Shares rally for a third day on tech optimism

General market commentary

U.S. equity markets closed sharply higher on Thursday, with the S&P 500 posting its third consecutive daily gain of over 1.5%, driven by strong performances in the technology sector. The Nasdaq Composite surged 2.7%, while the Dow Jones Industrial Average also advanced by 1.2%. Investors were encouraged by positive economic data, such as better-than-expected durable goods orders for March and a decline in jobless claims, which pointed to a healthy labour market. Market sentiment was further lifted by indications that the U.S. may be looking to ease tensions with China, though no official details have been released.

Despite the recent rally, uncertainty surrounding U.S. trade policy remains a key focus, with ongoing discussions about potential tariff reductions and President Trump's previous comments regarding Federal Reserve Chair Jerome Powell. While investors are cautious, the fundamentals remain supportive, with first-quarter earnings for the S&P 500 expected to grow by around 7%. Although economic growth appears to be slowing, there are no immediate signs of a recession, and the current economic backdrop, alongside a healthy labour market, provides some optimism for the months ahead. However, ongoing trade negotiations could continue to introduce volatility into the markets.

Latest market and economic update

Most Asian equities advanced on Friday, led by Japan’s Nikkei 225, boosted by optimism over U.S.-China trade talks and strong earnings from Alphabet. Tech-heavy markets like Hong Kong’s Hang Seng and South Korea’s KOSPI also rose, while Chinese shares lagged amid concerns over the trade war’s long-term impact and mixed signals on trade talks.

U.S. equity futures rose overnight, driven by strong quarterly earnings from Alphabet, which sparked a rally in tech shares, including Nvidia, Tesla, Meta, and Amazon. Investor sentiment was also supported by hopes of a potential Federal Reserve rate cut, although mixed signals from the Trump administration on trade talks with China continued to weigh on market outlook.

European markets ended higher on Thursday, supported by strong performances from automakers and materials shares, with the pan-European STOXX 600 index rising 0.4%, aided by investor optimism around potential U.S.-China tariff reductions. Key movers included Renault, which gained 4.4%, while BNP Paribas and Nokia weighed on the market, with the latter falling 9.4% after missing profit expectations.

The US dollar edged higher on Friday following a volatile week driven by President Trump's mixed messages on trade and Federal Reserve policies, with investors uncertain about the progress of U.S.-China trade talks. Despite some optimism from early negotiations with Japan and South Korea, the dollar’s gains remained limited, with the currency index set for a modest rise of 0.27% for the week, snapping a four-week losing streak, while the EUR/USD traded at 1.1341.

Oil prices rose slightly on Friday but were still set for weekly losses, weighed down by expectations of increased OPEC+ supply and ongoing uncertainty over U.S.-China tariff talks. Geopolitical tensions, particularly the escalation of the Ukraine conflict, provided some support to prices, with concerns over potential disruptions to global energy markets.

President Trump claimed that the U.S. was in ongoing trade discussions with China, although the details were not disclosed. However, China’s Foreign Ministry spokesman Guo Jiakun denied this, stating that no talks were taking place, while the Chinese Commerce Ministry urged the U.S. to remove all unilateral tariffs and show sincerity for any potential deal.

Federal Reserve officials, including Cleveland President Beth Hammack and Governor Christopher Waller, suggested that interest rate cuts could be possible if data shows tariffs are negatively affecting the economy, particularly the job market. This contrasts with Fed Chairman Jerome Powell’s more cautious stance, as he has advocated for waiting for clearer signals before adjusting policy, a position that has drawn criticism from President Trump.

Equities on the move

The following companies experienced moves in their share price driven by analyst ratings, quarterly earnings, or other news:

Alphabet's first-quarter results exceeded expectations, with a profit of $2.81 per share and revenue of $90.23 billion, driven by strong growth in its advertising business and cloud services, with AI investments boosting its ad revenue and search offerings. The company also announced a $70 billion share buyback and reaffirmed its ambitious AI plans, despite concerns over macroeconomic uncertainty and U.S.-China trade tensions.

Intel issued a cautious Q2 revenue forecast, expecting a decline of up to 12% year-on-year, citing economic uncertainty and the impact of tariffs, while outlining cost-cutting measures and leadership restructuring. Despite better-than-expected Q1 results, the company warned of a slowdown in demand and supply chain challenges, while focusing on long-term product competitiveness and AI development to drive future growth.

T-Mobile added 495,000 monthly bill-paying subscribers in Q1 2025, missing Wall Street's expectation of 506,400, leading to a more than 5% drop in its shares after hours. Despite this, the company reaffirmed its annual wireless subscriber forecast and raised its adjusted EBITDA outlook for 2025, signalling confidence in its growth strategy amid growing competition and tariff uncertainties.

Procter & Gamble announced it would raise prices on some products to offset rising input costs from the trade war, while also lowering its annual forecasts due to reduced consumer spending amid economic uncertainty. The company warned that tariffs, particularly the 145% duty on imports from China, could cost it up to $1.5 billion annually, and it now expects flat net sales for 2025, down from its previous growth forecast.

Freeport-McMoRan reported a slight first-quarter profit beat but warned that proposed U.S. tariffs could increase material costs for its U.S. mines by about 5%. Despite a 20% drop in copper production, higher commodity prices and strong demand from the U.S. and China helped offset the decline, with copper prices rising by 10.7% during the quarter.

