US markets, along with a spate of acquisition activity.

The Dow Jones Industrial Average has added more than 1% to 25,016, while the S&P 500 opened 0.59% higher and the Nasdaq Composite rose 0.7%.

2.06pm BST

Time for a summary, before the opening of Wall Street...

1.55pm BST

Steven Mnuchin has also predicted there will be "a 35 to 40% increase" in exports of US farm products to China in the near future.

Here's a clip of the Treasury secretary speaking to reporters:

.@stevenmnuchin1 on China agreement: "This is not a government to government purchase order but we have an agreement with them as to what will be executed." pic.twitter.com/6lqk5Xumb2

1.31pm BST

US treasury secretary Steven Mnuchin on CNBC now.

Mnuchin says the US and China made "meaningful progress" during this month's trade talks.

US Tsy Sec. Mnuchin: Could Boost Energy Exports To China Under Agreement - CNBC

"They've been suspended," says Sec. Mnuchin on @CNBC about potential China tariffs and investment restrictions, which could have been put into effect as soon as tomorrow.

1.09pm BST

Despite Donald Trump's optimism, we really don't have much detail about exactly how China will help to cut the US trade deficit.

The agreement reached last weekend states that China will buy more US goods to achieve a "meaningful increases in United States agriculture and energy exports".

"Any expectation of a fundamental settlement of the disputes between the both sides would be unrealistic.

The political and economic relationship between China and the U.S. has changed dramatically in the last few years."

Get ready for annual U.S.-China trade wars, Credit Suisse says https://t.co/PyiAgh4AMH pic.twitter.com/8orlmBnZq2

12.39pm BST

President Trump is also welcoming the agreement with China - saying it will help US exporters such as farmers.

China has agreed to buy massive amounts of ADDITIONAL Farm/Agricultural Products - would be one of the best things to happen to our farmers in many years!

On China, Barriers and Tariffs to come down for first time.

12.28pm BST

President Trump has just tweeted:

I ask Senator Chuck Schumer, why didn't President Obama & the Democrats do something about Trade with China, including Theft of Intellectual Property etc.? They did NOTHING! With that being said, Chuck & I have long agreed on this issue! Fair Trade, plus, with China will happen!

11.58am BST

Today's rally means the FTSE 100 has now gained over 900 points, or 13%, since late March.

Good news for anyone who had the foresight to buy equities then, in the face of worries over a trade war.

11.26am BST

American farmers are waking up to some good news - soybean and grain prices are up, thanks to the trade war truce.

11.03am BST

Trade tariffs are a blunt weapon that can cause self-inflicted pain, as Paul Donovan of Swiss bank UBS explains:

China and the US have agreed not to increase taxes on their own consumers by avoiding tariffs for now.

The agreement at the conclusion of trade talks was suspiciously light on details. The overall US trade deficit is likely to grow this year.

10.41am BST

The Chinese government has welcomed America's decision to row back from a trade war.

"China has never hoped for any tensions between China and the United States, in the trade or other arenas.".

9.59am BST

Here's Neil Wilson of Markets.com on today's stock market rally:

"The FTSE 100 notched up a fresh record high, rising clear of 7800 for the first time as the feel-good factor from the trade war truce bolstered risk sentiment and a weaker pound delivered the usual shot of adrenalin for the blue chips.

It looks like progress on talks between China and the US means we are not about to descend into a punitive trade war. Whilst there is still long way to go and nothing is agreed until everything is agreed, there has undoubtedly been solid progress and the sense of relief in equity markets is palpable.

Emerging currencies are getting destroyed.#Lira 4.56 per $ pic.twitter.com/puay40It2M

9.48am BST

The weaker pound is driving shares in London to fresh record peaks.

The general positive sentiment reflects the decline of worries of a possible trade war between the U.S. and China, following weekend developments.

9.33am BST

Bloomberg says the British pound is suffering from Brexit angst and signs that UK growth has slowed.

The main thing investors are waiting for is to see whether the latest economic figures show any upturn, after a sluggish first three months of the year when the Beast from the East snowstorm swept across the country. That could push higher the odds of an interest-rate increase as early as August by the Bank of England.....

Aside from the date, the U.K. will go into the next round of Brexit talks this week against a backdrop of euro-zone turmoil as Italy's populist coalition pushes ahead with an agenda that's at odds with the European Union establishment.

Pound sets new low for 2018 against dollar https://t.co/jTN2M9SwDD pic.twitter.com/Xm7EvMjqog

9.06am BST

The pound has hit its lowest level since the start of the year.

