The Market Call

This week, Gareth and Jeremy continue their discussion about the bond market's predicament. Japan's Ministry of Finance thought that sending a questionnaire to its bond investors would resolve its problem. But it soon encountered another difficult auction, suggesting that its first step in acknowledging the problem was insufficient. 

Meanwhile, Japan's manufacturing prowess is under attack from China, its biggest competitor and from the US, its largest customer. The fact that Japan holds over a trillion dollars of US Treasury debt is a card to consider in its trade talks with the US. 

Meanwhile, Trump's tariffs have encountered a judicial roadblock, causing a sharp recovery in risk assets. However, this was not so helpful for bond markets, where investors had hoped that tariffs might plug some of the fiscal hole left by Trump's Big Beautiful Bill. 

In the UK, Rachel Reeves has signalled her intention to term forward its debt, increasing her interest rate exposure but lowering her short-term funding costs. Additionally, the IMF is offering air cover for her to bend her unbendable fiscal rules. A treat not afforded to her predecessors. Watch out for the spending spigots to turn fully on.   

The takeaway is that long-term global inflation expectations are out of the bottle, the bond market term premia hares are running, and there is a return to the old idea of outrunning the looming debt crisis. This raises the risk of monetary debasement, which should be beneficial for Bitcoin, gold, and (selectively) equities.  

Gareth covers updates from Beeks, and Watkins Jones. 

Looking ahead, it's jobs week in the US. We get EA inflation data and the ECB rate decision. Additionally, confirmation that the economy slowed sharply in Q1 could raise concerns about the potential for a recession in the US.   

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This week, Gareth and Jeremy discuss Moody's downgrade of US debt, Donald's Big Beautiful Bill (yes, that is what it is called), and the bond vigilantes' work at the long end of the yield curve. Jeremy discusses Japan's special place in all this and wonders how the world's monetary authorities can put the long-term inflation genie back in the bottle.

In the UK, inflation and government borrowing were higher than expected, making it a bad week for Rachel Reeves. But at least we have rejoined the EU (well, agreed to agree with them about a few things).

Despite all this, the UK market remained in a decent mood with small and mid-cap stocks outperforming large-cap stocks.

Gareth discusses updates and results from Forterra, IDOX and SDI Group.   

Next week, some US Q1 GDP data is widely expected to show a sharp decline in activity.

However, investors' main focus is likely to remain on the long end of the bond market and how to avoid the impact of FX and bond volatility. 

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Gareth and Jeremy discuss the US-China trade deal and Donald's many other activities: investment advice, trade deals, a ceasefire between India and Pakistan, huge win/win deals in the Middle East, and a crackdown on big pharma.

However, although the market has round tripped from the lows of early April, there is lasting damage to financial market confidence from the weaker dollar and stubbornly higher long-term bond yields.   

The Saudis traded lower oil prices for US weapons and AI chips to help it turn its energy to power AI data centres.

But, the probability of a US recession has reduced.

The UK economy grew faster than any other G7 economy in Q1, and the UK equity market continued to perform better.   

Gareth discusses news from Progressive research clients: Idox announced an acquisition, Gamma Communications gave an AGM update, Vertu Motors released FY 2025 results, which talk of a good start to the year, Nexus Infrastructure released H1 results, which report on the housebuilding recovery progress, and Secure Trust Bank reported a good start to their new financial year.

Looking ahead, we have inflation data from the UK and Japan, both signalling increases, which looks like a particular challenge for Japan. We feel that they should take some advice on how Argentina has coped with its much greater inflation problem over the last 12 months!

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This week Jeremy and Gareth discuss a smorgasbord of newsflow... from trade deals to interest rate cuts (or lack of them) and the selection of Maro Itoje as captain of the Lions team.

UK stocks discussed include ZOO Digital and Van Elle, and Jeremy describes the divergent outcomes for Alpha Group and Argentex...two payments/FX trading platforms who have had their resilience tested in recent years, with wildly different results.

Next week will see UK unemployment and GDP data, with US retail sales, inflation and consumer sentiment... watch for an angry Trump.   

