London Quick Take - 28 April

Key Notes:

• FTSE rally continues with investors looking to UK results this week from the large caps including BP, Shell, AstraZeneca, HSBC 
• Big tech earnings on deck with Apple, Amazon, Meta and Microsoft to report
• Deliveroo shares jump on takeover approach
• Canadian's elections, plus US GDP and Nonfarm Payrolls on deck this week

The FTSE 100 rose early on Monday as the positive momentum from its 10-session winning streak continued to cover up for ongoing trade uncertainty and the UK's own fiscal position, which could well see more tax hikes by the year's end. Key UK earnings updates are scheduled this week from the likes of BP, HSBC, AstraZeneca and Shell. These large caps have the potential to move the market. European markets were also higher with the DAX and CAC both firming up after a decent session in Asia and Wall Street closed the week with another strong -tech-led rally on Friday. Key earnings from 4 of the Mag 7 are on deck this week - these will be pivotal for the market's next move. Tariff impacts, cloud & AI spend and ad revenues will be the main things to watch from Apple, Amazon, Microsoft and Meta.

Gap almost filled – the S&P 500 finished the week at 5,525, right in the gap from the liberation day event. The Vix is back below 25. Markets are taking a very short-term view of the trade situation and seem to assume the narrative that Trump blinked. This is simply not the case. I refer you to the important speech by Treasury Secretary Scott Bessent last week, in which he made it’s abundantly clear that tariffs are just one – albeit big – weapon being deployed to completely remake the world economic order. The value of dollar, he said, was not about the daily price on a Bloomberg terminal.  

Markets appear way too complacent at this stage – tariffs are on pause, not cancelled. Markets are behaving like the latter. Certainly the direction of travel can be ascertained ‘at the moment’, but we don’t what happens next. Because this is not a game of chicken that Trump is losing right now.  

If the status quo is not sustainable, don’t expect Trump to stop just because of some market action. He will press on until there is systemic risk popping up. And for traders and investors be warned – the conditions that existed to create such wild swings in equity markets have only been reinforced by the rally. 

How can we be back at this point already? We’re not even through earnings season and have no idea how bad the impact of tariffs will be. The market is conditions to buy the dip and expect the Fed to ride to the rescue. Certainly, on that front, we had Fed governor Waller indicate the reaction to stagflation would be to err on the side of the labour market and cut. 

America, stupid 

 "It's the economy, stupid." That was Bill Clinton’s campaign manager James Carville on what matters most in an election. Well now we can say it’s Trump, stupid. The only show in town is what’s going on in Washington. 

“The bond market was getting the yips, but I wasn’t.”

That was what Donald Trump said to Time. His rowing back on tariffs arguably says otherwise.  

Trump started the week ready to fire Fed chair Jay Powell, calling him a moron, but ended it saying he’s not replacing the central banker he appointed. 

Rhetoric around trade and tariffs noticeably softened over the week. “They had a meeting this morning ... It doesn’t matter who ‘they’ is… we’ve been meeting with China,” said Trump. 

Tariffs, said the president on Friday, are “a tremendous success, you just don’t know it yet.” He also said he’d done 200 trade deals. Beijing told him to stop confusing things.  

Bessent seemed to contradict Trump again on Sunday...it's the new normal and the market has settled down a bit as investors have become accustomed to more noise.

Perfect 10 

The FTSE notched 10 straight winning days, its best run since 2019.From its April 9th closing price of 7,679.48, the blue chips have added about 760pts or so, or about 10%. 

The index was oversold and has benefitted from a broad relief rally of sorts from the depths of the post 'liberation day' tariff news. The news flow on tariffs has been incrementally more positive, while the Fed has hinted at being ready to cut rates in the coming months. 

But it's also the case that the FTSE has a lot of defensive characteristics - we've noted earlier that there are plenty of stocks with hefty dividend yields that can be viewed as a place of relative shelter from instability and volatile markets. It should be noted that when markets are stressed, capital preservation becomes even more important and some big dividend payers could be attractive. 

The relative shelter from volatility is highlighted by the fact that in the period since April 9th, while the FTSE has made slow and steady progress, the S&P 500 has seen one daily decline of almost 3.5%, and two more in excess of 2%. The FTSE 100 may be like an old blanket that you can wrap yourself in when times are tough and the shiny stuff breaks.  

It may also be that the UK is benefiting from a broad reallocation of global capital from the US to elsewhere. It's noteworthy that in the same two-week period from April 9th closing low, sterling has gained about 4.5% against the dollar. In dollar terms the FTSE is up about 15% since the lows after recovered its pre-liberation day equilibrium. Some calm has returned to equity markets - it won't last. 

Deliveroo Jumps on Takeover Approach 

DoorDash offered to buy Deliveroo for $3.6bn (£2.7bn). Shares jumped 16% to 170p after it offered 180p. Deliveroo said it was “minded to recommend such an offer to Deliveroo shareholders”. The market clearly sees some doubt about whether this will wash. Anyone who got in on the IPO is still underwater. But it’s started to turn a profit and could benefit from DoorDash scale.  

Madrid, not Miami 

BofA noted the remarkable flip from “US exceptionalism” hubris to “US repudiation”, with 304 stocks in the S&P 500, and 58 in Nasdaq 100 now trading below their 2021-22 highs. Spanish stocks are up 25% year to date in US dollar terms. It shows “reallocation of global capital from US” has begun, “e.g. Latin American capital now heading to Madrid not Miami”. Or London not Long Island?

Fed Pivot Begins 

The Fed seems to be moving towards a pivot in favour of looser policy. Governor Waller said: “I would expect more rate cuts, and sooner, once I started seeing some serious deterioration in the labour market”. He indicated the hard data wouldn’t show up until July. Cleveland Fed chief Beth Hammack said even earlier: “If we have clear and convincing data by June, then I think you’ll see the committee move.” 

Earnings Were Mixed

Tesla earnings were a total car crash but bulls were buoyed by Elon Musk saying he’s quitting DOGE to focus on the EV maker once more. Alphabet earnings beat expectations, boosting tech. Intel reported better than expected earnings but warned it was due to stockpiling ahead of tariffs and served up weak guidance. Faced with huge uncertainty, American Airlines withdrew guidance. Industrial tech bellwether Texas Instruments raised guidance.  

S&P 500 Triggered Rare Signal 

The Zweig Market Breadth Thrust was triggered. According to Carson Group’s Ryan Dettrick this is only the 18th time it’s been triggered. Of the 17 prior times it’s happened the average forward 6- and 12-month returns for the S&P 500 are 15.3% and 24%. 

What to Watch This Week

Huge week for US earnings – big tech and industrial/consumer bellwethers aplenty. Stay sharp. 

Tuesday: Coco-Cola (KO), General Motors (GM), Pfizer (PFE), Spotify (SPOT), Snap (SNAP), Starbucks (SBUX) 

Wednesday: Caterpillar (CAT), Meta Platforms (META), Microsoft (MSFT), Qualcomm (QCOM) 

Thursday: Eli Lilly (LLY), McDonald’s (MCD), Moderna (MRNA), Airbnb (ABNB), Amazon (AMZN), Apple (AAPL), Coinbase (COIN), Strategy (MSTR) 

Friday: Chevron (CVX), Exxon Mobil (XOM) - also Nonfarm payrolls will be important for broader market sentiment.

UK earnings also feature some big hitters 

Tuesday: AstraZeneca, BP, HSBC 

Wednesday: GSK, Taylor Wimpey, Next  

Thursday: Lloyds Banking Group, Persimmon, Endeavour Mining 

Friday: Shell, Standard Chartered