- FTSE stumbles at the open
- Magnificent Seven investors embrace US/China trade agreement
- Sun shines on British retailers with April footfall up 7.2%
- Unemployment up from 4.4% to 4.5% as expected
- Sterling rises from 1 month low against the dollar
- On the Beach results highlight strong holiday demand
- US core Consumer Price Index (CPI) later today – consensus +2.8%
- Brent Crude down a touch to around $64.9 per barrel
Derren Nathan, head of equity research, Hargreaves Lansdown:
“The FTSE 100 hasn’t quite echoed the enthusiasm seen in US and Asian markets for the partial roll-back of tariffs between trading giants the US and China. Asian markets continued to bask in the glow of a less onerous outlook for international trade, following strong gains on Wall Street, where stocks have now all but eradicated losses seen so far this year. The tech bulls were out in force, sending the Nasdaq composite up 4.3% as companies with Chinese exposure such as Apple, Amazon and Tesla rallied strongly. Chip stocks also breathed a sigh of relief, and in aggregate, the magnificent seven gained over $800bn in value, the biggest move in over a month. Conversely, the safe haven of gold gave up 3%.
But with tariff cuts only agreed between Beijing and Washington for 90 days, there’s still scope for further shocks over that time frame. Currently, US stock futures suggest traders may take some profits when markets open. US consumer prices are a key read out later today, with core prices expected to have risen 2.8% in the twelve months to the end of April. If it comes in weaker than expected that may boost hopes that the Fed can resume cutting lending rates.
UK investors have several data points to digest this morning. The British Retail Consortium’s latest figures showed a 7.2% increase in footfall to shopping venues in April. This was boosted both by the favourable timing of Easter and the sunniest April on record. A more meaningful comparison looked at March and April combined. Here the trend still moved in the right direction but to the much smaller tune of 0.2% which is unlikely to offset the impact of higher wages and employers’ National Insurance contributions on profits.
So far, these higher charges haven’t weighed too heavily on the job market, but unemployment has increased to 4.5% in April as expected, from 4.4% previously. There was nothing in the figures to derail expectations of further rate cuts by the Bank of England this year, but policy makers will be keeping a close eye on wage growth which was up 5.5% when including bonuses, hotter than forecasts of 5.2%. That said, Sterling has strengthened slightly this morning after hitting a one-month low against the greenback yesterday, as the dollar strengthened, following the trade agreement between Washington and Beijing.
The currency movements haven’t had too much impact on holidaymakers yet. Online package holiday specialist On the Beach has seen first half volumes rise 13% driving a 23% increase in underlying pre-tax profit to £7.6mn. It’s outperforming a strong market which has seen an increase of 70mn seats from the UK to European destinations including a 5% uplift in airline capacity to beach leisure destinations as UK consumers continue to ringfence funds for a getaway.
Tariff optimism hasn’t been enough to maintain the upward trajectory of Brent Crude oil prices, which are now sitting at around $64.9 per barrel. The loosening supply environment is keeping a lid on momentum, with OPEC+ signalling increased output in May and June and traders evaluating the prospect of lighter sanctions on Iran and Russia.”
For access to stock reports and articles please visit the Hargreaves Lansdown share research homepage or sign up to our updates. Our News & Insights page now provides real time reaction to market events throughout the day via HL Live.
