Trade deal optimism seemed to be reflected in a positive move for stock markets, with European shares rising on Friday – the Dax hit a record high this morning. The FTSE 100 rallied after dipping on Thursday and is back to flat for the week after its epic three-week bounce. Oil prices climbed, lifting the likes of BP and Shell, while JD Sports, which is among the companies exposed to China tariffs, rallied 2 per cent in early trade.
The S&P 500 rallied and US futures are looking firmer again this morning, increasingly priced for complete detente. Seven of eleven S&P 500 sectors are back to having more than 50 per cent of stocks above their 50-day moving averages. DIY investors have been net buyers of stocks for 21 consecutive weeks, the longest streak on record, according to Bank of America. Hedge funds have sold a record $1.5bn, while institutional clients have sold about $2.7bn, the second-largest amount in history.
BP got some extra juice after the Financial Times said a number of rivals have “run the numbers” about a possible takeover. We knew Shell had already run the numbers, as did Adnoc last year, but apparently Chevron and Exxon Mobil and Total have too. Whether or not it would come to anything is another matter – but there are clearly consolidation trends in the oil & gas space as it faces existential challenges. A trend to consolidate more seems inevitable and BP has opened itself up to be prey by making strategic errors and execution mistakes. Also the US-UK valuation gap means a reverse into a big US major could make sense – BP already does a lot of its business there. I’m not sure the government would like a US takeover, but it would be hard for Prime Minister Keir Starmer to tell US President Donald Trump that he’s blocking a Chevron or Exxon Mobil from doing business.
Coinbase shares fell after first-quarter revenue missed Wall Street estimates. The company, which operates the largest crypto marketplace, said consumer trading volume fell 17 per cent from the fourth quarter to $78.1bn. Boeing shares rallied 3 per cent on the White House teasing a $10bn order, which as expected, turned out to be from IAG, which initially fell this morning on the news, which is presumably a reflex to the monster order for new planes, as the results look good. IAG profits tripled from a year ago, and it reiterated full-year guidance. Elsewhere, the rally in Nvidia shares has flattened out a bit after rising on reportsthat Trump will rescind Biden-era chip restrictions.
Trade deal
The UK-US framework is narrow and not without cost but it’s not a huge impact on the UK economy. Carmakers will be happy. We can probably save our steel industry, or what’s left of it. These are important for politicians even if they are not that important for the overall economy, which is reliant on services. The Bank of England cutting rates is a bigger deal. And the fact it leaves a trade deal with the EU on the table is an even bigger deal.
It’s all relative – yes we took 10 per cent but everyone else will take at least that, which leaves the UK in a relatively decent position. But it was low-hanging fruit in terms of trade – China talks this weekend is what will matter for the broader equity space, particularly the US. But we did see some single stock movers in Rolls-Royce (tariff exemption), Aston Martin (cutting auto tariffs to 10 per cent), and Burberry.
By Neil Wilson, investor strategist at Saxo UK