Derren Nathan, head of equity research, Hargreaves Lansdown: “The FTSE 100 looks set for a sluggish return from the long weekend. This follows a tepid start to the week for European and US markets amidst a tense standoff in the Persian Gulf, and the resurgence of worries on tariffs levied by the US on its trading partners.
Sky-high oil prices continue to be a drag on sentiment as exchanges of fire between the US and Iran cast doubt on the durability of the month-long ceasefire. Brent Crude oil is steady at around $114 per barrel, after a rise of around 6% on Monday took prices to within touching distance of a four-year high.
The ongoing volatility gives further arbitrage opportunities to oil majors with well-developed trading arms. That includes Shell, which reports first-quarter numbers on Thursday. A strong trading result should take the edge off damage sustained to its Pearl GTL LNG facility, which has been offline since suffering an Iranian missile strike in March. That’s been offset to some degree by the ramp-up of LNG Canada, an area Shell’s decided to double down on, with the recently proposed $16.4bn acquisition of ARC resources. Given the even more complex-than-usual web of moving parts, markets will be paying particularly close attention to guidance for the second quarter and beyond.
Novo Nordisk is another big name to keep an eye out for this week. After previously holding the crown of Europe’s most valuable company, a string of disappointments has seen the valuation take a significant fall from grace. The launch of the Wegovy weight loss pill has been a bright spot, and so far, Eli Lilly’s competitor Foundayo doesn’t seem to be eroding Novo’s first-mover advantage. But the key question on investors’ lips is whether price reductions across its wider obesity and diabetes franchise have stimulated volume growth. That certainly was the case in Lilly’s results last week. Whether Novo’s followed suit sufficiently to return to the upgrades club remains to be seen.
US stock futures have edged up this morning. A robust first-quarter earnings season so far has seen the major Wall Street indices deliver double-digit returns over the last month, with, according to FactSet, the S&P 500 on course for its strongest quarterly earnings growth in over four years. Sector-wise, communications technology leads the way with blended earnings rising 53.2%.
Consumer stocks could prove to be the figurative fly in the ointment, but the key retailers aren’t on show until later in the month. Disney is one name to look out for this week. The Iran conflict shouldn’t have any meaningful effect on the viewing figures for Disney+ but commentary around the group’s theme parks and cruise liners should provide a steer on appetite for international travel and leisure experiences. The results also give new CEO Josh D’Amaro a chance to give some flavour of his plans to deliver value from company’s diverse business activities.
Shares in ARM holdings have been on a tear over the last month, receiving another small boost last week from Apple’s results, which showed good momentum for the iPhone. However, it’s the planned pivot towards selling chips rather than licensing designs that’s drawn much of the focus. The yet-to-be-launched AI-focussed AGI CPU targets a white-hot market, but it’s hard to see what ARM’s USP is here as NVIDIA enters the CPU race and hyperscalers look to increase the usage of bespoke solutions in their technology stacks.
Top-down drivers for the US outside of developments in the Middle East this week include consumer credit data, which is widely expected to show a pickup in Americans living on the never-never. Combine that with higher-for-longer rates, and the prospect of a credit bubble is likely to surface again. So far however, this is yet to have a major impact on the big lenders, with first-quarter credit quality at the US banks remaining broadly stable. Resilience in the job market is a key driver of credit health. With that in mind unemployment figures on Friday will also be closely watched, with consensus expecting a similar outcome to last month’s print of 4.3%.”
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