London stocks ended the week on a positive note on Friday, buoyed by upbeat global developments and solid US employment data. The TPP Bank Holiday update.

London stocks ended the week on a positive note on Friday, buoyed by upbeat global developments and solid US employment data.

The FTSE 100 index advanced 1.17% to close at 8,596.35 points, while the FTSE 250 added 0.52% to finish at 20,240.51 points. For the week as a whole, the FTSE 100 was higher by 181.1 points, or 2.15%.

Currency markets were relatively stable, with sterling holding steady on the dollar at $1.3278, although it slipped 0.3% against the euro to trade €1.1723.

On London’s equity markets, Shell rose 1.97% after the oil major reported stronger-than-expected first-quarter earnings and launched a £2.6bn share buyback. Adjusted profit came in at £5.2bn, well above the £3.7bn consensus, on revenue of £52bn. Despite slightly softer-than-forecast operating cash flow of £6.9bn, the company also declared a dividend of 35.8 cents per share and reported net debt of £31.21bn.

Standard Chartered edged up 0.06% after the bank posted a better-than-expected £1.57bn pre-tax profit for the first quarter, citing strong performance in wealth management. However, it warned of continued uncertainty linked to global trade tensions. Ferrexpo surged 7.92% as sentiment remained buoyant on the back of a US-Ukraine minerals agreement and signs of potential US-China trade talks.

Harbour Energy, also buoyed by stronger commodity prices, gained 5.04%. SSP Group rose 3.45% after the Financial Times reported that activist investor Irenic Capital had built a 2% stake in the company. British Airways owner International Consolidated Airlines Group climbed 4.14%, helped by improved investor appetite following US jobs data that signalled moderate economic momentum.

On the downside, consumer staples and utilities underperformed.

Sainsbury’s slipped 1.42%, SSE fell 1.35%, and Tesco eased 0.19%, as bond yields edged higher following the US payrolls release. BT Group and Lloyds also lost ground, down 0.75% and 0.95% respectively. Pearson dipped 0.21% despite confirming it was on track to meet full-year guidance after a 1% increase in underlying sales and a 6% rise in higher education revenue.

The company highlighted progress on strategic priorities and unveiled a £350m buyback.

On Friday, China said it was considering the possibility of holding trade talks with Washington, indicating a potential thaw in the U.S.-sparked trade war. “The U.S. has recently sent messages to China through relevant parties, hoping to start talks,” the Commerce Ministry said in a statement. “China is currently evaluating this.” The ministry’s comments followed reports that China has started to exempt some U.S. goods from tariffs covering roughly USD 40 billion worth of imports, Bloomberg reported. The list of exempted products, which include products such as drugs and industrial chemicals, has been circulating among traders and businesses over the past week but has not been officially confirmed, Bloomberg reported, citing unnamed individuals.

Europe

The pan-European STOXX Europe 600 Index ended 3.44% higher as tariff concerns eased. Major stock indexes rose as well. Germany’s DAX gained 4.63%, Italy’s FTSE MIB tacked on 4.13%, and France’s CAC 40 Index advanced 3.57%.

Economic growth in the eurozone accelerated in the first quarter to 0.4% from 0.2% in the previous three months. The consensus estimate of economists polled by FactSet had pegged the expansion in GDP at 0.2%. Spain’s economy grew by 0.6% and Italy by 0.3%, exceeding forecasts; Germany and France returned to growth, registering small increases. GDP in Ireland, where activity by large U.S. multinationals can distort the data, rose by 3.2

Meanwhile, eurozone headline inflation remained at 2.2% in April—a higher reading than economists had expected. The core rate that excludes volatile food and energy costs rose to 2.7% from 2.4%.

Still, indicators of business and consumer optimism have dimmed since the April 2 announcement of U.S. reciprocal tariffs, possibly heralding a downturn in output in the months ahead. The European Commission’s economic confidence indicator weakened to 93.6 in April, its lowest level since December. Meanwhile, its gauge of consumer sentiment remained in negative territory, at -16.7, as respondents became more pessimistic about the economic outlook and were less inclined to make major purchases.

The U.S.

U.S. stocks finished the week higher, with the S&P 500 Index logging its second consecutive week of gains for the first time since January and closing Friday with its ninth straight session in positive territory. The technology-heavy Nasdaq Composite rose 3.42%, supported by better-than-expected earnings reports from several large-cap tech companies. Small- and mid-cap indexes advanced for the fourth week in a row.

Positive sentiment early in the week appeared to be driven by a continuation of the prior week’s optimism around de-escalating trade tensions, with President Donald Trump rolling back some of his initial tariffs on cars and auto parts and Commerce Secretary Howard Lutnick announcing that a major trade deal was nearing the finish line.

Later in the week, the focus largely shifted to earnings as companies representing nearly 40% of the S&P 500 Index’s market cap reported first-quarter results, including four of the so-called Magnificent Seven names. T. Rowe Price traders noted that while a number of companies have discussed limited visibility into forward guidance, largely driven by uncertain trade policy, sentiment remained generally positive as investors seemed willing to wager that businesses would be able to weather slowing economic growth and tariff-fuelled disruptions.

The week’s busy economic calendar arguably painted a mixed picture of the health of the U.S. economy. On the negative side, the Bureau of Labour Statistics (BLS) reported Tuesday that job openings fell to 7.2 million in March, down from February’s reading of 7.5 million and the lowest reading since September, suggesting that demand for workers may be cooling amid elevated levels of economic uncertainty. On Wednesday, payroll processing firm ADP reported its count of private payrolls increased by only 62,000 in April, a sharp decline from March’s downwardly revised reading of 147,000.

