After April turbulence, what comes next?

Having come to the end of April the fact we’ve been able to shrug off most of the large losses seen at the start of the month should be considered as a win.

The big question now is whether we can kick on from here, and revisit the highs seen in March, and that remains an unanswered question.

Having round tripped from lows of 7,538 in April the FTSE100 has managed to regain the 8,400 level to only close down 82 points on the month, which is no mean feat. If we can stay above that then we could see a revisit of the peaks seen earlier this year

Similarly, the German DAX actually managed to finish April slightly higher, despite a low of 18,815 at the start of the month.

US markets also managed to recover some of their losses, however in some cases the rebound remains questionable, given that the Russell 2000 finished lower for the 3rd month in a row.

The Nasdaq 100 proved to be an exception, finishing April higher while the bond markets also settled down after a turbulent month which saw President Trump dial down his tone after announcing a 90-day pause on his tariffs, and dialling back his earlier strong criticism of the Federal Reserve Chairman Jay Powell. 

While the 90-day pause has bought markets some time, there is still considerable uncertainty around the economic damage recent events have done to confidence more broadly. There is little question that the growth outlook has darkened but on the flip side of that interest rate cut bets have increased and this may help to explain much of the recent rebound in stock markets. 

There seems to be a rising expectation that we will see more chances of multiple rate cuts than was the case a month ago.     

This week has also been doubly important in that it has given markets an insight into how much damage recent market turmoil and a loss of consumer confidence has had on company earnings, as well as plans for future investment and guidance about the future.

All told it’s not as bad a picture as had been feared, albeit there have been some notable exceptions, with BP in the UK disappointing investors, while in the US, fast food chain McDonalds saw its US sales fall the most since the pandemic, falling 3.6% year on year, and the second quarter in succession that US sales have slipped back. This slowdown prompted a 3% decline in revenue to $5.96bn, while net income fell a similar amount to $1.87bn.      

This week’s results and broad overview

AstraZeneca – decent set of Q1 numbers – 7% increase in revenue to $13.6bn and a 34% rise in profits. Strong performance in Oncology with a 10% increase in revenues there driven by sales of cancer treatments Tagrisso, Imfinzi and Enhertu. The only cloud was that the company may well be liable for a penalty in China over illegal drug importation allegations. Guidance unchanged.

Rolls-Royce shares popped higher after the company reaffirmed its full year guidance of underlying operating profit and free cash flow of between £2.7bn and £2.9bn in a trading update issued at its AGM today saying that any tariff impact can be mitigated. Long term EFH are now at 110% of 2019 levels. Certification of new blades for the Trent 1000 engine which will double the life span of the engine expected soon.

New engine for Airbus A359-900 certified in April.

Final tender to Great British Nuclear submitted in April for SMR with a decision expected in June. Given recent events in Spain and Portugal’s power networks one would hope that the UK government will approve this, so that the project can move forward.   

Primark owner Associated British Foods shares tanked this week, having pushed up to their highest levels since December last year earlier in the week.

The sell off was on disappointment over the performance of its sugar business, which left a bitter taste, after H1 revenues fell 2% to £9.5bn, and profits before tax fell 21% to £692m.

All the other businesses performed well, with low sugar prices and losses in the ethanol business dragging on performance, and set to post an operating loss of £40m this financial year.

The Primark business saw decent growth in all of its businesses except the UK, which makes up 46% of overall sales, with a 4% decline. The US, which makes up 5% of sales saw growth of 17%, and Spain and Portugal which make up 18% of sales, an 8% increase, and France and Italy 4% increase on a 16% of sales.

Barclays – despite seeing a 19% increase in pre-tax profits to £2.7bn in Q1, Barclays saw its shares give up their early gains on Wednesday, with the numbers unsurprisingly seeing a strong boost from its investment banking and trading business which saw a 16% increase in revenues to £3.87bn.

Equities trading saw revenues increase by 9% to £963m, while FICC rose 21% to £1.7bn. Advisory was the only weak spot revenues declining 3%

Total income rose 11% to £7.7bn with the UK bank also enjoying a good quarter as revenues rose 14% pushing above £2bn. Costs were also higher, rising 7%, although some of that was down to absorbing the assets of Tesco Bank.

Credit impairments were also higher at £643m, with the bank citing US macro uncertainty and the migration impact of Tesco Bank's assets.

One notable item from the Barclays UK results was that 30- and 90-day arrears remained low at 0.7% and 0.2% respectively. Loans and mortgages to customers rose by £1.9bn to £209.6bn while customer deposits were down by £1.1bn at £243.1bn. 

Guidance unchanged

HSBC’s Q1 results were somewhat of a mixed bag after the bank reported a sharp decline in both Q1 revenues and profits. The main reason for the fall in revenues and profits was down to the fact that in the same quarter last year there were one-off gains due to the sale of its operations in Canada and Argentina.

Profits after tax fell to $7.57bn, down from $10.8bn, while revenues were also lower, falling to $17.65bn, down from $20.75bn. The bank went on to announce a share buyback of $3bn.

Stripping out those one-off effects, the underlying numbers, while net interest margin was lower at 1.59% from a year ago, it was 5bps higher compared to Q4 24.

Reported profits at HSBC UK fell by £100m in Q1, falling to £1.71bn, while the Hong Kong business saw profits increase to $6.12bn. from $5.46bn.

On tariffs and their effect, the bank said that they had seen significant drops in volume in the US-China trade corridor, saying they expected to see up to $900m in credit losses.

The bank said its on track to deliver up to $1.5bn of annual savings by the end of 2026, incurring an initial $1.8bn in severance costs.

