Tech Surges

Yesterday saw the max relief from tariff fears – the Dow Jones rallied over 1,000 points, while the S&P 500 climbed 3.26% and the Nasdaq Composite rose 4.35%. It was the best day for all three indices since April 9th. The S&P 500 gapped up above its 200-DMA and is now 20% off its April lows. Futures are a little lower this morning as some of the shine comes off but still holds this key level.

Big day for all the Mag 7 and other large cap tech stocks on the China tariff news. The Roundhill Magnificent 7 ETF tracking the Mag 7 rallied almost 6% for the day and is up about 12% for the last month.

Anything heavy on China reliance rose -Apple shares rose about 6%. It makes 90% of its iPhones in China and forecast a hit of $900mn from tariffs this quarter. Amazon – where many sellers source from China – rose 8%. Tesla +7% and Meta +8% showed 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 ahead – possible read across for Alibaba on Thursday?

The surprise was really the pace of the change in tariff policy – abrupt and unequivocally to the upside of expectations, albeit markets had clearly long sniffed out the direction of travel for some time. Remember it’s an armistice not a peace treaty – and the tariffs are still at these levels 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 21.2x, which is above the 10yr mean of 19.2x...make of that what you will.

One note on the dollar which rallied on the trade talks news – US Treasury yields are rising with the 10yr to almost 4.5% and before we hit 5% we will see the next policy shift to lower yields which would be dollar negative. My colleague John Hardy suggests that while equities have gone full circle the dollar has not – which may suggest something more structural about dollar weakness.

FTSE Flat

AstraZeneca shares rallied 1% having come off on drug price fears. Trump signed an executive order asking drug makers to lower prices voluntarily to levels paid abroad or face regulatory measures. The order, however, was considered vague and weaker than expected with pharmaceutical companies bouncing following an early Monday slump.

On the earnings front 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. Group revenues were up 5.5% on a LFL basis with strong retail (+9.2% LFL) and softer Design and Installation business revenues –4.4% LFL.

Marstons – strong start to current quarter +10.5% LFL sales in the five weeks since March 29th. Half-year profits of £19.2m up from breakeven last year.

Elsewhere, SoftBank Group reported a quarterly profit from strong AI demand, boosting startup values and chip sales. The Tokyo firm earned ¥517.18 billion ($3.5 billion) in Q4, aiding its $30 billion OpenAI and $100 billion AI hardware plans.

China lifted its ban on Boeing deliveries after US trade negotiations, allowing around 50 jets to be delivered this year.

Coinbase Global Inc. joins the S&P 500 Index, replacing Discover Financial Services before May 19 trading. Shares rose 13% in after-hours trading. It's the first and only crypto company to join the S&P 500.

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% from 2.4% in March, while the core reading (excluding food and energy) is see steady at 2.8%. The reading will be watched closely for any signs of early impacts from tariffs – albeit the ramp in Q1 inventories mean the full hit from tariffs is likely to be delayed...but now the US and China have paused the bulk of their reciprocal tariffs for the time being this data is already looking a little stale.

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