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The FTSE 100 index climbed 0.51% on Friday to close at 8,213.49 points, while the FTSE 250 saw gains of 0.56% to 20,164.54 points.
In the UK, financials are providing a reliable source of gains, coming off the back of a period that saw the likes of HSBC and Standard Chartered capitalise on elevated interest rates.
Anglo American jumped 2.63% following reports that Glencore was considering a bid for the mining company, subsequent to its rejection of a £31bn proposal from BHP.
Diageo saw a marginal increase of 0.02% after announcing the appointment of Nik Jhangiani, former head of finance atCoca-Cola Europacific Partners, as its new chief financial officer.
Trainline leapt 6.58%, driven by better-than-expected revenue and a significant rise in annual sales and profits.
That growth was attributed to increased competition for passengers in Spain and Italy and a higher adoption of digital tickets in the UK.
Similarly, packaging firm Mondi saw a modest increase of 0.61% following a positive first-quarter trading update.
Aston Martin Lagonda experienced a notable 10.14%rebound, two days after disappointing first-quarter results.
On the downside, InterContinental HotelsGroup declined 2.49% after it reported a significant slowdown in revenue per available room growth in the first quarter, particularly impacted by weakness in the Americas and a slowdown in China.
British Land exhibited strength, rising by 2.54%,despite being downgraded to 'equal weight' from 'overweight' by Barclays.
In Europe
In Europe, the STOXX Europe 600 Index ended the week slightly lower. Investors appeared to become more cautious amid mixed corporate earnings and uncertainty surrounding the outlook for interest rates after June.Major stock indexes were mixed. Germany’s DAX weakened 0.88%, France’s CAC 40Index lost 1.62%, and Italy’s FTSE MIB declined 1.81%.
Eurozone gross domestic product surprised to the upside, expanding 0.3% in the first quarter, after shrinking 0.1% in the final three months of 2023. The contraction registered in the fourth quarter of 2023was a downward revision from 0.0%, meaning that the economy fell into a technical recession in the second half of last year.
Meanwhile, annual consumer price growth was steady inApril at 2.4%, but core inflation, which excludes energy and food prices, slowed to 2.7% from 2.9%.
European Central Bank policymaker and Bank of France Governor François Villeroy de Galhau, said that the latest data strengthened confidence that inflation would return to the 2% target by next year, suggesting that the ECB should be able to start lowering borrowing costs in June.
In the US
In the US stocks ended higher following a volatile week featuring a raft of economic and earnings data. Growth stocks outperformed value shares, which were flat overall for the week. Small-caps outpaced large-caps, helping lift the small-cap Russell 2000 Index back into slightly positive territory for the year-to-date period.
It was the second-busiest week of first-quarter earnings reports, and a positive reception to Apple’s earnings release after the close of trading on Thursday seemed to help drive a rebound in overall sentiment. The company beat consensus revenue expectations, but investors also appeared enthused by Apple’s announcement that it would buy back USD 110billion of its own shares, the largest such repurchase in history.
The main driver of the week’s gains appeared to be Friday morning’s non farm payrolls report, which showed that employers added 175,000 jobs in April, less than expected and the lowest number since November. While the miss signalled a cooldown in the labour market, and thus lower inflationary pressures, investors may have been more pleased by a surprises lowdown in monthly wage increases, from 0.3% in March to 0.2% in April. The year-over-year gain fell to 3.9%, the slowest increase in almost two years. Similarly, average weekly hours worked fell back slightly, while the unemployment rate climbed slightly to 3.9%.
The news may have been particularly welcome because it followed some upside inflation and (more distinct) downward growth surprises earlier in the week, a combination that added to recent worries over emerging “stagflation” trends. Stocks fell sharply on Tuesday after the Labour Department reported that employment costs rose 1.2% in the first quarter, or an annual rate of nearly 5%, which was above expectations and the fastest pace in a year. A separate report showed home prices rising in February at their fastest pace in eight months.
In Asia
As perceptions grew that Japanese authorities had intervened in the foreign exchange markets twice during the week to prop up the yen, Japanese stocks generated positive returns, with the Nikkei 225 Index rising 0.8% and the broader TOPIX Index gaining 1.6%. Changes in the Bank of Japan’s (BoJ’s) accounts suggested that such interventions had taken place, although the authorities refrained from confirming that they had finally acted with a view to halting the Japanese currency’s historic slump. The yen strengthened to around JPY 153 against the USD, from about JPY 158 at the end of the previous week.
Chinese stocks rose in a holiday-shortened week on hopes that the government will ramp up support. The Shanghai Composite Index gained 0.52%, while the blue-chip CSI 300 edged up 0.56%. In Hong Kong, the benchmark Hang Seng Index added 4.67%, according to FactSet. Markets in mainland China were closed from Wednesday for the Labor Day Holiday and will reopen on Monday, May 6. Hong Kong markets were closed Wednesday but reopenedThursday.
China’s top decision-making body, the 24-member Politburo, pledged to implement prudent monetary and fiscal support to shore up demand at its April meeting last Tuesday. Officials stated that China would make flexible use of monetary policy tools to restore growth, including possible cuts to interest rates and the reserve requirement ratio, which sets the amount of cash that banks must set aside in reserve.
The week ahead
The Bank of England will decide on UK interest rates this week.
The interest rate futures market curve implied a 21bp August cut at the beginning of the week, which as a rough guide is over an 80% probability, or just a 28% chance of a cut next week. So next week’s meeting really comes down to the wording to help traders decipher whether an August or June cut is a sure bet.
The last BOE meeting revealed that there were no votes to hike among MPC members for the first time since Q4 2021, eight voted to hold (highest since September 2021) and the first vote to cut since the pandemic. If market pricing is correct in assuming an August cut, we might start to see a few more votes to cut next week, which would of course reduce the ‘votes to hold’ to seven or less.
UK inflation numbers should come down again this month but much is dependent on April’s monthly figure. Annual inflation should now finally have a 2 at the start of it, which means the BoE don’t need to continue fighting, but can start looking at what might be best for the economy.
Other than more earnings, the only other major figure is that of UK GDP. We are expecting this to be positive, even if only just. The UK is managing perfectly well and most of the data is holding steady.
For those of you in the UK, we hope you had a great bank holiday.
