By Sabrina Escobar | Thursday, May 8

Rocket Ship. Stocks jumped Thursday after President Donald Trump announced a trade deal with the U.K. just days before the U.S. is expected to begin negotiations with China. 

The U.K. deal maintains the baseline 10% tariff on imported goods announced in April, but includes a lower tariff for some cars made in the U.K. as well as "billions of dollars of increased market access for American exports," Trump said. 

The deal with the U.K. doesn't provide much tariff relief on its own, but markets rallied on the expectation that this is just one of a series of agreements that will bring down overall tariff levels.

That hope was enough to shift investors to a risk-on mode. The tech-heavy Nasdaq Composite rose 1.1%, the S&P 500 closed 0.6% higher, and the Dow Jones Industrial Average gained 255 points, or 0.6%. Even Bitcoin and other cryptocurrencies rallied (more on that later). 

Trump himself seemed to be egging investors on.

 "You better go out and buy stock now," he said in the Oval Office. "This country will be like a rocket ship that goes straight up. This is going to be numbers that nobody's ever seen before."

But as my colleagues note, "there are good reasons the U.K. deal was the quickest and easiest to complete, and it doesn’t necessarily guide the way for others."

For one, Trump's biggest gripe at the moment is America's trade deficit with other countries, and a deal with the U.K. won't make a big dent in total deficits. The U.S. actually ran a surplus with Britain in the fourth quarter. Plus, the U.K. has some "low-hanging fruit" it can offer as concessions, such as easing restrictions on agricultural imports from the U.S. It's not clear what countries with trade surpluses with the U.S. (such as China, India, and Vietnam) "can put on the table," my Barron's colleagues wrote. 

The negotiations with China -- set to start this weekend -- may prove particularly tricky, and analysts warn investors not to get their hopes up for a dramatic rollback in tariff rates. Veda Partners’ Henrietta Treyz told my colleague Reshma Kapadia that investors' expectations that the meeting could result in a tariff rate as low as 40% was “insanity.”

"More likely," Reshma writes, "the talks could set the stage for a call between Chinese leader Xi Jinping and President Donald Trump that will produce such a pause."

DJIA: +0.62% to 41,368.45
S&P 500: +0.58% to 5,663.94
Nasdaq: +1.07% to 17,928.14

The Hot Stock: Axon Enterprise +14.1%
The Biggest Loser: Match Group -9.6%

Best Sector: Industrials +1.4%
Worst Sector: Healthcare -0.9%

Crypto Bro Summer, Anyone?

Bitcoin prices passed the $100,000 mark for the first time in three months on Thursday, cementing the risk-on attitude that gripped the markets following the U.K. trade deal announcement. 

Bitcoin was up 5.3% on the day and trading at $101,316.57 as of 4:15 this afternoon. Other cryptocurrencies rallied as well. Ethereum was up 18% and XRP gained 7.1%. 

Crytos have had a volatile year. Most surged ahead of Trump's inauguration on hopes the new administration would support pro-crypto policies. (Trump has his own digital currency circulating). But those gains were wiped out in early April following the "Liberation Day" tariff announcements.  As my colleagues, Mackenzie Tatananni and Elsa Ohlen, note:

Cryptos typically respond to macro events in the same way as other risk assets do. They drop when the economic climate sours or during times of increased market uncertainty, and vice versa. High tariffs could hit corporate profits and increase inflation, and the lack of clarity around the size of the levies has made investors nervous.

So it isn't shocking that investors are turning back to crypto now that the appetite for risk has increased. 

The jump in prices was boosting shares of crypto exchanges and companies with large crypto exposure. Robinhood Markets and Coinbase were up 8% and 5%, respectively. MicroStrategy, the largest corporate Bitcoin holder, closed 6% higher. Block, which also holds Bitcoin, was up 4.5%. 

Further bolstering the crypto rally was Coinbase's announcement Thursday that it's acquiring crypto options exchange Deribit for $2.9 billion. Investors seem to like the deal, thinking it could lessen Coinbase's reliance on Bitcoin trading for revenue. 

A Coinbase executive told my colleague Paul La Monica that the deal “complements the record growth" the company has already seen in its own derivatives business.