While traders aren't worrying about trade wars, they are getting jittery about Brexit again.

This backstop has been one of the sticking points in talks with the EU27 and some in Westminster believe it could become the post-Brexit norm if Brussels accepts the UK's proposal.

But Johnson insisted: "Brexiters fearing betrayal over the customs backstop must understand that the PM has been very clear that it is not an outcome we desire; we want a deal with the EU and she will deliver it."

Related: Boris Johnson: we want a deal with the EU, not a customs backstop

8.43am BST

Metal prices are also getting a small lift this morning.

Reuters has the details:

Copper edged higher on Monday after China and the United States put their trade row "on hold", easing concerns that the dispute could escalate, although headwinds from a stronger dollar capped further gains.

"It appears that America and China have moved towards a trade deal, which will mean the expansion of U.S. goods purchased by China, and thus, avoiding the prospect of an out-and-out trade war," said Kingdom Futures in a report.

8.35am BST

The FTSE is continuing to climb to fresh record levels, putting 8,000 points in its sights (I don't think we'll get there today, though!).

Connor Campbell of City firm SpreadEx says:

After intermittently fretting over signs that hostile relations were heating back up between the US and China last week, Treasury Secretary Steven Mnuchin's claim on Sunday that a trade war was 'on hold' has sent a - cautious - wave of relief through the market.

8.29am BST

The US dollar has hit its highest level in five months, against a basket of other currencies.

That's another sign that traders are comforted that the US and China have frozen tariffs on a swathe of exports - something that could have hurt the American economy.

8.17am BST

Hussein Sayed, chief market strategist at FXTM, reminds us that America and China haven't actually hammered out a full agreement on trade yet.

Sayed points out that details of the truce remain vague.

This was the second round of trade negotiations without clearly defined targets, suggesting that there's still a long way to go.

Today, a trade war may have been averted, but according to the joint statement from both countries, nothing is being guaranteed apart from China promising to increase American imports

8.06am BST

Boom! The UK's FTSE 100 index has burst to a new-alltime high this morning.

The Footsie gained 35 points, or 0.45%, to 7814 points for the first time ever.

7.53am BST

Although there's relief that the US and China have stepped back from a trade war, analysts are also cautious.

Tai Hui, chief market strategist for Asia Pacific at JP Morgan, predicts further clashes between the two sides:

Historical precedents suggest the U.S. could re-engage with China on trade issues if it sees China dragging its feet on fulfilling its pledges. Moreover, the last three months have further exposed Washington's concerns over China's advancement in technology and its threat as a competitor, both commercially and strategically.

It's like a back pain that never goes away. It was a shock in the first instance it happened, but then life goes on as the most acute symptoms are addressed. The good news is that markets should learn to live with it and consider its impact more rationally."

"The fundamental differences on trade and other economic issues remain unresolved."

The undeclared "trade war" between US and China has been put on hold according to US Treasury Secretary Mnuchin as the two superpowers agree on a economic truce.

This development puts the planned tariffs on hold while the two countries work on a plan to re-balance their trade relations and dampens the geopolitical risk.

7.36am BST

Britain's blue-chip share index of top shares is likely to smash through 7,800 points for the first time ever today.

City traders are predicting a rally in London, thanks to the new spirit of detente between the US and China over trade.

US and China stepping back from the brink of a trade war has lifted sentiment, boosting equity indices, putting the FTSE on track for a fresh record high.

Asian equities have bounced and Europe points to a higher start, as Trump's administration halts plans to impose trade tariffs on China, whilst China promises to significantly increase its purchase of US farm exports and energy.

7.09am BST

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

It's going to be a positive start to the marketss after U.S. Treasury Secretary Steven Mnuchin declared the U.S. trade war with China "on hold" following an agreement to drop their tariff threats that had roiled global markets this year: https://t.co/kwwvvVNoZp pic.twitter.com/kLyqeHdaLZ

"We're putting the trade war on hold, right now, we have agreed to put the tariffs on hold while we try to execute the framework."

Related: US and China put trade war 'on hold'

Morning all!

- Asian equity markets traded mostly positive with sentiment underpinned following the conclusion of the 2nd round of US-China trade talks

- China agreed to purchase more goods to avoid a trade war. Mnuchin announced that tariffs on China would be placed on hold as discussions progress

Concerns about an escalation in tensions between China and the US appear to have been deferred in the short term after progress in trade talks at the weekend.