Corporate earnings provide support

Global markets navigated a volatile mix of geopolitical risk and generally resilient corporate earnings, with price action dominated by developments in the Middle East. Oil prices remained elevated and highly sensitive to headlines around the conflict and shipping disruption, keeping inflation concerns in focus and weighing on bond markets, while equities swung between risk‑off and relief rallies as investors assessed how lasting the energy shock might be. Against that backdrop, a clutch of earnings updates across sectors – from financials and industrials to consumer staples and technology – helped to stabilise sentiment, with many companies pointing to solid demand and disciplined cost control despite macro uncertainty. The net effect was a choppy but relatively contained week for markets, marked by higher volatility, cautious positioning and a growing emphasis on earnings quality as investors look ahead.

The FTSE 100 was -2.7% over the week by mid-session on Friday, with the more UK-focused FTSE 250 trading -3.0%.

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Middle East

Events in the Middle East this week continued to dominate global markets, with energy prices, inflation expectations and asset volatility moving sharply in response to military developments and fragile diplomacy. Oil prices remained the primary transmission channel: Brent crude traded back above $100 a barrel after Iran seized vessels and the Strait of Hormuz remained effectively closed, even as Israel and Lebanon agreed to extend a ceasefire, underscoring how little confidence markets have in a durable de‑escalation. 

Repeated statements around ceasefires between the US and Iran triggered sharp but short‑lived moves, with prices swinging between relief rallies and renewed spikes as investors priced the risk of prolonged supply disruption through a route that normally carries around one‑fifth of global oil flows. The knock‑on impact spread rapidly beyond energy: government bond yields edged higher on concerns that oil‑driven inflation would delay rate cuts, while equities remained volatile – recovering on earnings and AI optimism, but repeatedly sold off on fresh headlines from the Gulf. 

Commodity analysts and policymakers warned that the conflict could have lasting macroeconomic consequences, with the International Energy Agency (IEA) and the International Monetary Fund (IMF) flagging tighter oil and gas markets, demand destruction?? at higher prices and slower global growth if shipping disruptions persist. The overall market message this week was clear: investors are less focused on individual military events than on whether energy flows normalise, leaving markets highly sensitive to any sign that the Middle East conflict could settle into a prolonged, economically damaging standoff. 

Economics 

UK inflation picked up again in March, underlining renewed price pressures just as policymakers had hoped inflation was settling back towards target. According to the Office for National Statistics, consumer price inflation (CPI) rose to 3.3% year-on-year in March from 3.0% in February, driven largely by higher energy and fuel costs linked to the conflict in the Middle East, with food price inflation also edging higher to 3.7%, while core inflation eased slightly to 3.1%. At the factory gate, producer price pressures intensified sharply, with input prices jumping 5.4% year-on-year, up from just 0.7% in February, as crude oil prices surged, while output prices rose 2.6%, signalling stronger cost pressures working their way through supply chains. The significance of the data is twofold: it shows how quickly global energy shocks can reignite both consumer and upstream inflation, and it complicates the Bank of England’s task, making near‑term interest rate cuts less likely as policymakers wait to see whether higher energy and producer costs feed more persistently into consumer prices. 

UK consumer data for March painted a mixed picture of household behaviour, with spending holding up even as confidence weakened sharply. Official figures showed that retail sales volumes rose by 0.7% in March, rebounding from a revised 0.6% fall in February, largely because motorists stocked up on fuel as prices surged following the Middle East conflict, while sales excluding fuel increased a more modest 0.2%. Over the year, retail volumes were up 1.7%. In contrast, GfK’s consumer confidence index slipped further into negative territory, falling to –21 in March before deteriorating again in April, as households grew increasingly worried about rising energy prices, the wider economy and their personal finances. The significance of the divergence is that it suggests resilience in short‑term spending is being driven by price effects and precautionary behaviour rather than improving sentiment: consumers are still spending, but confidence data point to growing caution ahead, raising the risk that retail momentum fades once fuel-related distortions unwind and higher living costs bite more fully. 

Company news

Associated British Foods reported a weaker first-half performance as tougher trading conditions weighed on profits, but the owner of Primark said it expects an improvement in the second half of the year. In the 24 weeks to 28 February, adjusted operating profit fell 17% to £691m while revenues were broadly flat at £9.47bn, as weak consumer demand in the US and poorer-than-expected results in its sugar business offset resilient performances elsewhere. Primark made progress in the UK, delivering like-for-like sales growth and market share gains, although trading in Europe remained sluggish, while the group’s grocery and ingredients divisions performed in line with expectations, supported by stronger international brands. 

British Land reported a strong finish to the financial year, with robust leasing activity in the fourth quarter underpinning upgrades to earnings guidance and full-year expectations. In an unaudited trading update for the year to 31 March, the property group said like-for-like net rental growth reached 6%, driven by tight supply and strong demand across its London office campuses and near-full retail parks, while underlying earnings per share are expected to come in at 28.9p, ahead of previous guidance. Leasing accelerated sharply in the final quarter, particularly in its campuses portfolio, where demand from AI and innovation-led occupiers pushed rents higher and helped lift occupancy across the group to 95%.

Rio Tinto reported a solid start to the year, with strong operational performance driving higher production across much of its portfolio in the first quarter, despite weather-related disruption and ongoing safety concerns. In its first-quarter operating review, released this week, the miner reported a 9 per cent year-on-year increase in copper‑equivalent production, underpinned by the continued ramp‑up of the Oyu Tolgoi mine in Mongolia and a resilient performance from its aluminium business. Pilbara iron ore operations delivered their second‑highest first‑quarter output since 2018, although shipments were hit by two tropical cyclones, which reduced volumes by about 8 million tonnes, with around half expected to be recovered later in the year. Copper output rose 9 per cent, lithium projects remained on track for first production in the second half, and the group said it had delivered the first $650m of annualised productivity improvements as planned, while maintaining full‑year guidance across its major commodities. 

