Update Equities: April was a bumpy ride
Trade tension has been the dominant factor in markets since the US laid out its trade policy intentions on 2 April. The risk-off reaction of financial markets was severe. Equity markets sold off, but most of these losses were recouped after Trump pushed the pause button on 9 April. What hasn’t reverted is the weakness of the US dollar.
Uncertainty concerning trade policy is still present and this can be observed in the comments and guidance that companies are sharing with investors during this very busy earnings week. Companies are responding in different ways. In the automotive sector, both Stellantis and Mercedes-Benz withdrew their full year outlook due to the uncertain environment. Volkswagen largely left its guidance unchanged, but warned that tariffs have not been factored in. Porsche significantly cut 2025 expected earnings, but this move also does not include the full potential of the Trump tariffs. It is clear that the financial visibility of the automotive industry is very low.
Within the health care sector, AstraZeneca’s results were below expectations on revenue but slightly better regarding earnings, partly due to strong cost control. The company also flagged that the vast majority of AstraZeneca's drugs sold in the US are already manufactured there, with the rest currently being transferred. Pharma peer Novartis was able to deliver very solid results. Earnings, in particular, surprised due to strong operating leverage. After the strong start to the year, Novartis increased its full-year guidance in terms of both its top and bottom lines.
Software behemoth Microsoft delivered robust results. The growth of Azure, its cloud business, was surprisingly strong as additional capacity came online. The guidance for the fiscal fourth quarter was strong as well. Meta also had a good start to the year. Revenue is growing convincingly, partly supported by investments in an improved ad-targeting model. The guidance came in well ahead of expectations as macroeconomic uncertainty seems to have had a lower impact then what investors feared.
In all, the earnings season so far is sending mixed signals on the impact of trade tariffs. But the overriding conclusion is that the road ahead will still contain some bumps.
Mark Weijers