Bueller? Bueller? Bueller? Everyone’s gone AWOL. You can get a seat on the Tube. London is bunking off, Ferris Bueller style. Markets looked like they were going to be fairly quiet and in consolidation mode after those monster swings earlier in the month. At least that was the feeling until another big (by usual standards at least) sell-off on Wall Street again on Wednesday, led again by tech but broad-based and brutal. Nvidia slipped nearly 7 per cent on White House plans to restrict sales to China further. Meanwhile, Jerome Powell, the Federal Reserve chair, said the US central bank will not ride to the rescue, yet. No ‘Fed put’ was the message. The market tanked some more. Volatility is the new normal.
This left the market scratching for somewhere to hide. The Nasdaq 100 finished down 3 per cent while the S&P 500 declined more than 2 per cent. Small caps had the better of it, with the Russell 2000 down just 1 per cent. Until the Fed pivots and we see the bottom in low-quality cyclicals, the market will trade in this way.
European markets were broadly weaker this morning, ahead of the Easter break. Siemens jumped to a record high, gaining 10 per cent as it raised its revenue and net income outlook based on strong demand for gas turbines, gas services and electricity products. Asian stocks were higher, with some big earnings from chipmaker TSMC in Taiwan – probably stockpiling ahead of tariffs (goes to the point that Q1 earnings are not telling the real story here). But this has assuaged some worries about the sector, though the overhang persists. Birkin bag maker Hermes, newly crowned top luxury stock, slipped despite it being European Central Bank (ECB) day.
After the steep decline in the session on Wednesday, US futures are firmly higher, as progress on trade talks has been latched onto. President Donald Trump said “Big progress!” was made during trade talks with Japan in Washington. Another report said China was open to talks. We shall see. Gold made a new high overnight but is pulling back this morning with yields picking up.
No tariff worries? Sainsbury’s results look positive – shares leapt 4 per cent. The company seems confident of defending its £1bn profit. Deliveroo was also higher as it stuck to guidance despite the macroeconomic uncertainty, as with Rentokil. Dunelm shares leapt 6 per cent with sales and margins up. No mention of tariffs from any of them. More on that here.
The ECB is all but certain to cut rates today by a quarter point to 2.25 per cent. It’s getting close to neutral, but the inflation risks are now clearly skewed to the downside. As is the risk for the growth outlook. It could alter its language to suggest rates being closer to neutral, but it seems unlikely, given the tariff uncertainty, that it will do anything to paint itself as being done. In March, it said monetary policy was becoming “meaningfully less restrictive” and that it was not pre-committed to a rate path. That seems sufficient for now, and on balance, it seems more likely to lean dovish than hawkish.
Huge week next week for US earnings: Tesla, Visa, Boeing, Ford, IBM, Caterpillar, Merck, PepsiCo, Alphabet, Intel, Microsoft and Exxon Mobil among others. Big industrial/tariff/tech bellwether reports, so this is the key for the tariff narrative. United Airlines split its guidance, whilst Bunzl slashed the outlook…watch for guidance being pulled and pauses in buybacks. It’s all about the outlooks.
Also check in on big tech AI capital plans – Q1 was all about the AI narrative, which has been completely superseded by tariffs…but will big tech dial back spend in face of the uncertainty? 23 April sees public net borrowing figures for the UK – how much room is left for Rachel Reeves? This will have implications for tax hikes, which would act as a headwind for the UK economic outlook and inflation.
The Trader will be taking a break over the bank holiday and will return on Tuesday 22 April. Happy Easter!
By Neil Wilson, investor strategist at Saxo UK