London Quick Take - 2 May

• Reform takes Runcorn from Labour

• Shell profits down but beat expectations 

• FTSE 100 set to extend run to 15 days of gains 

• Apple and Amazon fall after soft earnings 

• China said to be considering trade talks 

Big picture: Nothing stays the same

What a difference a month makes - the S&P 500 closed above its 50-day moving average for the first time since February 21st, one month on from Liberation Day. US futures are strong despite weakness from Apple and Amazon.

That's because risk appetite got a boost heading into the weekend as China said it was considering potential trade talks with the US. I don’t see how this is particularly earth-shattering but shows that bulls are in control and the max pain is the drift higher ...I’d be amazed if they were not ‘considering’ talking the US about tariffs. European stock markets and US futures climbed. The FTSE rallied as oil prices rose, while the Dax gained 1.2% and France’s Cac rose 1.4% as they played a bit of catchup after being shut for the May day holiday.

Reform took Runcorn from Labour by six votes. It was one of Labour's safest seats, underscoring that the victory changes the conversation in UK politics as Reform is now a credible threat on both flanks.

UK: FTSE carries on rising

The FTSE 100 rallied for a 15th day, marking its best run ever – as long as it holds. The FTSE 100 added about 0.75% in early trade on Friday and looks set to bring home a remarkable three-week unbroken run of gains.

Shell led the blue chips higher with a 3% gain as it beat expectations, while oil prices recovered to lift the mood. Crude had been looking at the April 4yr lows again before Trump threatened Iran with fresh sanctions and trade-tension-easing narratives fueled risk. Antofagasta and Glencore were among the gainers as basic resources traded risk-on after those China comments. Gold also picked up after touching $3,200 support while copper looks to be facing secular and cyclical tailwinds.

Super-resilient Shell reported a 28% drop in profits on weaker oil prices, but the $5.6bn in adjusted earnings was ahead of the $5bn expected by the City and shares are rallying accordingly. It’s keeping up the pace of its buyback programme despite the weaker crude outlook. The moves takes Shell flat for the year and we await to see whether peak-bearishness about oil prices is past us, which could ignite some action in the shares. 

NatWest is outperforming with a handsome earnings beat and it’s now nearly completely fled the public nest. Attributable profit hit £1.25 billion, well ahead of the £1.06bn consensus forecast. Pre-tax operating profits jumped 21% to £1.81 billion, beating the average forecast of £1.56bn.  There was a big jump in mortgage lending as buyers rushed to beat the reversal of stamp duty relief. Look now for revenue upgrades and shareholder returns. The bank said it expects to pay ordinary dividends of around 50% of attributable profit from 2025 and it “will consider buybacks as appropriate.” Shares rose over 4% to their best level since 2011 and the government stake is below 2%...the good times are back at Gogarburn.  

Standard Chartered shares fell despite a strong beat. Operating income rose 7% to $5.4bn on a constant currency basis with net interest income up 7% to $2.8bn. Wealth +28%, Global Banking +17% and Global Markets +14% all looked strong but expenses +5% and credit impairments +24%...this is really the story of the bank earnings – NII and trading revenues up, but rates seen coming down and marco uncertainty and expected global slowdown = slowing revenue growth and higher charges ahead.  

Pearson looks good with underlying sales growth at 1% in the first quarter, though some weakness in Virtual Learning (-4%) and English Language Learning (-6%). It expects sales growth and adjusted operating profit in line with market expectations for 2025. The company forecast low single-digit sales growth in the first half with stronger growth in H2. AI tools driving growth...interesting secondary AI trade. 

We’ll talk big tech in a second, but first McDonald’s - US sales declined 3.6% in the first quarter. If you want a read on the US consumer there it is – biggest decline since start of the pandemic. MCD just does not do this. Shares fell 2% yesterday but remain +7% YTD as it’s seen as kind of immune to tariffs and defensive...turns out if there is a big pullback in consumer spend in the US – as we are looking for in the survey data – then it’s not so insulated. Read across for other 'staples'?

Nevertheless, risk is on with the S&P 500 closing above 5,600 and above its 50-DMA for the first time since Feb 21st. The Nasdaq rose 1.52% and NDX rose 1.1%. 

Apple and Amazon were soft – consumer and tariffs. Apple said it faces a $900mn cost from tariffs next quarter, which is clearly going to compress margins...this is why Apple is a tough one right now until the tariff shenanigans are settled – you just don’t know if Apple can make iPhones anywhere else and if not what is the cost implication. Amazon cloud growth at +17% was a touch weaker than hoped after Microsoft’s Azure numbers. 

The Mag 7 has derated over the past 9 weeks, trailing P/E-multiple falling from 43x to 27x and its forward multiple falling from 40x to 25x.  

Today is the turn of Chevron and Exxon Mobil while Berkshire Hathaway is due to report on Saturday. 

ISM Manufacturing PMI for the U.S. dropped to 48.7 in April 2025 from 49.0 in March, slightly above expectations. The sector remains in contraction, with sharper output declines and rising prices. New orders fell more slowly, but export orders dropped due to tariffs. Manufacturers face rising costs and trade uncertainties, affecting supply chains and causing delays. Customer demand is volatile, with some delaying orders or shifting tariff costs to manufacturers. Definite sense of stagflation about this report - prices paid continued to accelerate while new orders and employment remained in contractionary territory. 

U.S. initial jobless claims rose by 18,000 to 241,000 in the week ending April 26, exceeding expectations of 224,000. Non-seasonally adjusted claims increased by 12,901 to 223,614, mainly in New York and Massachusetts. Continuing claims jumped 83,000 to 1,916,000 in the week ended April 19, suddenly posting the highest level since 2021, and above expectations of 1,860,000. 

Nonfarm Payrolls is the big event today – watch for signs of fast-forward in firing and slowdown in hiring. Consensus estimate +130k, but the estimate range is from+25k to +195k. March was +228k. The weak ADP report looms large and Jolts were weaker but initial claims needle hasn’t really shifted. Impact of tariffs probably waits for next month. 

Elsewhere, Japan indicated that its treasury holdings are among its tools in trade talks with the US, though “whether we actually use that card, however, is a different question.” according to Finance Minister Kato, at odds with his ruling out this idea in earlier comments. Too much is made of countries weaponizing Treasury holdings for my liking.

Back on Tuesday, have a wonderful weekend.