A blooming May for the UK

Stocks and bonds have had a good week again, revelling in the after-effects of the previous week’s US Federal Reserve meeting, and signals of a tepid US jobs market in the April employment report. Hong Kong stocks did particularly well, after the Chinese authorities were said to be considering tax waivers on Chinese stocks bought through the island’s Stocks Connect system. Here in the UK, the UK Large-Cap index stormed above 8400, helped by the Bank of England’s Andrew Bailey outdoing Jerome Powell, of the US Federal Reserve, in dovishness. So far, at least, there are few takers for the old adage “sell in May and go away”.

What to take from a strong earnings season

Reporting for 2024’s first quarter corporate earnings is nearly over. The reporting covers mostly US-listed companies, and the results have been good, with profits growing at a surprisingly strong rate. Earnings per share for S&P 500 companies was 5.2% higher in the last quarter than a year before. Not only does that comfortably beat the 3.4% expected by analysts, but it represents corporate America’s strongest profit growth in almost two years.

US firms have seen profits coming from domestic demand, but the encouraging feature about this earnings season is that European firms have joined in the good times too. European corporate earnings have improved beyond expectations, despite previous signs of economic weakness. Analyst forecasts for the next 12 months have also bumped up considerably, and businesses are becoming more optimistic.

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