Trump eases concerns on tariffs and Powell

General market commentary

Equity markets enjoyed a strong rally on Tuesday, with all major U.S. indices rising by over 2.5%, driven by a mix of positive earnings reports, a more dovish tone from President Donald Trump, and easing tensions in the U.S.-China trade dispute. Trump’s remarks, in which he walked back his criticism of Federal Reserve Chair Jerome Powell and signalled a softer stance on China, helped lift market sentiment. Tesla saw a notable surge in after-hours trading, jumping 5.1% following CEO Elon Musk’s commitment to devote more time to the electric vehicle maker. In Europe, the market closed higher after European Central Bank President Christine Lagarde commented that disinflation in the region was nearing completion, further bolstering investor confidence. The first-quarter earnings season continued to deliver positive results, with many S&P 500 companies surpassing expectations, although analysts reduced their earnings growth forecast for the period to 8.1%, down from 12.2%.

In after-hours trading, futures pointed to further gains, with S&P 500, Nasdaq 100, and Dow Jones futures all rising by 2% or more, suggesting continued optimism as the market heads into Wednesday’s session. Despite ongoing concerns over tariffs and geopolitical tensions, there was a clear recovery in investor sentiment, helped by the positive earnings reports and hopes for a de-escalation in trade conflicts. Companies such as Verizon, Lockheed Martin, and Moody's exceeded expectations, setting an encouraging precedent for upcoming earnings releases, with Alphabet, due to report on Thursday.

Latest market and economic update

Most Asian equities saw sharp gains on Wednesday, driven by optimism from President Trump's comments about potentially lowering trade tariffs on China, although mainland Chinese shares remained largely unaffected. Hong Kong and Japan led the regional rally, while concerns over the ongoing trade war and a downgraded GDP forecast for China dampened sentiment on the mainland.

US equity futures saw a strong rise overnight, reflecting investor optimism after a positive session on Wall Street and easing concerns over U.S.-China trade tensions. President Trump remarked, "High tariffs on China will come down substantially, but it won’t be zero," which helped fuel hopes for a de-escalation in both trade disputes and Federal Reserve policy.

European shares edged up 0.2% on Tuesday, driven by gains in financial sharesand a 6.3% surge in L'Oreal after it posted stronger-than-expected first-quarter sales. However, sentiment remained fragile amid global trade concerns and U.S. President Trump's criticism of the Federal Reserve, with Novo Nordisk notably dropping after news of a rival's weight-loss drug trial results.

The US dollar rose sharply on Wednesday after President Trump backed away from threats to fire Federal Reserve Chair Jerome Powell, lifting investor sentiment. The dollar gained over 1% against the yen and Swiss franc, while it steadied around $1.14 against the euro, after trading near multi-year lows the previous day amid concerns over trade tensions and Fed independence.

Oil prices extended their gains this morning, driven by new U.S. sanctions on Iran and a significant decline in U.S. crude stockpiles, with Brent and WTI futures rising by 1%. Market sentiment was further supported by President Trump's retreat from his earlier threats against Federal Reserve Chair Jerome Powell and his optimistic comments on U.S.-China trade negotiations.

Bank of America has downgraded its China GDP forecast for 2025 to 4% from 4.5%, citing significant challenges from the ongoing trade war with the United States, including the impact of high tariffs. The bank expects weaker growth in the latter part of the year, though it anticipates that further stimulus measures from Beijing could help support the economy, despite risks of delayed action worsening the situation in 2025.

Russian President Vladimir Putin has proposed halting the invasion of Ukraine as part of a potential peace deal with U.S. President Donald Trump, according to the Financial Times. The proposal, discussed in a meeting with Trump’s special envoy Steve Witkoff in St Petersburg, suggests Moscow could abandon its claims to parts of four Ukrainian regions still under Kyiv's control, marking a significant development in peace talks.

Equities on the move

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

Tesla reported a 71% drop in net profit for Q1, missing Wall Street estimates, with a 20% decline in auto revenue, although margins were stronger than expected due to lower costs. Elon Musk announced plans to reduce his involvement in government efficiency projects and focus more on Tesla, while the company remains on track to launch an affordable car and robotaxi fleet, despite facing tariff-related challenges and uncertain global demand.

GE Aerospace reported stronger-than-expected first-quarter results, with adjusted earnings per share of $1.49 and revenue of $9.94 billion, surpassing analyst expectations of $1.26 and $9.77 billion, respectively. The company reaffirmed its full-year guidance, expecting adjusted EPS between $5.10 and $5.45 and free cash flow between $6.3 billion and $6.8 billion, sending its shares up by 2% in after-hours trading.

Enphase Energy missed first-quarter profit estimates due to softening U.S. demand and a metering reform in California, with shares dropping 9.9% in after-hours trading. The company forecast second-quarter revenue below market expectations, despite a 35% year-on-year increase in quarterly revenue to $356.1 million.

Intuitive Surgical warned that U.S. tariffs will increasingly impact its business this year, particularly disrupting operations in China and raising costs for its robotic systems, potentially affecting its competitive position in hospital contract negotiations. Despite these concerns, the company exceeded analysts' earnings and revenue expectations for the first quarter, though it lowered its 2025 profit margin forecast due to tariff impacts.

RTX warned that U.S. tariffs could reduce its 2025 profits by $850 million, causing shares to drop 8.5%, despite beating quarterly earnings expectations and reaffirming its full-year forecast. The company reported strong revenue from its aerospace units but saw a decline in its defence sales, with concerns over ongoing trade tensions and supply chain challenges.

