What has happened
Equities yesterday added another day to an impressive run of gains, wrapping up a volatile month. The US S&P500 and the pan-European STOXX600 equity indices have now both rallied for 7 days in a row, while the UK FTSE100 equity index has notched up 13 days in a row of gains and the FTSE100’s best run in over 8 years. Since the markets close on 2 April, after which the US unveiled its “liberation day” tariffs, those 3 indices are respectively now “only” down -1.80%, -1.76%. and -1.32%, all in local currency price return terms. Looking to the day ahead, strong numbers last night after the US close from megacap tech companies Microsoft and Meta are expected to help equity markets today, while attention will turn later on to Apple and Amazon results due after the US close later today.
US GDP weaker, but distorted by a big surge in imports
Yesterday saw the advance estimate for US calendar 1Q Gross Domestic Product (GDP) released. The data showed Quarter-on-Quarter (QoQ) annualised real (constant prices) GDP shrinking -0.3%, versus market expectations for small growth of +0.3% – it was well below Q4 2024’s +2.4% print and the average growth of close to +3% over the past 2 years. To caveat, however, within the data there was a big distortion from a surge in goods imports (where imports are subtracted from GDP), which clocked a QoQ annualised growth rate of +50.9% in Q1.
Microsoft and Meta deliver strong numbers and outlook
Microsoft and Meta (the parent company of Facebook) both delivered strong results after the US close yesterday, sending both companies’ shares up in after-market trading by over +5% each. On the outlook for artificial intelligence (AI), both companies signalled continued strong demand: for Microsoft, its Azure cloud computing division which includes AI spend, posted an estimate-beating +33% revenue growth; for Meta, the company raised its capex spend plans for this year, with its CEO Zuckerberg saying that “the pace of progress across the industry and the opportunities ahead for us are staggering”.
What does Brooks Macdonald think
The latest US GDP data hides some cross-currents to be mindful of – with companies frontloading stock ahead of US tariffs, a surge in imports distorted the US 1Q GDP data – because any goods imported into the US are by definition not produced in the US, they are subtracted from US GDP. Instead, economists sometimes prefer looking at ‘real final sales to private domestic purchasers’ to get a cleaner snap-shot of consumer demand – indeed, US Federal Reserve Chair Powell has said in the past that this measure “usually sends a clearer signal on underlying demand” – on this measure the picture is a bit more encouraging, showing a +3.0% QoQ annualised increase in 1Q, and slightly up on the +2.9% QoQ annualised increase seen in 4Q last year.
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Marcus Blenkinsop
1st May 2025