CEO Elhedery was at pains, along with the CEOs of NatWest, Lloyds and Santander in calling for Chancellor Rachel Reeves to rip up the ring-fencing rules that stop UK banks from leveraging their deposit bases to fund riskier investment banking activities.

Interestingly Barclays CEO Venkat pushed back against that call, saying the cost of the rules was a small price to pay for the depositor protection it afforded as well as the peace of mind it afforded to consumers in general. In this he’s probably right given the recency of the financial crisis.

On a political level the rules give peace of mind to consumers, even if they aren’t the best way to police the banks behaviour, and it’s not as if the banks haven’t been able to adapt to them in a way that has held back their profits.                

Lloyds Banking Group shares slipped back modestly after the lender reported a drop in Q1 profits after tax to £1.13bn, down from £1.2bn a year ago.

This was due to the setting aside of a higher than expected £309m in respect of impairments, with the bank adding that £100m of that charge is in respect of adverse downside risks with the potential impact of US tariffs.

On every other metric the bank looks in good shape, NII rose to £3.2bn, a rise of 5% on last year, while total income rose 7%.

Interestingly net interest margin rose to 3.03%, higher than a year ago as well as being higher than in Q4 last year. Something to be said for higher gilt yields after all.

Customer deposits rose by 1% in the quarter to £487.7bn, from £482.7bn.

Loans and advances to customers rose to £466.9bn a rise of £7.1bn from the end of last year, with mortgages accounting for £4.8bn of that.    

Reaffirmed 2025 guidance of underlying NII of £13.5bn, and operating costs of £9.7bn.

BP Q1 results weren’t a particularly slick set of numbers, the shares falling sharply after the oil company announced a 48% decline in profits to $1.38bn from $2.7bn a year ago.

The main drag was in weaker than expected gas trading and refining

Profits attributable to shareholders fell from $2.26bn to $687m, although at least it was an improvement on the almost $2bn loss in Q4.

In a further sign that BP is serious about turning its focus back to hydrocarbons the company announced that its sustainability chief Giulia Chierchia would be leaving on June 1. Better late than never I suppose but at least it shows that Elliott Investment Management is starting to get the change it has been calling for.

Investors still remain unconvinced however with the shares slipping back.

The outlook for Q2 doesn’t look much better either with BP saying that a maintenance program in Q2 will likely mean lower production as well.

The company also announced a further $750m share buyback with little guidance on whether we’d see further buybacks in subsequent quarters.

While BP says it is looking to boost asset sales to $4bn and is looking to cut spending by $500m, restating its capex targets for 2026 and 2027 the jury remains out as to whether current CEO Murray Auchincloss is the main to take the business forward.

Its debt levels remain too high and rose to almost $27bn in Q1, $3bn higher than Q4, and $2bn higher than a year ago.

BP has a target to reduce that net debt number to between $14bn and $18bn by the end of 2027, which is a big ask when you look at how the business has performed over the past 2 years.

While some of that can be funded from disposals the rest will need to be funded by improved margins, cash flow and revenue. Oil production and operations were its key revenue earner in Q1 but even here profits were lower, at $2.9bn.

Travis Perkins shares enjoyed a boost earlier this week after its Q1 trading update was slightly better than expected, although given the low expectations after the recent annual report, anything remotely positive was always likely to be seized upon. Even so the numbers still weren’t great with its Toolstation division doing the lion’s share of the heavy lifting. Group revenue fell 2.4% with the merchanting division seeing a 3.5% fall. Toolstation on the other hand reported a 2.8% rise.

Alphabet’s Q1 results saw a 4% increase in revenues to $90.23bn with incomes from search and advertising holding up well, rising to $50.7bn, up from $46.15bn a year ago. YouTube ads came in at $8.9bn, a $900m increase in Q1 24.

Google Cloud also saw a big jump rising to $12.26bn, up from $9.5bn in Q1 last year.

Net income also saw a big jump, rising 46% to $34.5bn from $23.6bn.

Operating margins also improved, rising from 32% to 34%, despite losses in its other bets division, which includes Waymo, increasing to $1.23bn.

These increased losses appear to be due to increasing capacity in its San Francisco, LA, Phoenix and Austin regions.

Capex guidance of $75bn for 2025 was kept unchanged, while the board announced an additional $70bn share buyback.

Microsoft shares popped higher after reporting another set of strong quarterly numbers. Q3 revenues comfortably beat expectations, coming in at $70.1bn, up 15% well above the $68bn forecast and profits of $3.46 a share, that’s $25.8bn.

Azure and other cloud services saw revenue growth of 33% while all other business areas saw sizable improvements in revenue.

Microsoft cloud revenue added $42.4bn across various different business areas including Personal computing which saw a 6% increase in revenue to $13.4bn.

Guidance was also strong with Q4 expected to deliver revenue between $73.15bn and $74.25bn

Azure revenue guidance was increased to between 34% and 35%.

Microsoft, like its peers intends to spend heavily on data centres with $80bn earmarked for the current fiscal year, although higher costs could impact this due to tariffs. Capex in the quarter rose 53% to $16.75bn.

Meta shares also edged higher after reporting another strong quarter from its Family of Apps division. Total revenue came in at $42.3bn a rise of 16% with net income rising 35% to $16.6bn or $6.43c a share. Revenue from FOA came in at $41.9bn, an increase of almost $5bn, generating an income of $21.7bn. The Reality Labs division saw losses increase to $4.2bn.

The company also raised its capex forecast for the year to between $64bn and $72bn as it looks to push on with investment in AI.

On the outlook Meta said it expects to see Q2 revenue of between $42.5bn and $45.5bn.