Week in Review: 19th to 23rd May
| UK & US Equities (week ending 23/5) | Notable Markets (week ending 23/5) | ||||
| Index | Close 23/5 | Week | Market | Close 23/5 | Week change |
| FTSE 100 | 8,717.97 | 0.38% | Gold Futures | 3,365.80 | 5.01% |
| FTSE 250 | 20708.72 | -1.22% | Bitcoin (Friday) | 108747 | 4.50% |
| FTSE AIM 100 | 3564.25 | 0.27% | UK 10yr GB Yield | 4.68% | 0.04% |
| S&P 500 | 5802.82 | -2.61% | CBOE Volatility (VIX) | 22.29 | 5.05 |
| Dow Jones | 41603.07 | -2.47% | Euro STOXX 50 | 5326.31 | -1.86% |
| NASDAQ 100 | 20,915.65 | -2.39% | GBP/USD | 1.3562 | 2.11% |
UK shares were relatively resilient this week in the face of volatile currencies and a higher than expected inflation print. US shares sold off dramatically as Q1 earnings start winding down and a Moody’s downgrade caused investors to move focus toward federal debt levels. Although it comes some 14 years after S&P downgraded US bonds, and had considered changes over successive years and governments, the Moody’s downgrade coincided with Donald Trump’s ‘Big Beautiful Bill’, where tax cuts promised in his first term are to be extended and new tax cuts are to be considered. The bill passed the House of Representatives and is now put to the senate. US 30 year bonds are now yielding over 5%. As the budget deficits are getting bigger year on year, and the debt pile continues to grow, investors have grown increasingly wary, selling long duration bonds, US Dollars, US shares and buying gold and bitcoin last week.
Then just as we thought the tariff terror was behind us, the US- EU trade war heated up as negotiations are set to commence. As the EU wrangles its herd of cats, the US negotiators have reportedly grown frustrated, however there was believed to be some progress on the way. On Friday, Donald Trump went to social media to declare he wants 50% tariffs on the EU. For years he has had a gripe with the EU, whom he believes was established purely to screw over America. He then walked back his comments over the weekend, striking a more constructive tone toward a deal, allaying investors’ concerns but resulting in more market volatility and confusion.
UK Inflation came in at 3.5% much higher than expected, however there were numerous one off events like energy price cap increases and transport ticket price rises.
US Q1 Earnings Season wrap up
According to FactSet, 96% of S&P 500 companies have reported their earnings during this reporting period. Corporate America recorded a 12.9% year on year growth in earnings marking a second straight quarter of double digit earnings growth. 78% of S&P 500 companies reported a positive earnings surprise and 63% of companies reported a positive revenue surprise, in that their earnings and revenue were actually higher than Wall Street analyst predictions.
During reporting season, companies often provide guidance for future quarters and the remainder of the year. Given the widespread uncertainty caused by tariffs, there was an expectation that many companies would withdraw or refrain from providing guidance. Out of the 259 companies providing commentary (53% of S&P 500), only 8 stated they were withdrawing or not updating previous EPS guidance. Compared to Q1 2020 (COVID), 185 S&P 500 companies withdrew or did not update future earnings guidance.
American Association of Individual Investors Survey painted a positive picture for the earnings seasons with most investors describing the earnings season as either in line or better than they had expected.
Source: AAII
Time will tell however, as this reporting season has not captured the bulk of tariff related and second order impacts on corporate earnings. Valuations are still elevated with FactSet pegging the forward 12-month P/E ratio for the S&P 500 at 21.1. This P/E ratio is above the 5-year average (19.9) and above the 10-year average (18.4).
U.K. Market Performance
FTSE 100 Movers
Gainers: Johnson Matthey +27.7%, Fresnillo +13.3%, Vodafone +8.3%, Babcock Int’l +6.5%, Centrica +6.2%, Hiscox 6.2%, Anglo American +6.1%, Marks & Spencer +5.7%
Losers: British Land -6.7%, Carnival -6.5%, Spirax Group -6.2%, Diageo -6.1%, DCC -5.8%, Bunzl -5.7%, CRH 5.5%, Intercontinental Hotels 5.3%, Prudential -5%
Macro
Inflation: We saw a greater than expected jump in inflation to 3.5% in April up from 2.6% in March. Largely driven by one off impacts on areas such as transportation and increases in the energy price cap. There was still notable increases in food and beverage and recreation and culture prices, providing vindication of a slower trajectory of rate cuts.
