Personal Wealth Management Monday Espresso Podcast

Monday Espresso Podcast – 5th May 2025

[00:00:00] Nathan Sweeney: It is Monday, the 5th of May. Today I'm joined by Andrew Shaw. Andrew is one of our analysts within the team covering fixed income. Good morning, Andrew.

[00:00:07] Andrew Shaw: Morning, Nathan.

[00:00:08] Nathan Sweeney: So I'll just start with a quick recap of what was happening in markets before we go to Andrew's for some of the deeper detail. But really we had quite a good week for equity markets.
We had a good rebound in equities across the board. US equities were up close to 3% as were UK European equities, even Asian equities performing quite well. The one kind of laggard there was actually China and for obvious reasons. So Andrew, what were the key things on investors' minds?

[00:00:35] Andrew Shaw: There were a few things that came out last week.
Job openings came in slightly higher than expected, but not by too much. And then on Friday, non-farm payrolls was actually higher, which had a positive impact on markets on Friday trading.

[00:00:50] Nathan Sweeney: Yeah, so I suppose a lot of people have been looking at the jobs data. And the concern here is that there's the potential for recession in the US and so what you wanna do is closely watch those jobs numbers to see are they showing any signs of weakness in the economy or is unemployment increasing?
But as you said, those numbers kind of showing, we're not really seeing that yet. So it's little things like that, really help the markets and remove some of the concerns that people have. But I suppose the other kind of cloud over markets is around tariffs really, isn't it?

[00:01:24] Andrew Shaw: Yeah, it certainly is.
And a few people are saying it might be a little bit too early for the impacts of tariffs to filter through to these job numbers. So it's definitely something we're going to be looking at and watching over the next few weeks and months.

[00:01:35] Nathan Sweeney: Yeah, and if we look at the things that were driving markets, so, because obviously tariffs are still in the background and obviously it is a concern, but we're starting to see some softening of language there.
So whether it's China saying yes, we're open to having discussions with the US and that's helping markets. But it just means that markets can focus on other things and clearly we had some big company earnings last week and the big concern for companies, particularly in the tech space is will AI continue to deliver?
So how did company earnings look last week?

[00:02:07] Andrew Shaw: Yeah, company earnings were a little bit of a mixed bag in the Mag seven that were reporting. Microsoft had strong earnings. Azure, which is its cloud services platform, grew by 35% year over year. Microsoft say that this is partly due to the partnership with the Open AI and ChatGPT and seeing strong demand for AI.
A lot of people have been worried about the AI trade and the lack of demand for chips as CapEx gets reigned in. However, Microsoft will signal they're gonna be spending $80 billion in this fiscal year, which ends in June on data centers. And next year, they actually see an increase in that CapEx spend. Mesa came out and said something very similar.
They were looking spend $72 billion this year on CapEx, and a good fact from the FT was that the top 11 cloud service providers are expected by Morgan Stanley Analyst to spend a collective $392 billion this year. Which is actually a 38% rise compared to 2024.

[00:03:08] Nathan Sweeney: Yeah, that is quite important point there because it just highlights that these big companies see the potential in AI and actually they're not letting up on spending at all.
They're actually increasing their spending in their space. So it real relieves some of the concerns that the investment community has had around AI and will it deliver? So the company earnings are showing there's some delivery coming through there, and these companies are committed to continuing to spend.
But yeah, there have been some concerns about tariffs, et cetera. Apple had their results. Was there anything showing up there?

[00:03:40] Andrew Shaw: Apple signaled that they were budgeting $900 million per quarter, extra costs from tariffs. They don't see that as a big headwind at this point in time. The toy with the idea of making iPhones that are destined for the US market in Vietnam and India, and for the rest of the world, iPhones, they're gonna be still made in China.
So they're looking to negate the impact of tariffs on the business. 50% of the revenues from Apple come from iPhone as well.

[00:04:06] Nathan Sweeney: Yeah, I suppose and I think a lot of companies that will be the strategy. How do we, what's the work around, there's tariffs in place between one country and another. How do we work around the supply chain to ensure it's more efficient?
And we've seen that happen before and no doubt we will see that happen again. So yeah, there's a big week for earnings, the big tech companies. But yeah, so some good news there. Really helping to lift the market and then market's less concerned about tariffs as it stands today. And the jobs numbers really showing that there's no recession in sight as of yet.
What do we have on, what should we be watching out for?

[00:04:37] Andrew Shaw: Well, two big central bank decisions. Fed interest rate decision on Wednesday, markets critical pricing in zero cuts there. And then the following day in the UK we've got the Bank of England interest rate decision and they're expected to be a quarter of a percentage point cut by the Bank of England there.

[00:04:54] Nathan Sweeney: Yeah, it's so great to see Bank of England continuing with those rate cuts, which will be welcomed for, you know, homeowners, you know, particularly when you've got that mortgage in place. And then obviously borrowers and then companies as well who've got debt in place, being able to refinance a cheaper debt.
Now, Andrew, at our Monday morning team meetings, you always have some very interesting facts. If you have any facts for our audience today.

[00:05:15] Andrew Shaw: I did get something that was, sent to me and it was, I think it's from LinkedIn. It was interesting that the country in the world with the most CFA charter holders and Bloomberg terminals per capita.
You'd think it was a small country somewhere like Luxembourg with water financial companies, but it's actually the Vatican City. And Vatican City has 882 residents with four CFA charter holders there. So that's my nugget of useless information this week.

[00:05:43] Nathan Sweeney: Perfect. Thanks. Always great to get those facts, giving us a little bit of insight into something that we didn't know.
Thank you everybody for listening. If you do have questions, we always say if you email them in, we'll bring 'em up on the show. We really do mean that. It would be great to get your questions in, 'cause obviously there's a lot happening in markets and you know, clearly we want our listeners to understand as much as possible about the current climate today.
Thanks for listening in and have a great