Lockheed Martin reported a higher-than-expected first-quarter profit of $7.28 per share, driven by strong demand for its missile systems and fighter jets, with total revenue rising 4.5% to $17.96 billion. Despite challenges such as Canada's review of its F-35 contract, the company reaffirmed its annual forecasts, with optimism around defence spending and potential export rule changes.

Halliburton warned that second-quarter earnings would be impacted by tariffs and reduced oilfield activity in North America, with a forecasted 2-3 cent per share impact, sending its shares down by 5.5%. The company posted a lower-than-expected first-quarter profit of $204 million, but revenue of $5.42 billion exceeded analyst estimates.

MSCI reported a rise in first-quarter profit, driven by increased demand for its index products and analytics services amid market volatility caused by economic uncertainty. The company’s operating revenue grew by 9.7%, although higher expenses, including compensation and a larger workforce, led to a slight increase in costs.

L'Oreal's shares rose by up to 6.3% after its like-for-like sales growth exceeded expectations, driven by strong performance in China, although US sales showed a slowdown. Despite this, Deutsche Bank lowered its price target for the company, citing a cautious recovery reliant on a rebound in China and a potential slowdown in its fragrance business.

Shares of Bristol Myers Squibb fell 4.1% in extended trading, after its Phase 3 ARISE trial failed to meet its primary endpoint, with Cobenfy showing only a numerical improvement compared to placebo in treating schizophrenia. Despite this, the company plans further analysis and continued research into Cobenfy’s potential as an adjunctive treatment for schizophrenia and other neuropsychiatric conditions.

Intel is set to cut more than 20% of its workforce as part of a broader strategy under new CEO Lip-Bu Tan to streamline operations and shift towards an engineering-driven culture. The layoffs are part of a $10 billion cost-reduction plan aimed at addressing high costs, shrinking margins in Intel's core segments, and its lagging position in the AI chip market.

Roche announced it will invest $50 billion in the United States over the next five years, creating 12,000 new jobs, as part of a broader trend of companies responding to President Trump's tariff policy. The investment will focus on expanding manufacturing and distribution facilities, including a new plant for weight loss medicines and a continuous glucose monitoring facility, as Roche seeks to increase its U.S. production capacity.

UniCredit expressed concerns that Italy's conditions for clearing its bid for Banco BPM could impair its decision-making, warning that it cannot proceed unless these concerns are addressed. Despite this uncertainty, the market still values Banco BPM higher than UniCredit’s offer, and the bank is waiting for feedback before making a final decision on its $15 billion bid.

Elliott Investment Management has raised its stake in BP to over 5%, pushing for changes to the company's strategy, including a greater focus on free cash flow, capital discipline, and reduced spending on renewable energy projects. BP has acknowledged Elliott's increased stake and continues to push forward with its "reset strategy," but the move underscores growing investor dissatisfaction with the company’s direction under CEO Murray Auchincloss.

Oklo Inc announced that Sam Altman, CEO of OpenAI, would step down as Chairman of the Board, raising concerns about the company's future leadership. While the co-founders reassured investors about their strategic direction and ongoing partnerships, the transition has sparked uncertainty about the company's next phase of growth.

Shares of Hims Hers Health Inc. fell 1.9% after the FDA issued a warning about the safety of its compounded topical finasteride products, which are unapproved for market. The FDA's concerns over serious side effects and potential exposure risks have raised uncertainty about the future of these products, with analysts predicting potential pressure on the company's growth if patients are forced to switch to oral alternatives.

Shares of Duolingo rose 6.4% after the company announced its new chess course, marking the first new subject since it expanded to include math and music in 2023. The move reflects Duolingo’s strategy to diversify its educational offerings and tap into the large global chess market, with analysts predicting a modest positive impact on future bookings.

BMW will integrate artificial intelligence from Chinese startup DeepSeek into its new models in China starting later this year. CEO Oliver Zipse highlighted the company's focus on strengthening AI partnerships in China, where key advancements in the technology are taking place.

Wells Fargo has named McDonald’s its top restaurant pick for Q1, highlighting the company's defensive qualities and improving sentiment despite soft traffic and weak comparable sales. The firm expects Q1 earnings of $2.65 per share, slightly below the consensus, but remains positive on McDonald's outlook, maintaining an "Overweight" rating and a $350 price target.

Redburn Atlantic downgraded Stellantis and BMW to Neutral from Buy, citing rising tariff-related uncertainty and cost pressures that could impact earnings despite strong company execution. The analysts warned of significant earnings downgrades in the auto sector, with U.S. auto tariffs potentially costing manufacturers $19 billion, and lowered their price targets for both companies due to anticipated margin and sales challenges.

Bernstein downgraded eBay's rating from Outperform to Market-Perform, citing a “cloudy” short-term outlook due to a weakening market and tariff-related risks. The firm also lowered its price target to $65, warning that issues like China-sourced inventory could impact eBay's growth, particularly in the U.S.-China corridor.

Bernstein also downgraded Kraft Heinz to "Market-Perform" from "Outperform," citing ongoing market share losses in key U.S. brands like Lunchables, Kraft Mac and Cheese, and Capri Sun, despite some improvements in supply. The firm also lowered its price target to $31 from $34, expressing concerns over the lack of clear growth drivers and reduced EBITDA estimates for the upcoming quarters.

Upcoming data and events

Today's key economic data releases in the US include building permits, manufacturing and services PMIs, new home sales, and weekly EIA crude oil inventories. On the earnings front, reports are expected from tech giants IBM and Texas Instruments, along with mining company Newmont.

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