The Bureau of Economic Analysis (BEA) released its advance estimate of first-quarter economic activity on Wednesday, which indicated that the U.S. economy contracted at an annual rate of 0.3% in the first quarter, the first negative reading since 2022. The BEA attributed the contraction in gross domestic product (GDP) to “an upturn in imports, a deceleration in consumer spending, and a downturn in government spending.” The sharp increase in imports during the first quarter suggested that businesses spent aggressively ahead of the Trump administration’s impending tariffs, most of which went into effect in early April.

Asia

Japan’s stock markets gained over the week, with the Nikkei 225 Index rising 3.15% and the broader TOPIX Index up 2.27%. With the Bank of Japan holding rates steady and downgrading its growth and inflation forecasts, investors’ expectations grew that the timing of the central bank’s next interest rate increase could be delayed. While tentative global trade optimism lifted sentiment, bilateral trade negotiations between the U.S. and Japan remained at the preliminary stage, with both sides searching for common ground, according to Prime Minister Shigeru Ishiba.

The BoJ held interest rates steady at 0.50%, as expected, and downgraded its forecasts for economic growth and core inflation for the fiscal years 2025 and 2026. Underlying inflation is likely to be sluggish due to a deceleration in the economy. BoJ Governor Kazuo Ueda warned of extremely high uncertainty on the outlook due to the impact of trade and other policies in each jurisdiction, with risks to economic activity and prices skewed to the downside.

As the timing for underlying inflation to converge around the central bank’s 2% target was pushed back somewhat, investors anticipated that the next rate hike could be delayed but that Japan’s monetary policy normalisation process would not be derailed. The bank emphasised that if its outlook for the economy and prices is realised, it will continue to raise its policy interest rate. While accounting for external risks, the central bank sees the domestic dynamic of a positive wage-price cycle remaining intact, given labour shortages.

Against this backdrop, the yen weakened to around JPY 144.7 against the U.S. dollar, from about JPY 143.7 at the end of the prior week. The yield on the 10-year Japanese government bond fell to 1.26%, from the previous week’s 1.34%.

Mainland Chinese stock markets declined in a holiday-shortened week. The onshore benchmark CSI 300 Index shed 0.43% and the Shanghai Composite Index retreated 0.49% in local currency terms, according to FactSet. In Hong Kong, the benchmark Hang Seng Index rose 2.38%. Markets in mainland China are closed from May 1 until May 5 for the Labour Day holiday and will resume trading on Tuesday, May 6.

A pair of indicators gave the first official snapshot of China’s economy after the Trump administration raised total tariffs on most Chinese goods to 145% in April. The manufacturing PMI fell more than expected to 49 from 50.5 in March, according to the country’s statistics bureau, marking the worst contraction since December 2023. The non-manufacturing measure of construction and services activity also missed expectations, declining to 50.4 in April from March’s three-month high of 50.8.

China set an economic growth target of around 5% this year, a goal that many analysts think will be hard to meet given the trade war. While a trade war with the U.S. would likely deliver a shock to Chinese exports and economic confidence, Beijing should have the financial capacity to reduce its impact and could roll out fiscal stimulus in stages as it assesses the economic costs of tariffs.

The Week Ahead

All eyes over the coming week will be on the Bank of England as rate-setters meet to decide on monetary policy. Analysts at Rabobank are expecting a 25 basis point reduction in Bank Rate to 4.25% on Thursday, followed by a further two cuts over the remainder of the year.

Indeed, a "soft" reading on April CPI could lead them to pencil in another cut in June, they said in a research note emailed to clients. For his part, City analyst Michael Hewson believed that Bank "might well" cut rates next week. However, market pricing for multiple rate cuts in the months ahead might not be the done deal that many believe, he said.

Key to Hewson's thinking, core CPI at 3.4% and services inflation at 4.7% both remained elevated and headline CPI might yet peak at 3.7% later in 2025. To that one could add all of the Office for National Statistics recent problems around its estimates for foreign trade. But the Bank's inflation forecasts might be revised lower, Hewson noted.

He also called attention to hawkish MPC external member Megan Greene's recent comments regarding the possible deflationary effects of US tariffs as Chinese and EU goods are diverted to the UK, which might foreshadow a shift in the MPC's policy bias.

The Monetary Policy Committee's announcement would come a day after that of the US Federal Reserve. Fed funds futures were discounting 98.7% odds that the target range for the Fed funds rate would be kept at 4.25-4.50%. But market commentary would likely centre on any comments from the White House and Treasury regarding the need for cuts.

Labour market strength was seen as key for the timing of the first rate cut, which Fed funds futures were now pricing in for July.

That’s it for the weekend. There will be more from us in our midweek trading update on Wednesday. For those of you in the UK, enjoy the Bank Holiday weekend. If you have any questions about our report or if you would like information on how TPP can help you build an absolute portfolio designed to beat the markets, please click here.

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Disclaimer: The views expressed in this article are the author’s own and should not be considered in rendering any legal, business or financial advice. Opinions and estimates offered constitute our judgment and are subject to change without notice, as are statements of financial market trends, which are based on current market conditions.

This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The views and strategies described may not be suitable for all investors. This material has been prepared for informational purposes only.

Past performance may not be indicative of future results. Therefore, you should not assume that the future performance of any specific investment or investment strategy will be profitable or equal to the corresponding past performance.

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