Week in Review: 17th to 21st March 2025
During the week of the 17th of March 2025, global financial markets experienced continued volatility albeit more stable than recent weeks, with choppy trade on major indices. Fed commentary and US inflation data weighed down hopes of a bounce from the recent correction. Tech names staged a rebound late in the week following the recent sell off. Geopolitical concerns surrounding the Ukrainian conflict, trade wars and reignition of Middle Eastern conflict impacted sentiment and oil prices. China stimulus announcements spurred some short-lived optimism.
Observation of the Week:
Thanks to our partners at Saxo, who compiled an interesting chart plotting German defence company Rheinmettal against NVIDIA. Rheinmetall (RHM.DE) is experiencing phenomenal growth as a key beneficiary of Germany’s increased defence spending. With the company producing critical NATO supplies, it is at the centre of Europe’s rearmament efforts, leading to 36% revenue growth in 2024 and projected 25-30% growth in 2025. Like NVIDIA’s role in the AI revolution, Rheinmettal is ramping its production to keep up with demand in a market experiencing rapid structural change.
Rheinmetall’s share price is up 37% for the month, 169% for the year and over 2300% five years. It is worth noting that its current valuation is extreme for an industrial stock, which usually trade at lower multiples. However, analysts remain bullish with consensus 12-month price targets averaging €1,471 or 12% upside, and Morgan Stanley analysts suggesting the stock could reach €3,000 by 2030 if European defence spending reaches 3% of GDP.
Source: Saxo Equities Strategy
U.K. Market Performance
The FTSE 100 recorded a choppy trading week, ending down slightly on the week as investor sentiment was weighed down by weak economic data and geopolitical concerns. Despite an early-week rally, the index saw declines as UK inflation came in higher than expected, prompting concerns over prolonged higher interest rates at a time of slowing economic growth.
FTSE 100 Movers
Gainers: Phoenix Group +11.1%, Prudential +8.2%, Kingfisher +7.7%, JD Sports +7.1%
Losers: Tesco -12.5%, Compass Group -8.21%, Pearson -7.73%, Sainsbury -6.84%
Notable Macroeconomic Data:
· UK Inflation (CPI) – remained higher than expected at 3.4% YoY v 3.2% expectation.
· Retail Sales decline by 0.3% for the month.
· Services PMI came in at 52.3, down slightly but still expansionary whilst Manufacturing PMI remained in contraction at 47.8.
· The Nationwide House Price Index showed a 0.2% month on month decline in house prices.
Notable Corporate Earnings:
· Experian: A strong performance in US consumer credit services drove better-than-expected results, sending shares higher.
· Wetherspoons (JD): The UK pub chain reported a ‘frothy’ 5.7% revenue increase and a 73.5% rise in profit before tax. Like-for-like sales grew by 7.6%. The company also reinstated its dividend.
· Prudential Financial: posted strong results, with net income rising and adjusted operating income reaching $4.588 billion, reflecting strength and stability.
· Phoenix Group: was a top gainer on the FTSE 100 for the week on the back of its strong earnings result that beat consensus forecasts and strong guidance from management. It also has a dividend yield of close to 10%.
U.S. Market Performance
A mixed bag for US equities as tech stocks stabilised and rebounded on Friday after weeks in the red, but this was weighed down by continued fears over the economy. Small caps struggled over concerns of interest rate cut pushbacks and slower economic growth. Russell 2000 index down 1.3% for the week.
· S&P 500: Modest gains of 0.51% over the week.
· Dow Jones Industrial Average (DJIA): Up 1.2% for the week buoyed by Boeing, United Health, Chevron and the banks.
· Nasdaq 100: Modest gains of 0.25%; MicroStrategy, Applovin and Palantir boosting the tech index higher over the week.
Notable Moves
Gainers: MicroStrategy +10.95%, Boeing +12.5%, Southwest Airlines +9.6%
Losers: Incyte -8.7%, Nucor -7.48%, Nike -6.8%, Moderna -6.3%
Macroeconomic News
· U.S.: The Consumer Price Index (CPI) came in at 2.8%, irritating inflation and Fed watchers’ fears.
· US Interest Rates: The Federal Reserve held rates steady and signalled a cautious approach to further cuts.
· Trade Tensions: Tariff chatter continued to simmer as experts attempt to grapple with the wider implications for consumers, government and business.
· Consumer Sentiment Index published by the University of Michigan dropped to 57.9, the lowest level since November 2022, from a final reading of 64.7 in February. Below expectations of 63.1.
Notable Corporate Earnings
· Micron Technology: The semiconductor manufacturer surpassed earnings and revenue expectations; however, its mixed forward guidance led to an 8% stock decline.
· Accenture: The global consulting firm reported first-quarter revenue exceeding estimates, driven by increased demand for AI-powered tools, leading to a 6.1% premarket stock rise.
· Lennar Corporation: The homebuilder cautioned about a weak housing market, resulting in a 4% stock drop.
· Nike: The athletic apparel giant reported earnings of 54 cents per share on $11.3 billion in revenue, surpassing expectations. However, a 9% annual revenue decline and a pessimistic Q4 outlook, predicting a revenue decline and a gross margin reduction, led to a 5.5% share price fall.
· FedEx: The logistics company missed earnings estimates and lowered its profit guidance, citing weak demand in the U.S. industrial economy, which resulted in a 6.5% decline.