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Jeremy and Gareth discuss a slightly more normal week - Larry Fink and Jamie Dimon are talking up the UK market just as capital is being freed-up from the Mag Seven.

The UK small-cap space is delivering strong performance from stocks able to deliver not-worsening performance...we discuss Watkin Jones, Sanderson Design Group and IG Design as well as global shipping heavyweight Clarkson.

Jeremy highlights that lower energy prices could help pressure Putin towards peace, as well as potentially saving Labour's bacon - if they can wean themselves off Net Zero....

Next week is all about interest rate decisions...Trump vs Powell back in the headlines.

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This week, Jeremy and Gareth wonder whether there are signs of life... UK plc is perhaps "priced for failure" and recent share price moves suggest that even in-line performance (or only a small warning!) can lead to material upside. 

Severfield is a case in point, but this week has seen a number of examples. Jupiter and AJ Bell are also talking more positively.

Still, risks abound, as the unfortunate Argentex investor base have seen - a canary in the coal mine, showing that volatility or abnormal market activity can lead to unforeseen consequences.

Jeremy wonders whether the attack on US university funding could likewise lead to unexpected outcomes....

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This week, Jeremy and Gareth consider the ongoing shocks to the global system - and wonder whether the UK (or UK plc at least) is unusually well positioned, as well as attractively priced. 

Although Trump's "shock and awe" has calmed this week, gold is rising, the dollar is falling and US government debt is highly volatile...it feels as though we've had "America's Brexit moment", a "global Liz Truss event" and now a re-run of Covid supply chain pressures - as we hear reports of ships halted in ports awaiting instruction, and markets can't tell whether current demand is real or stocking-up for an uncertain future. The UK has had more than its fair share of such volatility - and maybe we can manage it better.

Micro-cap news from Progressive clients tinyBuild and Gear4Music shows that stocks delivering "not worsening" news, having cut their costs and adapted their models, can perform strongly - both up 20% at one point this week.

The Easter weekend weather in the UK is forecast to disappoint - let's hope the UK's broader performance across the rest of the year reflects what we see as quite some potential. 

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This week, Jeremy and Gareth  talk less about tariffs and more about their impact on capital markets - bonds in particular. 

Jeremy makes the point that the USA is now experiencing a Brexit AND "Liz Truss" moment at the same time - resulting in a falling dollar and rising rates.  Keep an eye on those two, and the gold price, and you have three metrics which give dashboard of the current situation - and level of trust in the US administration.

While Trump's economic guns are all trained on China, Scott Bessent is on his way to Japan - a major owner and buyer of US treasuries....remember the carry trade unwind panic of mid-last year...? 

Closer to home, we hope that the UK is next on Bessent's list, with a trade deal in the offing.

Small-cap news was from Nexus Infrastructure, Beeks and SDI Group.

Big data next week includes China GDP (required to be c.5%), UK inflation for March, US retail sales and hopefully a rate-cut from the European Central Bank. 

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Jeremy and Gareth react to Donald Trump's tariff pronouncements - major downward moves in US equities, and increased risk of a US slowdown.

But there is  some hope that the UK could navigate these choppy waters cleverly - and even a small proportion of the capital currently being reallocated could make a huge difference to the UK markets.

UK stock news from Gear4Music, Pharos, tinyBuild, Intuitive Investments, Peel Hunt and Alphawave. 

Next week - in addition to early responses to the US tariffs - we get Chinese inflation data, plus both inflation and sentiment survey info from the USA.

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This week, Jeremy and Gareth discuss some home truths about the UK economy - Rachel Reeves has reassured bond investors for now, but the low-growth stubborn-inflation structural problems persist.

Ironically, Trump's erratic tariff-wielding tactics could drive capital AWAY from the USA, to the benefit of China, Germany and even the UK equity market.

And this week, a couple of UK stocks with "reasonable" news - Xaar and SRT Marine - saw 25%+ price moves suggesting that many stocks are priced for pessimism.  Gamma Communications delivered a solid 2024, and we think investors are more wary than they should be of German expansion.

Next week sees Chinese confidence data, European inflation and crucially US jobs...as well as 2 April seeing Trump's tariffs (probably....) come into effect. 

Brought to you by Progressive Equity.