After the early April global market slump, stocks have rallied again as investors have given a cautious welcome to signs of a temporary pause in the trade war between the US and China. Earnings season has also helped calm investor nerves so far, although some of the biggest UK stocks are still to report first-quarter results.
Hopes of a UK-US trade deal have also boosted sentiment: UK Chancellor Rachel Reeves is currently in Washington on a trade mission, looking to make a deal with the US administration.
UK indexes have joined in the rally, meaning that in the year to date the Morningstar UK Index is up 3.59%, in sterling terms. The FTSE 100 is around 1% higher in 2025 so far.
While the recovery is at an early stage, there are clear patterns on the sectors that have picked up in the last week: having led the biggest fallers at the start of the month, financials, basic materials, and real estate stocks have driven the positive returns over a one-week period. It’s also clear to see the damage done to some sectors by the tariff turbulence: technology and basic materials sectors are still in negative territory for the year so far.
Banking Stocks Rebound
Financials sold off initially because of fears that Trump’s tariffs would trigger the end of globalization, a global recession, and interest-rate cuts that would hurt profit margins.
Asia-focused banks HSBC HSBA and Standard Chartered STAN were hit hard in the April selloff, after China and much of Southeast Asia were hit with the most severe tariffs.
HSBC and Standard Chartered shares are up 7% over the past five days. Even after the April selloff, both stocks are in positive territory.
Barclays BARC, which has a 32.2% exposure to US sales according to FactSet data, has seen its share price recover since Trump’s tariff shock. Shares are up by around 6% in the last five days, and like HSBC and Standard Chartered, they are up for the year despite the early April meltdown.
After banks, basic materials saw an uptick of 3.72%. Chilean-based copper miner Antofagasta ANTO led the pack with an 8.96% jump over one week. Copper is seen as a bellwether for the strength of the global economy and proxy for Chinese growth.
Rio Tinto RIO gained 5.34% beating Anglo American AAL and undervalued Glencore GLEN.
The UK real estate sector was the third best performer over a one-week period. As a recent video on Persimmon explains, UK housebuilders are insulated from tariffs because they are pure domestic players; they are not, however, immune from a global economic sector.
Persimmon PSN and Taylor Wimpey TW. are both significantly undervalued stocks, according to Morningstar metrics. Persimmon returned 3.33% and Taylor Wimpey 5.81% over a one-week period.
Can the Market Rally Be Sustained?
Lewis Grant, senior portfolio manager for global equities at Federated Hermes, believes that Europe’s stability and slow-moving institutions, once considered “boring,” now offer confidence in this market environment.
“The narrative is strengthened by the attractive relative valuations of European stocks, although the reasons for this discount should not be ignored. Europe is the ‘stability for cheap’ play, and we expect global investors to continue to fund European markets for as long as that holds,” he says.
Despite the current optimism, Bank of England Governor Andrew Bailey has warned that the trade war impact on global growth could still hit the UK.
“Fragmenting the world economy will be bad for growth,” Bailey told the Global Outlook Forum hosted by the Institute of International Finance in Washington.
While the UK has a lower tariff rate than other countries, the UK’s globally focused service economy is highly sensitive to outside events.
The UK stock market has a high international exposure because of its components: pharmaceutical stock AstraZeneca AZN, oil giant Shell SHEL, and Asia-focused bank HSBC HSBA have the largest weightings in the Morningstar UK Index and FTSE 100.
And while the UK chancellor says that the US is “keen to make a deal” with the UK, investors are aware that tariffs are paused for just 90 days. April has already thrown up a number of surprises, and as ECB President Christine Lagarde said on April 17, investors can’t say the worst of the uncertainty is over.
Earnings season could affect sentiment, too. The following stocks will report earnings soon: HSBC will announce on April 25; AstraZeneca follows suit on April 29, and Shell will report on May 2.
The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar's editorial policies.