Aberdeen reported continued client outflows in the first quarter, although stronger performance in its wealth platform helped offset pressure in its core investments business and management reaffirmed full‑year targets. The asset manager said assets under management and administration fell to £547.7bn from £556.0bn at the end of December, reflecting adverse market movements and net outflows of £2.9bn amid heightened geopolitical uncertainty and cautious investor sentiment. 

Bunzl reported a resilient start to the year, with modest underlying growth and trading in line with expectations despite a backdrop of heightened macroeconomic and geopolitical uncertainty. In a first‑quarter update, the distribution group said underlying revenue rose by 2% in the three months to the end of March, supported by volume growth, easier comparatives and tariff‑related price increases, while group revenue increased by 1.5% at constant exchange rates but slipped 0.4% at actual rates due to fewer trading days and currency movements. 

Reckitt Benckiser reported modest first‑quarter growth amid a challenging trading environment, with strong momentum in emerging markets offset by weakness in Europe and an unusually soft cold and flu season. The consumer goods group said core like‑for‑like net revenue rose by 1.3% in the three months to the end of March, below market expectations, although growth improved to 3.1% when seasonal over‑the‑counter products were excluded. Emerging markets delivered high‑single‑digit growth, led by double‑digit increases in China and India, while Europe remained a drag with revenues down 4.2% amid weaker categories and heightened promotional intensity. North America was also slightly negative, reflecting low seasonal incidence and ongoing mix pressures. Despite the slow start to the year, Reckitt held its full‑year guidance unchanged, saying growth is expected to accelerate as the season normalises, new product launches gain traction and performance in Europe improves later in the year. 

London Stock Exchange Group reported a record start to the year, with strong market volatility and continued growth in subscription businesses driving a sharp rise in revenues in the first quarter. The group said total income excluding recoveries rose 9.8% on an organic constant‑currency basis, the strongest quarterly growth since the Refinitiv acquisition, as trading activity surged across multiple asset classes and demand for its data and analytics services remained robust. 

Sainsbury’s reported another year of market‑beating sales growth, although profits edged lower as the grocer stepped up investment to help customers manage the cost‑of‑living squeeze. In its full‑year results for the 52 weeks to 28 February, the retailer said sales excluding fuel rose 4.9% to £25.9bn, with grocery sales up 5.2% as it delivered volume growth ahead of the wider market for a sixth consecutive year. Retail underlying operating profit slipped 1.1% to £1.025bn, reflecting higher operating costs and deliberate investment in lower prices, staff pay and store upgrades, while underlying profit before tax came in at £718m. Argos sales were marginally higher at £4.1bn.

Mondi reported a subdued start to the year as challenging market conditions and softer demand continued to weigh on trading in the first quarter. The paper and packaging group said trading conditions remained difficult across several end‑markets, reflecting ongoing customer caution, elevated energy costs and geopolitical uncertainty, particularly in Europe. While the company did not provide detailed financial figures in the statement, it said performance in the quarter was broadly in line with expectations, supported by its diversified portfolio, integrated asset base and continued focus on cost discipline and operational efficiency. 

Tesla reported a stronger‑than‑expected first quarter, with higher margins and earnings offsetting mixed trends in deliveries. The electric vehicle maker said revenue rose 16% year-on-year to $22.4bn, while adjusted earnings came in at $0.41 a share, ahead of market forecasts, helped by a sharp improvement in gross margins to 21.4%. Vehicle deliveries increased 6% from a year earlier to 358,023, though remained below the previous quarter and fell short of expectations, contributing to an inventory build‑up, while the energy storage division saw a sharp sequential slowdown. 

Texas Instruments reported a strong first quarter, with buoyant demand from industrial and data centre customers driving faster‑than‑expected growth and prompting an upbeat outlook for the months ahead. In a trading update, the US chipmaker said revenue rose 19% year-on-year to $4.83bn, while net income climbed 31% to $1.55bn, lifting earnings per share to $1.68 and well ahead of market expectations. Growth was led by the industrial business and a near‑doubling of data centre revenue, reflecting strong demand for the company’s analogue chips, which play a critical role in power management and signal conversion in AI‑driven infrastructure. 

Comcast reported a better‑than‑expected start to the year, as a packed sports calendar and early signs of a turnaround in its connectivity business helped offset ongoing pressure on profits. In a first‑quarter update, the media and telecoms group said revenue rose 5.3% year-on-year to $31.46bn, beating forecasts and benefitting from record advertising around the Winter Olympics and the Super Bowl, as well as strong growth at its Peacock streaming service. Broadband subscriber losses narrowed sharply to 65,000, an improvement of more than 100,000 on a year earlier, while its wireless business delivered a record 435,000 net additions, reflecting the impact of simpler pricing and bundled offers. 

Nestlé reported a solid start to the year, with volume‑led growth in core categories helping the group outperform expectations despite currency headwinds and the impact of an infant formula recall. In its first‑quarter update, the Swiss consumer goods group said organic sales rose 3.5% in the three months to the end of March, driven by real internal growth of 1.2% and pricing of 2.3%, beating market forecasts. Coffee was the standout performer, alongside stronger momentum in food and snacks, while emerging markets again delivered the strongest growth, supported by rising volumes. Performance in Europe and the US was described as robust in a challenging consumer environment.