Public Sector Borrowing: Provisional data on government borrowing for financial year ending March 2025 was estimated at £151.9b, £20.7b higher than last year and £14.6b higher than the Office for Budget Responsibility (OBR) forecasts. The higher-than-expected deficit for 2024/25 is putting pressure on the public finances, with chancellor Rachel Reeves’ budget plans hinging on a tiny buffer against the government’s fiscal rules. This will likely bear a significant change to the upcoming budget’s tax and spend equation.
UK Retail Sales: Monthly retail sales grew 1.2% beating economist predictions and well ahead of the 0.1% in March. Year on year, we have seen a 5% increase.
GfK Consumer Confidence: Brits grew more confident about their finances in May. At -20, it is an improvement from April’s -23, likely attributed to tariff news flow and the recent BoE rate cut. However, confidence is still lower than 12 months ago. We may well be a pessimistic bunch here though, the only times the surveys have been in the positive since 1982, were in the late 80s, the late 90s through early 2000s, then a brief period pre Brexit.
Bank of England Commentary: Huw Pill is one of the more hawkish members of the MPC and spoke on Tuesday. Indicating the need for restraint in lowering interest rates. This was seemingly vindicated by the hot inflation print the next day.
UK-EU Relations: The UK-EU trade deal aims to reset relations between the UK and EU post-Brexit, covering key areas such as trade, energy, security, travel, and fisheries. Regardless of the political mess, it was a net win for investors, particularly for the travel and defence sectors of the market.
Notable Corporate News:
UK Companies
Diageo provided a 3rd quarter update on Monday. They saw organic net sales rise 5.9% for the period with revenue of £4.38b. Although the effects of U.S. tariffs are likely to impact performance, management pointed to price increases, cost control and supply-chain management to mitigate the damage. This was still a difficult read for investors as shares sold off over 7% for the week.
Utilities: SSE confirmed earnings in line with expectations and an increase in renewable energy output. Capital investment was around £3b supporting their net zero acceleration plan. Shares initially rose but later fell over the rest of the week reflecting investor cautiousness. Severn Trent delivered strong annual profit growth and expects adjusted earnings per share to double by 2028 from a base of 112.1p in 2025. The water utility company has been investing heavily in infrastructure improvements.
Consumer: In consumer-facing sectors, Marks & Spencer (M&S) reported solid earnings for the period pre cyber-attack and estimated cost of the attack around £300m due to operational disruption. This sent shares down initially as the disruption is expected to occur for longer than expected. However, the market began to see the light at the end of the tunnel, with price partially recovering. JD Sports fell short in expectations with sales down 2% and a warning of a hit to demand in its US operations. In telecoms, Vodafone posted a loss in fiscal 2025, weighed down by hefty impairment charges, but remains optimistic regarding a return to growth as it continues its turnaround plan. BT reported a slight increase in earnings but missed consensus expectations and saw revenue slip.
In financial services, Intermediate Capital Group beat earnings expectations, with analysts revising EPS estimates upward to £1.55 from £1.52. Despite the earnings beat, analysts expect a decrease in earnings for the next period.
Investec reported a drop in earnings but otherwise strong performance with Return on Equity of 13.9%, with pre-provision adjusted operating profit growing 7.8% and surpassing £1 billion for the first time in their history. They also reported growth in client numbers and fund flows.
Industrials: Diploma posted exceptional results with revenue up 14% to £728.5m and a 25% jump in adjusted operating profit to £156.9m, with organic revenue growth of 9%, a raise in its full year guidance and operating margins. This lifted the shares back to an all time high. Tate & Lyle, which produces food ingredients, met its FY25 guidance, with a 5% organic revenue decline and a 4% increase in EBITDA, aligning with the lower end of its forecast. Shares plummeted 11% amid concerns over price pressures and muted demand.
Lastly, defence technology company QinetiQ reported a 7% increase in revenue surpassing expectations. The company secured over £1 billion in orders and announced an extension of its share buyback program. They face challenges with legacy US operations, impairments and restructuring costs, but a strong order intake and a focus on other NATO countries was well cheered by investors.
U.S. Market Performance
S&P 500 Movers
Gainers: Newmont +10.1%, Moderna +10%, Dollar General +9.5%, GE Vernova +7.8%, Intuit +7%, Gilead Sciences +6.7%, UnitedHealth +5.8%, CBOE +5.5%, Coinbase +5.4%
Losers: Fair Isaac -22.8%, Deckers Outdoor -21.1%, Enphase Energy -20.7%, AES -20.1%, Copart -15.5%, First Solar -15.4%, Workday -13.1%, Super Micro -11.9%
Macroeconomic Data
Upcoming Economic Data – U.S.
