Citi(US:C)2025-05-12 03:14Investment Rating - The report does not explicitly provide an investment rating for the industry or companies discussed Core Insights - Risk assets have reacted positively to the initiation of trade talks between the US and China, as well as a preliminary trade deal with the UK, despite the continuation of 10% tariffs with the UK and indications of higher tariffs for other countries [1][4] - Current tariff levels are expected to remain in place, with potential increases after the 90-day pause concludes on July 4th, particularly for China, where tariffs may decrease but remain prohibitively high [5][4] Economic Indicators - The ISM Services Index for April increased to 51.6, surpassing expectations, while the Trade Balance widened to -$140.5 billion in March due to a surge in imports, particularly in pharmaceuticals from the EU [11] - Initial jobless claims fell to 228,000, indicating a steady labor market, which is keeping the Federal Reserve in a wait-and-see mode regarding interest rate adjustments [11] Market Reactions - Equity prices have returned to pre-tariff levels, with expectations that tariffs on imports from China could be cut from 145% to 60%, although imports would still be significantly more expensive [4][5] - The market is pricing in expectations of three interest rate cuts this year, reflecting concerns over economic activity and employment due to elevated tariff rates [13][19]