FTSE Rises with Bond Yields in Retreat on Soft US Data

Key Points

• FTSE 100 rises for second day to close in on 8,700

• US data weaker, bond yields retreat

• S&P 500 up for fourth session, tech weighed down by Meta and Amazon

• UnitedHealth tumbles again

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Big picture: Bond yields matter

Treasury yields have pulled back sharply on some soft US numbers, now Japan is slowing. This is dragging yields down across the space. US PPI and Retail sales data indicates both consumers and business buying time in April and hoping the trade war would resolve itself...so can we read much into the data? The main thing now is what happens to bond yields from here. Look also to big changes in the way foreign holders of US Treasuries are taxed, and rules governing US banks’ Treasury holdings...repatriation of dollars...all part of the trade reset. Basically, the US Treasury department is laying the groundwork for countering any yield surge due to foreign selling. A big question for investors is whether the administration goes after equity income as well as bond income.

Alchemy – scientists at CERN in Switzerland have used the Large Hadron Collider to turn lead into gold...is it over? Spot gold has recovered the $3,200 support after touching $3,120 with the 50-DMA holding.

UK

The FTSE 100 is looking a bit livelier after Thursday’s rally, posting modest gains early Friday. The blue chips snapped a two-day losing streak yesterday and bulls are trying to get over the 8,685 near-term top in order to push on to 8,750. However it does rather look that after a big rally off the early April lows we are now in a phase of consolidation for the index.

St James Place and JD Sports led the index higher, while GSK and AstraZeneca were among the leading large-cap weightings to push the index up.

Investors punished Future heavily for cutting its revenue forecast after a dip in March ad sales hurt its Q1 performance. GoCompare got hit by a decline in car insurance pricing...which was evident yesterday with Admiral down sharpish. First-half sales fell 3% to £378.4 million, with adjusted profit down 5%. Given the Q1 softness and macro backdrop it now expects a low single-digit decline in FY 2025 organic revenue. Shares fell 9% at the open.

Land Securities fell 2% despite a 5% rise in rental income in the quarter. Plans to shift £3 billion out of offices and into retail and residential by 2030.

 

US

 

US PPI collapse – companies ate tariff increases, didn’t pass on to consumers...sign that maybe we don’t get the inflation impulse? The producer price index fell 0.5% after no change in March, contrary to a predicted 0.2% rise. Excluding food and energy, the core PPI declined 0.4%, the steepest since 2015.

US retail sales growth slowed dramatically after the March boost from front-running tariffs. Sales rose 0.1% in April, following the 1.7% surge in spending in March.

US factory production dropped 0.4% in April, the first decline in six months, due to higher import duties and other challenges. 

Fed Chair Powell warned of high long-term rates and inflation volatility from supply shocks, stressing anchored expectations for growth and reaffirming the Fed's 2% inflation target to prevent job losses.

Meanwhile, Japan's economy shrank by 0.7% annually in the first quarter, its first decline in a year, due to lower exports, higher imports, and stagnant consumer spending.

It was a mixed day for US equities on Thursday. The S&P 500 rose 0.41%, boosted by utilities and consumer staples, while tech struggled with the Nasdaq slightly down amid Amazon and Meta losses. The Dow added 0.65%, driven by GE's 2.8% gain as Qatar selected its engines for Boeing aircraft., while UnitedHealth continued its collapse. The S&P 500 has notched 4 straight days in the green this week, up 4.54% so far this week. It’s looking a tad near-term overbought and we have a $1.2tn in notional SPX options expiring today with the max pain point at 5,840 – wouldn't be surprised to see some pullback from the 5,900 area today.

Shares of Meta fell 2.5% after news that the company is postponing the launch of its highly anticipated AI model, Behemoth.

UnitedHealth just keeps falling – falling knife but going to offer value, seen some clients averaging in. RBC Capital, JPMorgan, Bernstein, Oppenheimer, Morningstar analysts all reiterated overweight – presume they know what is going on?

Alibaba was sharply off on profits miss but growth looks resilient and AI strong. Walmart down after saying it will pass on tariff cost increases to consumers – who are already under a lot of pressure. “The magnitude and speed at which these prices are coming to us is somewhat unprecedented in history,” said CFO John David Rainey. UoM survey data on inflation expectations and consumer sentiment coming but is now totally out of date as it will likely capture peak tariff fear.

Coinbase fell –7% on hack report.

Raytheon - House Representative Josh Gottheimer filed a purchase of Raytheon stock, Gottheimer sits on the House Intelligence Committee. This is the first time he’s bought Raytheon.

Finally, Buffett’s latest 13F for Berkshire Hathaway is out – trims financials, exiting Citigroup position entirely, selling 7% of Bank of America stake, while more than doubling  stake in Constellation Brands and Pool Corp. In the quarter Berkshire made no changes to its Apple stake.