Market report: UK labour market weakens, US momentum pushes on
Matt Britzman, senior equity analyst, Hargreaves Lansdown: “UK markets opened higher this morning as the Bank of England has been handed a fresh incentive to cut rates after labour market data showed slowing wages and a rise in unemployment. Markets are pricing in two cuts by the end of the year, with 80% of the first cut coming in August. The fallout from hikes to National Insurance and minimum wages has not been as large as once feared. Yesterday’s inflation print showed some signs of higher prices, but companies look to be cutting back on hiring as their priority.
As US earnings season kicks off, markets remain transfixed by tariff talks and the simmering tension between the White House and Federal Reserve Chair Jerome Powell. President Trump’s televised remarks – denying plans to oust Powell but hinting at reconsideration if DOJ probes uncover fraud in the Fed’s costly headquarters overhaul – stoked fresh uncertainty. Equities battled through a volatile session yesterday but ended the session higher. Inflation data continued to add fuel to the raging debate about whether tariffs are going to materially add to inflation or not, with consumer prices showing early signs of simmering pressure, but wholesale prices are behaving quite well. This momentum-driven US market rally isn’t showing any signs of let-up, with futures pointing to another positive open later today. But given this bull market’s reliance on a few names, a broadening would be welcome to provide longer-term support.
TSMC breezed past expectations to post a record quarterly profit, as the ramping AI buildout continued to fuel demand for its most advanced products. There had been concerns heading into the results that recent tariff drama could lead to a slowdown in demand, but there’s no indication of that in these numbers. TSMC’s dominance as the world’s leading semiconductor factory is underpinned by technology leadership and manufacturing excellence. As the AI buildout continues at pace, TSMC is the one-stop shop for chip designers like NVIDIA, putting it in a prime position to benefit from a once-in-a-generation technological transformation.
Oil prices climbed with Brent approaching $69 per barrel this morning, breaking a three-day decline, fuelled by strong economic data from major oil consumers and easing trade tensions, including the Chinese AI chip ban lift and a new Indonesia trade deal. Despite tariff pressures tempering US optimism and swelling gasoline stocks capping gains, China’s strong second-quarter growth and 8.5% year-on-year crude throughput surge, alongside a 3.9-million-barrel drop in US crude inventories, signal resilience, though tariff risks still loom large.”
Derren Nathan, head of equity research, Hargreaves Lansdown: “easyJet’s underlying pre-tax profits flew 21% higher in the third quarter to £286bn, boosted by strong demand and the timing of the Easter break. But the no-frills airline is running up against some turbulence. The price of jet fuel shot up following military action against Iran, and it’s proving to be stickier than crude oil prices. Meanwhile, the widespread disruption over French airspace due to an air traffic control strike is also weighing on the outlook. These are factors outside of the group’s control, but with the trend towards later booking patterns holding firm, passengers look to be holding out for last-minute bargains. That adds an extra degree of uncertainty around the peak travel period, which falls in the group’s final quarter.”