Global stock markets continued their bounce-back last week, rising by just over 3%. Last week’s gain was powered by some strong corporate earnings, with several of the big US technology companies reporting. Both Microsoft and Meta stood by (and increased in the case of Meta!) their commitment to AI spend, which helped the US market rally higher. There were also some strong earnings numbers released for UK companies which we touch on below. This week the focus will be on Central Banks, with the US Fed and the Bank of England both meeting to decide on interest rates.
Last week
- Global stock markets posted a strong week.
- US shares led the way, with US tech rallying on the back of some strong corporate earnings.
- US economic growth was negative for the first quarter: but the devil in the detail was quite positive!
- US monthly jobs data surprised strongly to the upside.
- Bond markets were flat ahead of the Central Bank meetings this week.
This week
- Wednesday night sees the US Federal Reserve finalise their decision on interest rates: we expect them to maintain rates at 4.5% but the press conference will be the interesting bit for markets.
- Thursday sees the Bank of England meet: we expect them to cut interest rates to 4.25%.
- Chinese trade data is released on Friday.
- Disney report on Wednesday along with Costco and then we have Rightmove in the UK reporting on Friday as well as a trading update from Next on Thursday.
| Equities and Oil | Last week (%) | YTD (%) |
|---|---|---|
| WTI Oil | -7.3 | -18.5 |
| Global | 3.3 | -4.3 |
| UK | 2.3 | 5.6 |
| US | 3.2 | -8.5 |
| Japan | 2.8 | -4.4 |
| Europe ex UK | 0.9 | 8.8 |
| Emerging | 1.7 | -2.9 |
| Bonds, Gold and Currencies | Last week (%) | YTD (%) |
|---|---|---|
| Gold | -2.1 | 16.4 |
| Sterling Corporates | 0.3 | 1.7 |
| GBP vs Japanese Yen | 0.6 | -2.3 |
| GBP vs USD | -0.3 | 6.0 |
| UK Government Bonds | -0.1 | 1.9 |
| High Yield | -0.1 | 1.3 |
Source: Bloomberg
More details:
- Global equities rose by 3.3% last week. The US equity market drove most of the gains and within that, technology was the strongest sector. This came on the back of some strong corporate earnings from Microsoft and Meta: these 2 companies alone committed to c $152bn of CAPEX to support AI capacity!
- Fixed Interest markets were pretty flat last week, with UK gilts selling off by 0.1% and UK investment grade credit rising by 0.3%. UK bond markets are pricing in an interest rate cut from the Bank of England this Thursday.
- Last week was a big week for corporate earnings. The broad picture was strong. As always, there were winners and losers. However, a couple of the big US technology companies not only delivered strong earnings’ growth but stood behind their intended spending and investment plans in AI and data centres: this helped the US stock market regain its mojo.
- Pulling out some specifics:
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- Meta posted 37% year-over-year earnings growth and upped their 2025 guidance for capital expenditures to a range of $64bn to $72bn (from $60-$65bn). They beat expectations on revenue and earnings.
- Microsoft also beat on revenue and earnings expectations and issued strong guidance: suggesting sales would be better than expected. They made no change to their planned CAPEX spend this year of $80bn.
- Amazon beat on revenue and earnings expectations, growing earnings at 62% year-over-year but did guide towards slightly lower future revenue than had been expected.
- Companies most closely in the tariff cross hairs lowered their guidance for future sales:
- General Motors posted decent numbers (growing earnings by 6% YoY) but lowered their guidance and actually postponed their results (by 2 days) due to changes to auto tariffs.
- UPS cut their guidance and said they’d cut 20,000 jobs
- Mcdonald’s reported its worst quarterly US 3-month sales job since the height of the pandemic in Q2 2020, saying that middle-income diners were spending less.
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- The general backdrop for US Q1 earnings has been strong and been better than expected. Just over 70% of companies have reported and the blended (YoY) growth rate is 12.8%: this is significantly better than the 7.2% rate that had been expected in end March.
- About 1/3rd of the larger companies in the UK stock market have reported their Q1 earnings. Growth has been mixed, with the oil majors struggling (with a falling oil price) but the Banks, in particular, continuing to post strong numbers:
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- HSBC posted 14% earnings growth and announced a $3bn share buyback:
- Standard Chartered posted 18% earnings growth and said they expect to return at least $8bn to shareholders between 2024 and 2026.
- Natwest posted 30% earnings growth, with the share price hitting its highest level since 2011
- Lloyds (which is up 33% ytd) posted a drop in profits. This was largely driven by a £100m impairment that they’ve set aside for the impact of trade tariffs. The devil within the detail was more upbeat and spoke of a recovering UK economy, with UK home loans rising by £4.8bn in Q1.
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- US growth (if we can call it that!) came in at -0.3% in the first quarter of 2025. At face value, this is not a good number! Whilst we don’t quite side with President Trump’s Chief Trade Adviser (Peter Navarro) who described it as “the best negative print I have ever seen in my life”, this reading is not nearly as bad as its first impression might suggest:
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- The reading was broadly in line with expectations (economists as surveyed by Bloomberg had expected a reading of -0.2%)
- The reading was massively skewed by imports (which contributed a record -4.8% to the total GDP print) as businesses front loaded to avoid tariffs
- Business Investment grew at 22.5% (hardly a sign of panic!)
- Personal Consumption (the biggest long-term kicker for US growth) was strong (growing at 1.8%) and better than expected (1.2% was the expected rate).
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- Hence whilst the US growth number was not brilliant by any stretch, it was certainly as disastrous as might appear at first glance!
- US monthly jobs data was released on Friday and surprised strongly to the upside. 177,000 new jobs were seen to have been created in April: significantly more than the 138,000 that had been forecast (by surveyed Bloomberg economists). The unemployment rate remained at 4.2%. This comes ahead of the Federal Reserve meeting this week where the US Federal Reserve are expected to keep interest rates at 4.5%, with the next cut being priced in at their 30th July meeting.
The value of investments and the income from them can go down as well as up and you could get back less than you invested. Past performance is not a reliable indicator of future performance.
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