Market Report: FTSE on a firm footing against mixed trading in global markets
Derren Nathan, head of equity research, Hargreaves Lansdown: “FTSE 100 futures are pointing slightly upwards this morning, mirroring optimism on continental stock exchanges. European shares are largely holding onto yesterday’s gains, which saw Germany’s DAX reach a record high, with several other European indices closing at levels not seen since just before the Great Financial Crisis. It’s too early to call the end of US exceptionalism but there are signs that investors are looking to diversify. Europe offers some big names in everything from fashion to pharmaceuticals and there’s still some value to be had.
Asian markets had a tougher time overnight held back by weaker than expected Japanese GDP data for the first quarter which in real terms shrank by 0.2%, a worse outcome than markets had expected. Growth was constrained by a 2.3% decline in exports with tariffs expected to hit industrial manufacturers such as the automobile industry.
Chinese conglomerate Alibaba saw a slide in its share price both in Hong Kong and New York. First quarter revenue growth of 7% just missed forecasts, reflecting ongoing competition on its domestic eCommerce operations. Growth is more robust in its cloud intelligence arm, an area where it’s investing hugely in areas such as its QWEN3 models for generative artificial intelligence. However, 18% wasn’t enough to impress the market despite the seventh consecutive quarter of triple digit increases in AI related sales.
US stock futures are trading broadly flat with stocks plateauing after a strong run earlier in the week following the introduction of temporary reductions in tariffs between the US and China. But that wasn’t enough to stop America’s largest retailer Walmart warning customers of forthcoming price rises in its first quarter earnings call. Sales growth of 4% was at the top end of guidance with earnings per share of $0.61 ahead of forecasts. A further 3.5-4.5% sales growth is expected in the second quarter, but the omission of profit guidance reflects uncertainty about its ability to pass on costs to customers.
The inflationary effect of tariffs complicates interest rate decisions which are a constant tug of war between capping price rises and encouraging economic growth. The University of Michigan Consumer Sentiment print for the month is out later today. It’s expected to rise from 52.2 last month to 53.1. Anything significantly higher could dampen the prospects for further US rate cuts this year.
Brent Crude oil prices are stable this morning at around $64.8 per barrel as the benchmark price heads for a weekly gain. Optimism over US-China trade relations is outweighing supply concerns that have emerged from several corners. US crude inventories have notched up a surprise increase, peace talks with Iran could open the taps further and the International Energy Agency has raised its global supply forecast by 380,000 barrels per day, citing output increases from Saudi Arabia and other OPEC+ members.”