Markets firm as earnings offset mixed macro signals

Market Commentary

European equities rebounded on Thursday, with the STOXX 50 up 1% and the STOXX 600 rising 1.30%, as sentiment improved on steady policy outcomes and slightly softer oil prices. Gains were underpinned by central banks maintaining a cautious but unchanged stance, alongside a more supportive risk tone across global markets.

The European Central Bank left rates unchanged but reiterated a data-dependent outlook amid persistent inflation and growth uncertainty, with President Christine Lagarde noting that a hike was actively debated. The Bank of England also held policy steady, though Governor Andrew Bailey cautioned that a “forceful” response could still be required if economic fallout from the Iran conflict escalates. Macro data reinforced the mixed backdrop, with Eurozone inflation accelerating to a 2.5-year high of 3% in April, while Q1 GDP growth unexpectedly slowed.

Against that backdrop, earnings drove dispersion across European equities. Rolls-Royce surged 7.30% on maintained guidance, Standard Chartered gained 5% on record profits, and Unilever, Glencore, ArcelorMittal, and Volkswagen all advanced more than 1%. Despite the volatility in macro signals, European indices still closed April firmly higher, with the STOXX 50 up 5.50% and the STOXX 600 rising 4.70%.

The improved global tone carried into the US, where equity futures extended their recent rally as investors largely looked past geopolitical risks and refocused on earnings momentum. S&P 500 and Nasdaq contracts hovered near record levels, while Dow futures edged higher. Apple led pre-market gains, rising more than 3% after strong results and an upbeat outlook driven by robust iPhone demand and resilient performance in China. Energy majors also traded firmer, with ExxonMobil and Chevron both edging higher after beating first-quarter profit expectations.

Big tech remained in focus, with hyperscalers broadly higher following Wednesday’s earnings as markets continued to assess whether rising AI-related capital expenditure is being matched by genuine demand. Recent data showed AI investment was a key contributor to US GDP growth in Q1, helping offset softer private consumption and reinforcing the sector’s central role in growth dynamics.

In Asia, Chinese equities closed mixed on Thursday, but still delivered a strong April performance overall. The Shanghai Composite edged up 0.11% to 4 112, holding near a one-month high, while the Shenzhen Composite slipped 0.09% to 15 108. For the month, sentiment remained firmly constructive, with the Shanghai Composite rising 5.66% and the Shenzhen Component surging 12.09%, supported by stronger-than-expected PMI data and sustained strength in technology stocks.

Macro data added further support, with official manufacturing PMI at 50.3 in April, beating expectations, while a private survey rose to 52.2 — its highest level since December 2020. Policy buffers, including strategic petroleum reserves and continued investment in renewable energy, also helped cushion the economy against external shocks linked to Middle East tensions.

South African markets ended Thursday mixed, with the FTSE/JSE All Share Index slipping 0.47% to 113 865.92 points as commodity volatility weighed on sentiment, while the Top 40 gained 1.15% to around 107 229. Brent crude edged higher to $114.66 per barrel, while gold declined 1.09% to $4 553.18 as geopolitical tensions eased marginally. The rand weakened to 16.79/USD, pushing 10-year bond yields to a four-week high of 8.89% amid inflation concerns, with resources under pressure despite resilience in financials and industrials.