It will be a relatively quiet week in the US, with attention focused on developments surrounding tariffs, speeches by several Federal Reserve officials, and the release of S&P Global manufacturing and services PMIs, along with data on existing and new home sales.
US Companies Earnings:
Home Depot reported Q1 sales of $39.9 billion (up 9.4% year-over-year) but missed earnings expectations for the first time since May 2020, earning $3.56 per share versus $3.60 expected. The company reaffirmed its full-year guidance and maintained its pricing strategy amid tariff concerns. Lowe’s beat earnings expectations with $2.92 per share versus $2.88 expected, though revenue of $20.93 billion slightly missed the $20.94 billion estimate. The company experienced a 1.7% decrease in comparable sales but saw strong growth in home professional sales (mid-single digits) and reaffirmed its full-year forecast. Williams Sonoma announced Q1 revenue of $1.73 billion, with comparable brand revenue up 3.4%. Despite beating estimates, the stock declined over 9% following the release. Big box retailer Target significantly disappointed with Q1 results, reporting adjusted EPS of $1.30 versus $1.61 expected and revenue of $23.85 billion versus $24.27 billion expected. Comparable sales decreased 3.8%, leading the company to guide for a low-single digit decline in sales for fiscal 2025. TK Maxx owner TJX Companies surpassed expectations with earnings per share of $0.92 and revenue of $13.1 billion. Comparable store sales increased by 3%, in line with the higher end of the company’s projections and pretax margins of 10.3% exceeded company estimates, Ross Stores have reported a slow start in Q1 and withdrew full year guidance as tariffs drag on earnings. Earnings and revenue were both ahead of analysts estimates, however as more than 50% of their products originate in China, the company is expecting to see a reduction in earnings over future quarters. Deckers Outdoor slipped after investors focussed in on their negative outlook given trade concerns and softer consumer outlook. Although Ugg and Hoka both increased sales and earnings for the previous quarter beat consensus, the stock sold down around 20% for the week. Polo Ralph Lauren reported adjusted earnings per share of $2.27, which surpassed the consensus estimate of $2.00. The result put an emphasis on the company’s strong brand momentum, operational discipline and strategic execution while the company remains cautiously optimistic about their next fiscal year. Viking Holdings reported explosive growth with soaring revenue outpacing and overlapping the cruise industry in what is a travel revival. However, the market focussed in on advance bookings for next year which were lower than a year earlier, adding concern to a peak in sales momentum for a hot stock in a hot sector.
In technology and cloud software, Palo Alto Networks reported better-than-expected Q3 results with adjusted EPS of 80 cents versus 77 cents expected and revenue of $2.29 billion versus $2.28 billion expected. However, the stock dropped 4% in extended trading due to gross margin missing estimates and guidance that failed to ease growth concerns. Snowflake, delivered standout results, reporting Q1 revenue of $1.04 billion (beating estimates of $1.01 billion) and adjusted EPS of $0.24 versus $0.21 expected. This marked the company’s first-ever quarter with revenue exceeding $1 billion. The strong results caused Snowflake stock to jump more than 10% and created a “snowball effect” lifting other stocks in its sector. Zoom Communications achieved EPS of $1.43, surpassing analysts’ expectations of $1.31 and reflecting a 6% increase from the same quarter last year. The introduction of AI Companion features and updates across its suite of services has been well-received, contributing to the company’s growth. Shares dipped on the day of the announcement, but this could have been attributable to broader market volatility. Wix, reported Q1 revenue of $474 million, up 13% year-over-year, exceeding expectations. However, earnings missed estimates by 7%. The company has been focusing on integrating artificial intelligence (AI) into its platform, enhancing user experience and driving growth. Intuit, renowned for its financial software products, reported a robust fiscal Q3 2025. The company achieved revenue of $7.75 billion, a 15% increase year-over-year, and adjusted earnings per share of $11.65, surpassing analyst expectations of $10.93 EPS and $7.57 billion in revenue. Workday, reported Q1 fiscal 2026 total revenues of $2.24 billion, a 12.6% increase year-over-year. Subscription revenues were $2.06 billion. Despite these strong results, shares declined due to slightly lower Q2 projections, with the company forecasting Q2 subscription revenue of $2.16 billion, aligning with Wall Street expectations but reflecting concerns over weakened client spending due to economic uncertainty. Autodesk, a provider of engineering and computer aided design software, reported solid earnings and revenue numbers and provided guidance of further growth in the next quarter and rest of the year.
