Market report: FTSE 100 skips Wall Street rally and Burberry slims down
Susannah Streeter, head of money and markets, Hargreaves Lansdown: “Stocks stateside have gone on a run as more trade deals are inked, but the baton hasn’t been passed to the FTSE 100, which is flat in early trade. The more cautious sentiment may partly have been prompted by concerns that interest rates look set to stay higher for longer in the UK. Bank of England policymakers have been striking notes of wariness about the risk that inflation may stay stubbornly above target. Market expectations for further rate cuts this year have cooled off, with only one to two further reductions being priced in. Decision makers are worried that pay growth remains steamy, which could have a knock-on effect on broader price rises. In the three months to March, pay growth including bonuses, came in at 5.5%, above market forecasts. Huw Pill, the chief economist at the Bank of England, voted against cutting rates last week, favouring keeping them unchanged, and other members have stressed they are wary about going too fast.
Burberry has had a checkered past year. The 94% drop in adjusted operating profits and 17% fall in revenues is not a good look, although recent quarters indicate that the brand turnaround is smartening up. The refreshed fashion strategy under CEO, Joshua Shulman, is helping to stem the decline, but patience is wearing thin. The aim is to slim down and take on a leaner silhouette to cope with the uncertainty ahead. The company is focusing on cost efficiencies, with 1,700 jobs set to go globally. It’s hoped the organisational changes will help it find £60 million in savings by 2027, on top of the previously announced £40 million in cost cuts. Burberry is dealing with difficult conditions in the mid-market luxury sector. It doesn’t have the same pull of its ultra-luxe rivals, and aspirational shoppers are more cautious, without the deep pockets of wealth to keep them insulated.
There is a risk of more difficult times to come given that the financial year for the fashion house ended before President Trump’s tariff announcements. Although the most onerous tariffs have been rolled back, consumer confidence in China, which has been the powerhouse for luxury brands, will take time to be restored, which could also slow down Burberry’s progress. Fashionistas elsewhere are also likely to be tightening their expensive belts and may opt to go for second-hand designer items on Vinted, rather than splurging on brand new ranges. Vinted have tripled their profits in the last year, indicating the surging demand for vintage bargains. Second-hand goods have fallen firmly into fashion, as shoppers seek style and tighten their purse strings.
Wall Street has rediscovered its mojo, with fears about recession and higher inflation receding. While the US China trade agreement continues to buoy sentiment, there was cause for fresh celebration with a string of deals struck with Saudi Arabia. While the mega arms sale clinched with Riyadh has taken centre stage, the commitment to buy AI focused products from Nvidia were like catnip for investors. Nvidia will sell more than 18,000 of its high-end Blackwell chips to Saudi AI firm Humain, for a huge data-centre project. It’s a big win for the company which has been trying to expand its customer base around the world. Nvidia’s shares rose by almost 6%, helping lift the Nasdaq and S&P 500 given the weight its huge valuation has on the indices. The S&P 500 has now recovered its losses for 2025. Investors are taking on a glass half full attitude to the trade situation, even though murky sediment remains about the outlook.
Sentiment has also been boosted by the latest inflation numbers, showing a decline in April to 2.3. Nevertheless, even though Trump has rolled back on most of the punishing tariffs imposed on so called Liberation Day, there is still set to be an impact from the higher blanket duties of at least 10% which have been brought in. So, while investors are in an optimistic mood right now, fresh wariness may emerge once new figures land.
Oil prices have stumbled on their gaining streak, with a price of Brent Crude easing to around $66 a barrel. It comes as industry data shows that there was a surprise rise in US stocks last week. Inventories jumped by 4.29 million barrels, the largest rise in six weeks. Nevertheless, crude prices are still largely hanging onto their two-week high, helped by the brighter trade outlook.”