Market report: Trump’s 100 days, Deliveroo deal and Marks and Spencer cyber chaos
Susannah Streeter, head of money and markets, Hargreaves Lansdown: “A mood of cautious optimism is hovering around European markets, despite the uncertainty surrounding US trade policy the effect on the global economy. The FTSE 100 is set to be a little higher in early trade, as the recovery continues from the tariff shock amid hopes that talks will see onerous duties reduced. China has indicated it’s in a more resilient position to deal with fallout, with authorities maintaining that the economy is on track to meet growth forecasts of 5% this year. Expectations are growing for more interest rates cuts from the People’s Bank of China in the coming months, with other stimulus moves also on the table to support consumers and businesses. Hopes that the world’s second largest economy will weather any economic storm have put a little more spring in the step of traders in Asia, with indices largely rising. Brent Crude has headed higher adding to last week’s gains, in the hope that countries will have more appetite for energy if the worst effect of the tariffs don’t materialise.
President Trump is preparing to rally his ‘maga-faithful’ this week as he celebrates his 100 years in office in his second term. The crucial first 100 days of this presidency have notched up some shocking economic scores on the doors of the White House. He’s already presided over an equity market meltdown, a mega bond strop out, and a sharp slide in the dollar. He’s picked trade fights with long-time allies, slapped irrational duties on unpopulated islands, and ratcheted up an economic war with China. He’s stemmed the financial market mayhem only by pausing much of his hugely contentious trade tariffs but despite recovering somewhat valuations on Wall Street have still been hammered as investors have fled from American assets amid the turmoil. US stocks have underperformed the rest of the world this year, with the MSCI USA index losing 11% this year compared to the MSCI All World ex-USA index which has climbed 4% – the widest gap for three decades. The broad based S&P 500 is than 8% lower compared to when he took office, while the tech-heavy Nasdaq has shed more than 12%. Friday’s April jobs report will be closely to establish just how much more cautious employers are becoming about hiring amid this sky-high uncertainty. Its forecast that there will be a steep drop in hirings compared to the robust numbers of 228,000 in March, partly due to the public sector firings that Elon Musk has enacted in the Doge department.
It’s not surprising that glass half empty attitudes are set to return to Wall Street at the start of the week. S&P 500 futures are indicating a fall in early trade. Even though work on multiple bilateral trade deals is continuing and some rapprochement between China and the US is expected, high uncertainty remains. Given the capricious nature of Trump’s policymaking and his determination to spark a renaissance in American manufacturing it seems highly likely that tariffs are here to stay. The hoped for Trump bump for the economy threatens to be a slump, with recession fears swirling and America’s reputation for stability is set to stay under pressure. Big corporates especially tech and financial companies have largely turned in robust earnings reports but as more numbers out this week, warnings are set to continue to mount up about the risks ahead. Companies will want to pass on the costs of tariffs to consumers, but they are likely to baulk at significantly higher prices, especially given they come off the back of years of painful price increases following pandemic supply chain snarl ups and commodity price shocks due to the war in Ukraine.
Deliveroo shares are set to shoot up, as investors assess the implications of a potential take-over offer from the US giant Doordash. Speculation about a potential deal first erupted last year, and although no formal offer has been made, talks are continuing. Deliveroo has said it would be minded to recommend a the offer if it comes through for £1.80 a share. If the deal is done at that price, the company will fail to shake off the ‘Floperoo’ tag it was saddled with after its disastrous IPO debut in 2021. Even though Deliveroo has finally broken through into profitable territory, the prolonged bout of indigestion around its share price has continued. The surge in demand for home deliveries during the pandemic waned just as competition heated up. Deliveroo’s foray into grocery deliveries has helped it turn a profit but it’s still facing fierce rivals. Just Eat which has the biggest share of the market is being gobbled up by the global technology firm Prosus, while Uber Eats is angling for a bigger slice of business. The delivery market is in a era of consolidation with tech giants vying for opportunities right across the consumer focused space with potential to offer groceries, restaurant made meals and financial services in simple clicks.
The Doordash Deliveroo deal will be unappetising for the government which has been trying to boost the number of tech companies listed in London. If Deliveroo is purchased it would join a stream of companies leaving the London Stock Exchange, with too few IPOs in the pipeline to make up the numbers. Even despite the recent volatility hitting Wall Street London, firms have not been immune and UK-listed companies are still undervalued compared to US peers.
The cyber chaos at Marks and Spencer continues into a second week underlining how difficult the breach has been to get a handle on. The hack attack has been so serious that all online orders have been suspended for days now which will be hugely damaging for sales. Marks and Spencer’s recent run of success has been partly down to how it been so efficient at managing its multi-channel operations with click and collect services particularly popular. It’s been reducing its store footprint focusing on smaller food stores where customers can swing buy and pick up products bought online. This ease of shopping and delivery has been upended. Even though stores are open, many simply don’t stock the popular ranges from online. Fashion sales are likely to take a big hit particularly as the attack has come during the spell of warm weather when summer ranges would ordinarily be piling up in virtual baskets. While other retailers have not been immune to IT breaches, the depth of Marks and Spencer’s problems in resolving the issue are worrying, and it may take some time to win back some more warier shoppers.
Gold prices have dropping back sharply to below $3300 an ounce after reaching fresh record highs last week. The slight rise in the dollar after its run of dramatic falls has also put downwards pressure on gold as it makes buying the metal more expensive for holders of other currencies. However, it’s not lost its allure as a safe haven asset given it’s still up more than 26% since the start of the year. Gold’s recent volatility comes on a remarkable anniversary. US exceptionalism is fading 100 years after the UK lost its shine of financial stability and standing. It prompted Winston Churchill exactly a century ago today to return the country to the gold standard, pegging the pound to a specific value of the precious metal. This was abandoned in 1931 as the experiment of fixing the exchange rate proved unsustainable, severely limiting the firepower of central banks to respond to crises.”