HL LIVE
HL commentary as it happens
Tuesday 5th May
US stock futures edge up
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%.
Oil prices hover at four-year highs
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.
FTSE 100 futures flat
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.
Friday 1st May
Gold caught between two opposing forces
Gold is caught between two powerful forces. A weaker dollar is giving it support, but the prospect of higher-for-longer interest rates is stopping the rally from really catching fire. Bullion is holding above $4,600 an ounce after reports of Japanese currency intervention knocked the dollar, but the bigger backdrop is still the Middle East, where fading hopes of a US-Iran peace deal and a closed Strait of Hormuz are keeping energy supply fears firmly in play. If tensions stay high, gold’s safe-haven appeal may stay intact, but the rate story means this is not quite the one-way trade it might usually be in a geopolitical shock.
Global markets trade higher on earnings optimism
Global markets are in one of those strange phases where the news looks messy, but the tape looks almost bulletproof. The FTSE 100 opens slightly down after a strong session yesterday, while US futures are pointing to more of the same after the S&P 500 and Nasdaq hit record highs last night, with Wall Street also coming off its strongest monthly gains since 2020. The message from investors is clear: this earnings cycle matters more right now than the Middle East stalemate, higher oil prices, or the inflation risk that comes with them. An AI super investment cycle is, of course, playing a major part, but this isn’t just another tech-led earnings rally, with beats coming through across healthcare, industrials, consumer staples and beyond. If oil stays in the $100 a barrel range for an extended period, the broader economic costs will eventually be harder to ignore, but for now, earnings are the bigger fish, and markets are happy to keep swimming with the current.
Thursday 30th April
MPC cites war in Iran, and likely impact on inflation and growth
Our house view is that the rate is held whilst the conflict is active, and the Strait of Hormuz restricted. However, we recognise that there’s significant continued uncertainty and that volatility in the gilt market is expected to continue. We think, unlike in 2022, the weaker jobs market constrains the likelihood of wage inflation. But the Bank of England is unlikely to cut base rate until later in the cycle. We additionally think a domestic recession is unlikely, though note that the outlook for UK growth is anaemic, and recently downgraded by the IMF, which will impact consumer confidence.
Bank of England holds rates at 3.75%, voted by a majority of 8–1
The Bank of England’s decision to hold rates today at 3.75% is very much as the market expected. Only the Bank’s economist Huw Pill voted to raise rates, against 8 other members who voted to hold. The Bank has also released scenario analysis related to the war in Iran, and the effect on inflation and economic growth. Their most likely scenario recognises that the conflict has impacted prices and would continue to do so, but that for now it was sufficient to monitor markets rather than act on rates. Gilt yields have fallen on the news. Markets were concerned that the vote would be more divided, and that the forward guidance starker.
Oil prices at four year-highs
Brent crude prices have risen to over $113 per barrel, levels not seen since 2022, after President Trump rejected Iranian proposals to re-open the Strait of Hormuz and speculation mounts on the resumption of military action by US forces. A bigger than expected 6.2 million barrel drawdown of US crude inventories last week has also contributed to the squeeze on prices.
US PCE, GDP, and jobless claims in focus later today
The personal consumption expenditure (PCE) index will provide a key touchpoint to determine how tariffs and the Iran conflict are feeding through to prices. The oil price spike means the headline number is forecast to rise sharply from 2.8% last month to 3.5% on an annualised basis. Core PCE which excludes food and energy is expected to show a more modest 0.2 percentage point expansion to 3.2%. Initial Q1 GDP data will be released simultaneously and is expected to show a rebound from 0.5% in Q4 2025 to around 2.4% but it’s not necessarily a sign of universal optimism. The numbers are likely to be inflated by government spending, with the prior quarter still feeling the effects of the Washington shutdown. AI investment is also providing a tailwind, but consumer sentiment remains fragile. Given the complex puzzle that makes up GDP, labour market data could provide a more reliable indicator of economic health, with consensus forecasts pointing to stability in weekly jobless claims which are expected to come in just under the 214,000 reported last week.
FTSE 100 opens slightly up, Bank of England rate decision due at midday.
The FTSE 100 opened slightly up ahead of the noon announcement of the Bank of England’s monthly interest rate decision. We’re not expecting a change from the 3.75% baseline but will be keeping an eye on the vote split following a closer than expected vote by the Monetary Policy Committee’s counterparts at the Federal Reserve Bank yesterday. The post meeting press-conference will also be a key point of focus given the divergence between market expectations of a hike or two by the end of the year, and a consensus by forecasters that rates will remain steady until at least 2027. With 10-year gilt yields now over 5%, the highest since the Great Financial Crisis, the Treasury will also be hoping for a more doveish outlook on borrowing costs.
Wednesday 29th April
All eyes on the US – Federal Reserve interest rate decision and conference
S&P 500 futures are also trading flat this morning. The Federal Reserve is due to deliver its latest interest rate decision today, with no change widely expected. The inflation picture remains uncertain, progress had been encouraging prior to the escalation of conflict in the Middle East, but the situation has since become more complex. The Fed, in common with other major central banks reporting this week, including the Bank of England tomorrow, is expected to hold steady until greater clarity emerges. The longer the conflict persists and the Strait of Hormuz remains disrupted, the more pronounced the inflationary pressures are likely to become. I’ll be listening out for Powell’s comments on this and any concerns on what central bankers call ‘second round effects’ from higher prices – that’s when they worry about higher costs feeding into higher wages and inflation becoming more embedded. It’s expected to be Powell’s last as Fed chair.
Brent crude hovers $110 per barrel as UAE signals leaving OPEC
The UAE has confirmed its departure from OPEC, a move that has been anticipated for some time, though the timing is notable. As one of the few producers within the cartel capable of rapidly scaling output up or down, the UAE has long been a strategically significant member. However, its ambitions have increasingly diverged from those of Saudi Arabia, OPEC’s dominant force. Riyadh has consistently favoured supply restraint to support elevated prices and meet its substantial fiscal requirements. The UAE, a smaller but wealthier nation accounting for approximately 3.5% of global supply, would like to prioritise higher production volumes and a faster transition away from hydrocarbon dependency in preparation for a post-carbon economy. This strategic divergence has ultimately proved irreconcilable.
Despite the news, oil prices have remained broadly flat this morning, prices nonetheless remain well elevated relative to historical norms. The blockade of the Strait of Hormuz continues to be a significant overhang, and US-Iran peace talks appear to have stalled. Issues spread beyond the oil price itself: it's about LNG, availability of refining capacity and the ability to ship vital supplies to several sectors such as helium for semiconductors, urea and ammonia for fertilisers for the agricultural sector.