- UK interest rates expected to see a cut after US holds firm
- Alphabet’s search dominance faces fresh questions
- Oil climbs but still sits at depressed levels
- Next delivers its trademark profit upgrade
Matt Britzman, senior equity analyst, Hargreaves Lansdown:
“There’s a fresh sense of optimism in the air, with the FTSE 100 opening 0.3% higher as markets react to the latest trade news. The US and China may finally be sitting down to talk and, closer to home, there’s expected to be a UK-US agreement announced later today. The auto industry will be paying particular attention, given the current 25% auto tariff is a tough pill to swallow. Aside from trade talks, it’s central bank decisions that are dominating the newsreel this week. While the US Fed held things steady, UK rates are expected to see some action, as the combination of a weaker growth outlook and better than expected inflation offers enough wiggle room to cut.
It wasn’t a huge surprise to see US rates unchanged, but it will come as a blow to President Trump, who has been pushing hard for the Fed to abandon its independence and deliver lower rates for Americans. For markets, a stable and independent Fed is a positive, and comments around the risks of both higher inflation and unemployment didn’t do much to upset the apple cart. US markets ended the day in the green, and futures point to a positive open today as investors choose to focus on the potential US-China meeting this weekend – at this stage, any sign of easing tensions is likely to be welcomed.
Alphabet shares slid yesterday in the worst day since October 2023, after fresh signs emerged that Google search might finally be feeling the heat. Apple revealed that search volumes through Safari dropped in April – the first time that’s ever happened – and hinted it may bring AI-powered search to its browser. Despite solid growth last quarter, it’s a fresh signal that Google’s dominance could be under real pressure. Still, the 7.5% selloff feels like an overreaction for a stock already trading at a discounted multiple, especially since search revenue hasn’t missed a beat, even with the rise of ChatGPT. It’s clear Alphabet’s role as the internet’s gatekeeper is starting to fade, but it still has a big opportunity to lead in a larger AI-driven web – it doesn’t need the entire pie to keep growing.
Brent oil climbed back above $61 a barrel on Thursday, helped by a bigger-than-expected drop in U.S. crude stockpiles and hints of a potential supply correction. But despite the rebound, prices are still hovering near multi-year lows, with lingering pressure from weak demand signals, rising gasoline prices, and ongoing U.S.-China trade uncertainty. On top of that, OPEC+ is moving to ramp up production, and the Fed held rates steady while warning that economic uncertainty isn’t going anywhere.”
Aarin Chiekrie, equity analyst, Hargreaves Lansdown:
“Next continues to deliver for investors, with yet another profit upgrade continuing its hot streak. Sales over its first quarter were well ahead of expectations, nearly double the group’s forecasts. In the UK, both online and in-store sales powered higher at mid-single digits. There had been some weakness from in-store sales of late, but it looks like the better weather has convinced shoppers to head to stores to try before they buy. Next remains cautious about the outlook for future footfall, and in-store growth is expected to return to being broadly flat over the rest of the year. Overseas growth was the standout though, growing at an eyewatering pace of nearly 30%. Given the untapped size of these markets, there’s a big opportunity if Next can execute its expansion plans well.
Much of the overperformance over the period has been put down to warmer weather, which has pulled forward demand for summer-weight clothing. Alongside some tough comparable numbers and Next’s expectations that National Insurance increases will begin to weigh on the economy, sales guidance for the rest of the year has been maintained for now.”
