Equity markets firmer heading into long weekend, crypto stocks gain momentum

• FTSE ticks up in muted trade ahead of long weekend

• US stocks tread water as bond yields ease off highs

• Trump tax bill creates winners and losers

• Coinbase, GameStop shares jump

• Games Workshop shares slide on licensing outlook

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Big Picture 

Trump’s tax bill cleared the House of Representatives on Thursday, pushing bond yields higher. But the breakout was tamed and stocks ended the day flat. The tax bill won’t lead to default but it means more debt and the markets are cagey about this and about the US economy. The bill means less revenue from tax and more spending on defence in particular – it raises the deficit, which essentially makes fixed income less attractive – until the Fed pivots that is. Stock markets are in wait-and-see mode for the moment after Wednesday's sharp pullback.

Bear steepening – the yield on the 30yr Treasury – the long bond – was headed for its highest close since July 17th 2007...we all know what followed. It didn’t quite make it and eased back in the end. The 30-year Treasury bond yield hit a peak of 5.161%, its highest since October 2023, while the rate on the 10-year Treasury note at one point breached 4.6%. 

Potential winners from the “big beautiful bill” include defence, cybersecurity, and select consumers: Think maybe the likes of Lockheed Martin, Northrop Grumman, Palantir and CrowdStrike, while tax breaks for overtime and tips support service-sector consumption. Potential losers include renewables, EVs, and healthcare: Clean energy tax credits are scrapped, EV incentives eliminated, and Medicaid cut by $800 billion — potentially hitting stocks like Sunrun, Tesla, and Humana. We saw steep falls in solar energy companies - Sunrun -37%, Enphase -20%, NextEra – 6%, First Solar -4%, Invesco Solar ETF -7%. 

Meanwhile, BYD surpassed Tesla in European EV sales for the first time, registering 7,231 vehicles in April, a 169% increase YoY. This vaulted BYD into the top 10 EV brands, while Tesla's registrations fell 49%. BYD share is up 80% YTD. Note that the Trump tax bill eliminates the $7,500 federal EV tax credit after 2025 and imposes a $250 annual EV road fee. Tesla however is immune to actual fundamentals.

Oil prices were hit on reports Opec+ is considering increasing output by 411,000 barrels per day in July, which is triple the amount initially planned and would match previous increases agreed for in May and June.  

Nuclear-industry stocks were trading higher after Reuters reported that President Trump is expected to sign executive orders as soon as Friday that aim to jumpstart the nuclear-energy industry. In post-market trading, shares of Lightbridge rose 22%, Centrus Energy jumped 22% and NuScale Power climbed 16%. 

And crypto/meme stocks surged to the top of Wall Street yesterday – Coinbase +5% to lead the S&P 500, and GameStop up 11%, as Bitcoin made record highs on broad cryptocurrency optimism. COIN is now up 9% for the week. And why GME? Remember in March it announced it would buy Bitcoin with corporate cash in a move that echoes MicroStrategy - which has been offering more stock to purchase more Bitcoin...shares of MSTR are flat the last five days as a result.

Market Snapshot 

Meanwhile, European stock markets are a little firmer on Friday morning in what’s shaping up to be a quiet session ahead of the bank holiday weekend. Figures this morning show the German economy growing at 0.4% in the first quarter, double the rate estimated, while UK retail sales climbed 1.2% in April, well ahead of forecast. These numbers are giving a little fillip to risk sentiment and maybe just show that the UK/Europe continues to offer some shelter from the US shenanigans. 

The FTSE 100 rose about a third of a percent after dipping more than 0.5% on Thursday. That was part of a broader decline in European equity markets as they to some extend played catch-up to the 1.6% falls on Wall Street on Wednesday amid sharp moves in the bond market. 

The S&P 500 and Dow edged down (SPX -0.04%, DJI nearly flat), while the Nasdaq 100 rose 0.15% as there was some uplift in tech – maybe search for quality/balance sheet. For the week the S&P 500 is down nearly 2%, the Dow set for a decline of about 1.9%, and the Nasdaq is off 1.5% week to date.  

Games Workshop fell over 3% as it warned record licensing revenues would not be repeated. The company said full-year core revenue will be at least £560 million, up from £494.7 million a year ago, while licensing revenue of should hit around £50 million, a significant uptick from £31mn a year ago. Core operating profit is estimated at not less than £210 million and licensing operating profit of c.£45 million, both up sharply from the year before The Group's profit before taxation ("PBT") is estimated to be not less than £255 million, about 25% higher than a year before. Great numbers from the Warhammer firm but taking the shine off the report was the line that licensing revenue in the period is at a record level and management is not expecting this to be repeated in 2025/26. So, is this as good as gets?

Stock markets in the UK and US will be closed on Monday for the Spring bank holiday and Memorial Day holiday respectively.  

 

Off to get soaked in Cornwall next week – back on June 2nd.