US payrolls in focus, as weekly jobless claims fall to 50 year lows

1) US non-farm payrolls (Apr) – 08/05 –  Having seen payrolls growth go negative in February to the tune of 133k, we saw a strong rebound in March of 178k, prompted by a reversal of some of the factors that acted as a drag in February. The January number also saw a revision up to 160k thus serving to paint a rather erratic overview of how the US labour market has performed since the start of the year. While the BLS labour statistics have proved to be rather erratic the same cannot be said for the ADP jobs report which has been shown to be much less volatile, seeing growth for every month since November last year. Since December we’ve seen gains of 41k, 11k, 66k and 62k. Weekly jobless claims have also remained relatively low, averaging consistently below 220k since 7^th February this year, and falling to 189k, their lowest levels since 1969 at the end of April. What this tells us about the US labour market is that it still appears to be relatively tight, with the unemployment rate at 4.3%, although participation has seen a sharp fall since the end of last year from 62.4% to 61.9% the lowest level since November 2021, which suggests that some looseness may well be starting to creep in, even with a US economy that managed to see a rebound in annualised growth of 2% in Q1.   

2) UK Services PMI (Apr) – 06/05 – In the recent flash PMI numbers we saw a welcome pickup in private sector growth activity with services PMI seeing an improvement from 50.5 in March to 52.0. All so far so good, however far from being an indicator of economic improvement this pickup had all the hallmarks of businesses looking to front run significant supply chain price increases due to the conflict in the Middle East. This acceleration in cost pressures was the steepest in a single month since the index began in 1996, as sharp rises in fuel prices, as well as raw materials pushed costs higher. Furthermore, the rate of business activity in the service economy, while picking up from March, was still weaker than at the start of the year. Private sector employment numbers also decreased for the 19^th month running, although it did slow a little. Increases in costs also saw services companies push up prices at the fastest rate in over 3 years, while business optimism fell to its second weakest since December 2022.            

3) HSBC Q1 26 – 05/05 – When HSBC reported its full year results at the end of February the shares jumped to new record highs despite a 7% decrease in annual profits of $29.9bn. Profits after tax were down $1.9bn to $23.1bn. This decline was mainly due to impairment charges in relation to the recent Bank of Communications purchase. Full year revenues rose by 4% to $68.3bn, while declaring an interim dividend of 45c a share. Net interest margin rose by 3bps to 1.59%, while credit impairments also edged higher due to concerns over Hong Kong and mainland China real estate. All that aside the various businesses saw solid profits growth, with Corporate and Institutional Banking reporting a 38% rise to $11.4bn, with strong performances from the Hong Kong and UK businesses. The UK saw a 22.4% increase to $6.7bn, while HK returned $9.6bn, a 32% improvement. The bank also upgraded its ROTE outlook for 2026, 2027 and 2028 to over 17%, with 5% revenue growth out to 2028. In respect of 2026 the bank says it expects banking NII of $45bn, a modest rise from 2025’s $44.1bn, and ECL charges of around 40bps. Since then, we’ve seen a modest decline on the back of the increase in tensions in the Middle East, however since finding a modest base in March the shares have rallied, although we remain short of the peaks seen at the end of February.    

4) Next Q1 27 – 06/05 – Having seen their shares slide to 6-month lows towards the end of March, in the wake of the outbreak of hostilities in the Persian Gulf, the shares have undergone a modest rebound since then. The share price weakness started at the start of January amidst a backdrop of concern over UK consumer confidence as well as spending power, as well as concern over the impact that rising prices could have on consumer demand in the weeks and months ahead. Since those lows, we’ve managed to see a modest rebound, helped in some part by a decent set of full year results which saw the retailer announce a final dividend of 181p per share, taking the total dividend to 268p per share. Group profits before tax came in at £1.16bn, an increase of 14.5%. Next full price sales were up 10.9%, while total group sales rose by 10.8% to £7bn, with statutory revenues rising by 12.8%. On guidance for 2026 Next raised its pre-tax profit guidance to £1.2bn, while keeping full price sales guidance growth unchanged at 4.5%. Management went on to cite some risks to this in the form of additional costs that could arise from the current situation in the M/E allocating £15m aside for that. They went on to say that as far as further out is concerned they aren’t in a position to make any further predictions or assumptions, given the uncertainty over future supply chain disruptions and freight rates, and would offer more clarity this week. 

5) Diageo Q3 26 – 06/05 – Having got off to a solid start to 2026 Diageo shares fell sharply after reporting a set of disappointing H1 results. Organic net sales fell 2.8% to $10.5bn, due to weakness in North America and China. Operating profit was down 1.2% at $3.12bn. The main reason for the decline was a 50% cut in the dividend to 20c a share, and a cut in full year guidance, as new CEO Dave Lewis looked to shore up the balance sheet and in essence get all the bad news out in the open. Its guidance for 2026 was cut to a decline in organic net sales of between 2-3%. One of the main problems Diageo has had in recent years has been meeting demand, particularly for its Guinness brand which saw sales in North America rise 15% in H1, but which has seen the business struggle to meet demand, as most recently over the Christmas period, which saw shortfalls in supply. Of course, the cut in the dividend is unwelcome, as is the cut to guidance, however it’s not as if the shares haven’t fallen significantly already. If Diageo can sort out its supply chains and deliver more growth in the markets it is doing well in, then it could be argued that the shares are cheap. Of course, that doesn’t mean they can’t get cheaper especially given the problems in the Middle East which is likely to push prices higher in the longer term. Notwithstanding the company has some very strong brands which could make the business vulnerable to a bid.