Brazilian miner Vale reported a 17% decline in Q1 net profit to $1.39 billion, falling short of analyst expectations, due to lower iron ore prices, despite improved cost management. While the company benefited from cost-cutting measures and a stronger Brazilian real, a 16% drop in iron ore prices led to a 4% decline in net revenue, although it slightly exceeded forecasts.

Bristol Myers Squibb reported higher-than-expected first-quarter revenue, driven by growth from its cancer immunotherapies, and raised its full-year forecast. Despite concerns over U.S. tariffs, the company maintained a resilient supply chain and saw strong sales for drugs like Opdivo and Yervoy, though overall revenue declined slightly year-on-year.

PepsiCo lowered its annual profit forecast, citing higher production costs and weak consumer spending due to the uncertainty surrounding U.S. tariffs, leading to its first quarterly profit miss in five years. Despite price increases, volume growth struggled, and the company plans to mitigate higher supply chain costs while focusing on healthier ingredients and natural products.

Skechers withdrew its annual forecast and warned of significant impacts from rising tariffs, causing its shares to drop by 6.7% in after-hours trading. The company reported a 7.1% sales growth in the first quarter, below expectations, with a 16% decline in China sales, and highlighted the difficulties of making strategic decisions amid the ongoing trade uncertainty and tariff increases.

IBM's shares dropped nearly 7% after the company revealed the suspension of 15 government contracts, resulting in a loss of about $100 million, alongside challenges in its consulting business due to an uncertain economy. Despite a 2% revenue decline in consulting, IBM maintained its 2025 growth target, while analysts highlighted the importance of its software unit, which showed modest growth but fell short of expectations.

Mobileye Global forecasted a surprise 7% revenue growth for Q2 and stated it would not face direct impacts from U.S. tariffs, thanks to its simple supply chain. While the company remains insulated from tariff costs, it cautioned that any slowdown in global vehicle production or shifts in consumer spending could still affect its performance.

BNP Paribas CEO Jean-Laurent Bonnafe remained optimistic about capitalising on opportunities arising from the trade war-induced slowdown, despite mixed first-quarter results that saw a decline in net income and rising costs. While the bank's investment banking division performed well, its retail operations struggled, and investors were concerned about the uncertain outlook, with shares falling by 2.2%.

Saint-Gobain reported a 3.2% increase in first-quarter sales to €11.7 billion, driven by improved volumes and recent acquisitions, with a forecast for gradual recovery in the European construction market in the second half of 2025. Despite a 0.3% decline in like-for-like sales, the company highlighted growth in certain regions, including Northern Europe and Latin America, and maintained its full-year guidance with an expected operating margin above 11%.

Carrefour reported a 2.9% like-for-like sales growth in the first quarter, with strong performances in Brazil and improvements in its French market due to price cuts aimed at cash-strapped shoppers. The company reaffirmed its 2025 profit and cash flow targets, noting that its local business model limited its exposure to international tensions, and highlighted its ongoing cost-saving plan to support price reductions.

Renault reported a slight 0.6% increase in first-quarter revenue to €11.68 billion, driven by strong sales of new models like the electric Renault 5 and Duster SUV, although it fell short of analyst expectations. Despite challenges from exchange rates and reduced dealer inventories, the company confirmed its target of a 7% operating margin for 2025, with a notable increase in EV sales, which now make up 13% of total sales.

American Airlines withdrew its 2025 financial forecast due to growing economic uncertainty and the impact of escalating trade tensions, following similar moves by other major carriers. Despite a smaller-than-expected first-quarter loss, the airline faces challenges from higher costs and cautious consumer spending, with second-quarter profit forecasts falling below analysts’ expectations.

Air India is in discussions with Boeing to acquire around 10 737 MAX jets, potentially redirecting planes that Chinese customers have rejected due to the trade war with the United States. The deal, still in early stages, could boost Air India's fleet and expansion plans, which have been hampered by delivery delays from Boeing and Airbus.

Uber shares rose over 5% after announcing a long-term partnership with Volkswagen to introduce fully autonomous, all-electric ID. Buzz AD vans on its ride-hailing platform, starting in Los Angeles. Testing will begin later this year, with commercial service set to launch in 2026, expanding to multiple U.S. markets over the next decade.

Italy’s Banco BPM rejected a €13 billion takeover offer from rival UniCredit, citing the proposed price as too low and unfair to its shareholders. UniCredit's offer, which involves a 9% discount to BPM’s market price, has been complicated by Italian government conditions and Banco BPM’s view that the deal would not provide a sufficient premium or benefit for its shareholders.

Morgan Stanley reduced its price target for ASML Holding to €640 from €680, citing weaker-than-expected Q1 orders, tariff concerns, and uncertainties around AI production cuts and China demand. Despite strong orders from China, the bank remains cautious, noting that the sustainability of demand and tariff impacts pose significant risks to earnings forecasts.

Bank of America lowered its price target for Apple shares to $240, citing delays in the AI rollout, rising supply chain costs, and tariff uncertainties, while maintaining its Buy rating. The bank also revised down its fiscal 2026 earnings and revenue estimates but remains optimistic about the potential for future product launches and a weaker US dollar boosting sales.

Upcoming data and events

Today's economic data includes the University of Michigan's Consumer Sentiment Index and the Baker Hughes rig count, which could influence market sentiment. Additionally, earnings reports from major companies like AbbVie, Colgate-Palmolive, and HCA Healthcare are set to be released, offering insights into various sectors.

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