Week Ahead: 24th-28th March 2025
Market Themes to Watch
United Kingdom
BoE Rate Cut expectations: UK Investors will be sensitive to any commentary or data that will give signals as to the timing of an interest rate cut by the Band of England.
UK CPI Inflation (26th March Wednesday) – This will be a major event for UK markets, as a hotter-than-expected reading could delay rate cuts and weigh on equities.
FTSE 100’s Response to global trends: The global trade sensitive index has lagged U.S. markets of late. Ongoing trade negotiations and geopolitics will continue to influence market sentiment and volatility.
Commodity Stocks & China Stimulus – Glencore (GLEN) and Rio Tinto (RIO) could benefit if Chinese stimulus measures boost iron ore demand.
Chancellor Rachel Reeves Spring Statement (Wednesday): This update will provide insights into the UK’s economic performance and outline fiscal policies for the upcoming period. The Office for Budget Responsibility (OBR) is expected to present a more subdued economic forecast compared to previous assessments. Given the challenging economic environment, the Chancellor may consider several fiscal measures. To adhere to fiscal rules, the government might announce additional spending cuts in targeted welfare programs and further cuts to civil services. On the revenue side of the equation, there is speculation about potential tax increases and rule changes to generate more fiscal headroom. The announcement of spending cuts or tax hikes could be detrimental to sentiment, particularly if these measures are perceived as hindering economic growth. Conversely, a credible plan to manage public finances and support growth might bolster confidence.
United States
AI & Tech sell off stabilised? – chip makers, software firms and the hyperscalers will be watched to see if a resurge in AI enthusiasm can take hold following negative sentiment shifts in the last few months.
US PCE Inflation (Friday) – This is the Fed’s preferred inflation gauge and will be crucial in shaping rate expectations.
US Consumer Confidence (Wednesday) – Sentiment data will be key in assessing the strength of the US consumer after last week’s weak retail sales report.
Oil Prices & Energy Stocks – Brent crude’s movement above $85 per barrel could impact names like ExxonMobil (XOM) and broader inflation concerns.
Financial Sector Sensitivity to Fed Signals – With markets debating the Fed’s next move, stocks like JP Morgan (JPM) and Goldman Sachs (GS) and smaller regional banks could see swings.
Upcoming Earnings
Retail & Consumer Goods: A focus on consumer demand trends, pricing power, and global expansion will be crucial, especially amid inflationary pressures and supply chain disruptions.
· BYD (BYD Company Limited): US listed Chinese company BYD is a leading electric vehicle (EV) manufacturer, and its earnings report will be interesting due to its expanding global presence, progress on battery and charging technology which will draw conclusions on their competitive battle with Tesla, who should see further volatility coming out of this result.
· Next: The market will look to see if Next are able to pass through any increased costs to consumers and get a gauge on the UK fashion retail landscape.
· Kingfisher: The home improvement goods and services company downgraded its full-year pre-tax profit guidance, citing increased employer National Insurance contributions and changes in French tax laws.
· Lululemon (LULU): Athleisure brand lululemon reports on the 27th of March. Key will be any signs of whether the brand can continue to ‘stretch’ its premium positioning.
· McCormick & Co (MKC): It will be interesting to get some flavour into how inflation is affecting consumer demand for packaged foods and spices, especially in the face of higher raw material costs, developments in international markets and the impact of global trade disruptions.
· GameStop (GME): Key topics for meme stock GameStop include the transition from a physical retailer to a more digital, e-commerce-based model, performance of its NFT and cryptocurrency initiatives, and profitability and how effectively it is managing its large inventory of unsold products.
Labour & Workforce
· Cintas Corporation (CTAS): Cintas provides uniform and workplace services, and its earnings report will be interesting as it reflects workforce trends and demand for employee services.
· Paychex (PAYX): Payroll services provider Paychex’s performance will be viewed in light of shifting labour market conditions and could give signal to wider economic conditions such as wage growth trends and labour market tightness.
Macro Environment & Industrial
· Ithaca Energy (ITH): Ithaca Energy is an oil and gas producer, and its earnings report will be key for understanding the effects of energy prices.
· Smiths Group (SMIN): Smiths Group operates in industrial technology and its earnings report will be notable for its efforts to improve operational efficiency. The company is in an upgrade cycle and has raised its own guidance twice. It is also looking to sell its Smiths Interconnect business.
· Bellway (BWY) & Vistry (VTY): Bellway and Vistry are both UK homebuilders, and their earnings report will be significant for understanding housing demand and the impact of rising construction costs. The health of the UK housing market and the challenges builders face in a rising cost environment, will be watched.
Conclusion
Markets remain highly sensitive to macroeconomic data and geopolitical developments. With inflation concerns, interest rate speculation, tariffs and Ukraine peace negotiations driving sentiment, key economic releases, central bank commentary and chatter from the oval office will be closely assessed and debated. Following the shift in capital flows away from the U.S. into Europe and China there has been a buying opportunity in the large cap tech space, with support coming for the big names in recent days. As the structural growth opportunity remains, even amid the widely accepted narrative of slower economic growth, we could see further stability and support for the sector, especially as valuations have cooled for the likes of NVIDIA and Microsoft since the end of last year. At home, there will be lots to say when Rachel Reeves gives her spring statement. Let’s hope we don’t find it to be too ‘taxing’.
DISCLAIMER This article is for information purposes only and no part of it or its contents are deemed to be nor should be taken as advice. It does not constitute recommendations to buy or sell any securities mentioned. Past performance of investments is no guide to future returns and you may get back less than you invested. Capital at Risk.