6) Shell Q1 26 – 07/05 – it seems a long time ago now since Shell published its Q4, and end of year results back in February, prompting the shares to slip back after the company reported profits which came in slightly below expectations. On the plus side the company did announce another $3.5bn share buyback as well as a 4% increase in the dividend. Q4 profits came in at $3.25bn, the weakest since 2021, and down 40% from a year ago. Profits were also down from Q3, while profits for 2025, fell to $18.5bn, down sharply from $23.7bn a year ago. This weakness was mainly due to the declines in both oil and gas prices, along with continued weakness in its Chemicals division. Cashflow was also lower for the year, dropping by over 20% to $42.86bn. Net debt rose to $45.7bn, up from $41.2bn. Since then, the shares have surged on the back of the outbreak of war in the Middle East and the surge in oil and gas prices which has seen the shares rise to new record highs just shy of 3,600p, although we have slipped back a touch from those peaks. In its recent Q1 production update Shell said that integrated gas production was expected to be between 880-920 kboe/d. Upstream production is projected at 1,760-1,860 kboe/d. Shell is also having to deal with the damage to its LNG facilities in Qatar following the Iranian attack on Ras Laffan which has seen the plant cease production, with the costs of that attack as yet unknown.  

7) Harbour Energy Q1 26 – 07/05 – Seen a decent performance in the Harbour Energy share price since the start of the year, with the shares getting a further lift in the wake of their full year numbers at the beginning of March. Free cash flow saw a sizeable increase to $1.1bn from $0.1bn the previous year. Record production of 474kboepd was an 84% increase on 2024, while unit operating costs fell 22%, helped by the Wintershall Dea acquisition. Revenues came in at $10.3bn, up from $6.4bn in 2024. Growth opportunities in Mexico and Argentina helped play a part, along with 3 acquisitions. Despite the significant improvement in revenues over the course of the past year, the company was still unable to turn a profit net of tax. Before tax the company posted profits of $2.8bn, over double that of 2024 when they returned profits of $1.2bn. After tax, losses almost doubled from -$93m to -$182m. The company said its effective tax rate came in at 106%. For 2026 Harbour said it expects production to average between 475-500 kboepd, slightly above current levels, while reducing its capex as it cuts UK activity further to focus on other markets overseas.        

8) IAG Q1 26 – 08/05 – With airlines at the front line so to speak when it comes to the impact of surging fuel price, as well as concern about shortages of jet fuel, recent updates from US carriers have offered some hope, however there is a concern that passengers will stop travelling unless these concerns start to diminish. Noone wants to risk travelling somewhere if there is a risk they could be stranded somewhere if airlines start to cut services over concerns about rising costs. In March IAG shares hit 9-month lows in the wake of the outbreak of kinetic action in the Middle East. At the end of February IAG reported a positive outlook for 2026, on the back of full year revenue of €33.2bn and a 22.3% increase in profits after tax of €3.34bn. Sadly events have moved on since then which means that expectations for revenue and earnings growth at high margins and high return on capital could be at risk, from higher costs. Assumptions for 2026 were an increase of capacity of circa 3%, and while the easter period may well have offered a boost the bigger concern is what happens over Q2 and Q3, even with fuel costs hedging of about 62% in the most recent guidance.    

9) Disney Q2 26 – 06/05 – Disney shares plunged in the wake of a fairly robust set of Q1 numbers which saw the company post a 5% increase in revenues of $25.98bn, and profits of $1.63 a share, or $3.69bn. The entertainment division posted a 7% increase in revenue of $11.61bn, while experiences contributed $10bn, an increase of 6%. Operating income, on the other hand, saw a 9% decline due to higher costs, as well as a decline in advertising revenue. Zootopia 2 was the stand out winner at the box office, doing particularly well in China. Domestic parks and experiences also posted a record quarter with growth of 8%, while sports saw a sharp decline in operating income to $191m. The sell off appears to have been driven by guidance for Q2 which was on the soft side, particularly with respect to parks and experiences with management expecting softer visitor numbers due to lower international visitors. These concerns don’t appear to have gone away since then with the shares falling to 10-month lows at the end of March. While some of that is undoubtedly down to the sharp rise in gasoline prices due to events in the Middle East, there’s also concern that a fall in international visitors won’t help it either. The streaming business appears to be on steadier ground with an expectation of $500m in Q2 operating income, up from $300m a year ago.

10) Uber Q1 26 – 06/05 - Uber shares took a dump in the aftermath of their Q4 numbers, despite a 22% increase in bookings and trips taken. Gross bookings increased to $54.1bn, helping to boost revenues by 20% to $14.4bn. Free cash flow also improved, increasing by 65% to $2.8bn. On an annual basis revenues pushed up to a record $52bn, an increase of 18%, with net income rising to $5.2bn, an increase of 32%. On guidance the ride sharing firm was upbeat, projecting gross bookings of $52bn to $53.5bn, an increase of 20%, however there seems to be some concern that where they are strongest in terms of market share, that they are susceptible to losing market share to the growth in autonomous vehicles like Waymo. While some of these concerns may well be justified there’s also the possibility, they are overstated with the shares finding some support just below $69. Call me old-fashioned but I prefer a person behind the wheel and while there is a growing market for AI autonomous vehicles it may take longer than people think to start taking huge chunks out of Uber’s market.