European shares are in the red this morning having lost the enthusiasm that boosted New York yesterday evening after the US and China meaningfully engaged in trade war peace talks. So why is everyone down? Well, it’s an armistice, not a peace treaty.
The FTSE 100 and Dax are marginally in the red having started brighter, falling back as the day progressed. In Paris, shares are up 0.15 per cent. The FTSE is struggling despite top stock AstraZeneca rising after the US government’s planned price regulations were weaker than anticipated.
In New York, it was a huge session yesterday for the Magnificent Seven, but it’s worth noting that futures today aren’t so bright. The Dow Jones rallied more than 1,000 points, while the S&P 500 climbed 3.26 per cent and the Nasdaq Composite rose 4.35 per cent. It was the best day for all three indices since 9 April. The MAGS ETF, which tracks the Mag Seven, rallied almost 6 per cent and is up about 12 per cent for the last month. Anything heavy on China reliance rose: Apple shares up 6 per cent. It makes 90 per cent of its iPhones in China and forecast a hit of $900mn from tariffs this quarter. Amazon – where many sellers source from China – rose 8 per cent. Tesla up 7 per cent and Meta 8 per cent showed that the kind of intraday volatility is still there. Chinese e-commerce giants Alibaba and JD.com rose sharply along with internet firm Baidu. JD.com reports today.
The surprise was the pace of the change in tariff policy – abrupt and unequivocal to the upside of expectations, albeit markets had clearly long sniffed out the direction of travel for some time. But, the tariffs are still worse than we had before – what case do you make from these levels? How does the data provide a positive catalyst from here? Slow drift here looks possible to squeeze the last from the bears. Current forward PE of S&P 500 is 21.2 times, which is above the 10-year average of 19.2.
The dollar rallied – US Treasury yields are rising with the 10-year to almost 4.5 per cent and before we hit 5 per cent, we will see the next policy shift to lower yields, which would be dollar negative.
In London, Wickes warns of an uncertain consumer outlook and significant cost headwinds for the year but says it’s confident of meeting current consensus expectations. Marstons has had a strong start to the current quarter. Elsewhere, SoftBank Group reported a quarterly profit from strong AI demand, boosting startup values and chip sales. More on this and more here
Looking ahead, we are light on earnings today with JD.com the main event before the opening bell on Wall Street. In terms of economic data – UK employment data shows cracks emerging, which supports a more dovish bias from the Bank of England. US CPI inflation data today – energy prices have come down, so the headline CPI is seen coming down to 2.3 per cent from 2.4 per cent in March, while the core reading (excluding food and energy) is seen steady at 2.8 per cent.
By Neil Wilson, investor strategist at Saxo UK