In healthcare, Medtronic, which provides medical devices including its fast growing diabetes management products exceeded analyst expectations. However strategic shifts, news on a spin off of its diabetes division and tariff impacts weighed on investors concerns.
The Open: Monday 26th May
With London closed for May Bank Holiday and New York closed for Memorial Day, Asian and European markets were left to set direction given the weekends developments as well as bond market, currency and commodity moves. The Japanese Nikkei closed Monday higher by 1%, Hong Kong’s Hang Seng down 1.35%, the Australian ASX 200 was flat. In Europe, equity investors rejoiced another apparent walk back by Donald Trump with regard to his 50% tariff threat on Friday. The Euro Stoxx 50 index up approx. 1.5%.
Week Ahead: 26th to 30th May 2025
Eyes and ears will be on the tone of proceedings in the US-EU trade negotiations, as both parties jostle for leverage and the EU wrangle the positions and needs of its member states. The Art of the Deal playbook was once again in effect on Friday, and it appears the EU side are wary to it.
US Treasuries are still demanding attention as the long end of the curve continues to rise and bond selling persists.
Key things to watch
- Beautiful Bill commentary to continue to dominate investor concerns as the US National Debt looks likely to expand further. It is becoming apparent that tariffs are unlikely to raise as much revenue as expected, and productivity savings from DOGE have barely put a dent in the budget. Thus, further tax cuts and increased spending are likely to see the US debt balloon to continue expanding.
- Earnings news to come from NVIDIA, Salesforce, Okta and CostCo.
- S. and EU trade negotiations will garner significant attention in news headlines with the potential for profound implications for both parties.
UK Macro
A light week on the economic diary in the UK.
Retail Activity: BCI Distributive Trades includes measures of sales activity across the distributive trades. It is a leading indicator of consumer spending.
BoE Speeches: Hauser on Tuesday and Pill on Wednesday
Coporate Earnings: A light week from a UK perspective with International Distribution Services (Royal Mail), Pets at Home and AutoTrader reporting this week.
US Macro
Tuesday: Fed member Kashkari speech, Durable goods orders, S&P Schiller Home Price Index, CB Consumer Confidence and the Dallas Fed Manufacturing Index.
Wednesday: Mortgage data and rates, Richmond Fed Manufacturing, Dallas Fed Services, Retail Sales Red Book and all eyes will be on the FOMC minutes from their recent rates decision
Thursday: Initial and Continuing Jobless Claims and GDP Growth rate will be eagerly anticipated.
Friday: Core PCE Price Index, PCE Inflation data and the Michigan consumer sentiment final report.
Upcoming US Corporate Earnings:
As Q1 earnings wraps up, the overarching theme this week centres on AI infrastructure validation through NVIDIA’s results, which will set the tone for the entire technology sector. Enterprise software companies like Salesforce face the critical test of proving they can monetise AI capabilities effectively. Meanwhile, the consumer discretionary sector battles stretched consumers who don’t have a lot of capacity to hoard right now, limiting the pre-tariff stocking activity that some had anticipated. Companies with strong value propositions and defensive characteristics are likely to outperform in this environment, while those dependent on discretionary spending face continued pressure.
AI Infrastructure
NVIDIA (NVDA) – Wednesday’s Marquee Event The week’s most critical earnings report expects revenue around $43.0 billion and EPS of $0.76-0.9. The key focus will be on Blackwell revenue with consensus at $11.9 billion and China H20 inventory write-down impact of $5.5B. Q2 guidance expectations around $46.4 billion will be crucial for market sentiment.
Dell (Thursday) tests AI infrastructure demand beyond chips. Marvell provides data centre component insight despite speculation of disappointment. HP, Synopsys report Wednesday.
Enterprise Software, cloud and cybersecurity
Salesforce (CRM) – Wednesday Expect revenue of $9.7 billion (+6.6% YoY) and EPS of $2.55. Focus on Agentforce adoption, though only modest contribution expected as monetisation proceeds slower than hoped.
Okta (Tuesday) enters with strong Q4 momentum and record profitability.
Zscaler, NetApp, Veeva report Thursday.
Consumer Discretionary
The sector faces headwinds with the Consumer Discretionary Index down 15.02% vs S&P 500’s 7.8% decline. Costco (Thursday) leads defensive plays expecting EPS $4.24 (+12.2% YoY), revenue $63.1B. Challenged retailers include Ulta Beauty, Gap and Macy’s, with tough results expected for BestBuy and Footlocker. Key theme in the sector will be a focus on consumers trading down, e.g. shifting their spend toward discount providers like Costco and away from more premium or luxury names.
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