Morning Note: Market news and an update from American Express

Market News

On Monday, China accused Washington of abusing tariffs and warned countries against striking a broader economic deal with the US at its expense. This sent US equities tumbling last night – S&P 500 (-2.4%); Nasdaq (-2.6%) – with mega cap tech falling back towards year-to-date lows (and down 25% from the mid-February highs). A gauge of the dollar is at its lowest since 2022 and 10-year Treasuries have moved back up to a yield of 4.42%.

Narendra Modi and JD Vance held trade talks in India. The White House hailed “significant progress” and said the two sides had a roadmap for a possible deal. Walmart, Target, and other retailers met with President Trump to discuss relief from tariffs. Global GDP may take a $2 trillion hit by the end of 2027, Bloomberg Economics estimates.

Gold has continued its record rally, touching a new high of $3,500 an ounce, driven by concerns over Trump’s criticism of Federal Reserve Chair Jerome Powell, which dampened risk sentiment and drove investors towards the safe-haven bullion. There has, however, been some profit-taking this morning, with the price currently back at $3,470 an ounce.

In Asia this morning, equity markets were calmer: Nikkei 225 (-0.2%); Hang Seng (+0.4%); Shanghai Composite (+0.3%). The yen appreciated to trade near the closely-watched 140-a-dollar level. China’s GDP growth will probably slow sharply in the second quarter due to tariffs and potential export front-loading, Goldman warned.

The FTSE 100 is currently little changed at 8,268, while Sterling trades at $1.3390 and €1.1640. The oil price is firm, with Brent Crude trading at $67 a barrel.

Markets are eagerly anticipating speeches from several Fed officials later this week, hoping for insights into future monetary policy amid concerns about central bank’s independence. It is also a busy week for earnings, with results due from Tesla, Alphabet (Google), IBM, Philip Morris, Reckitt, Essilor, Newmont, Unilever, P&G, and Colgate.

Source: Bloomberg

Company News

At the end of last week, American Express released Q1 results that were better than market expectations and announced a lower provision from credit losses. Guidance for the full year was reiterated although there is some scepticism that this will be maintained as we go through the year given the uncertain macroeconomic backdrop. In response the shares have fallen, due in part to the overall market weakness.

AmEx is a globally integrated payments company whose platform includes card-issuing, merchant-acquiring, and card network businesses. American Express cards issued by American Express as well as by third-party banks and other institutions on the American Express network are accepted at millions of merchants around the world. The group has c. 85m proprietary cards in force generating around $1.55tn of annual billed business worldwide. With its premium customer base, the group has an aspiration to grow revenue by more than 10% per annum and EPS in the mid-teens.

The company is benefiting from the ongoing shift from cash and cheques to electronic means of payment, and the growth of online retail, contactless, and mobile payment systems. We believe the industry is at an inflection point in terms of sales growth driven by the global proliferation of smart devices which provide a way to pay and to be paid. The group will also benefit from growth in connected devices and commercial payments. In emerging markets, a lack of physical communication infrastructure traditionally provided a barrier to payments growth, but that has been removed by the emergence of mobile phone technology and a government focus on digitalising cash to reduce the black economy.

In the three months to 31 March 2025, total revenue net of interest expense was up 8% at constant currency to a record $17.0bn, in line with market expectations. Excluding the leap year impact, growth was 9%. The increase was primarily driven by higher net interest income supported by growth in revolving loan balances, increased Card Member spending, and continued strong card fee growth.

Performance across key areas, including Card Member spending, customer retention, demand for premium products, and credit performance, continued to be strong across the Amex customer base, consistent with and in many cases better than what the company saw in 2024.

Revenue was made up of discount revenue (52% of the total, growing by 5%); net card fees (+20%); service fees and other revenue (+5%); and net interest income (+11%).

The group saw continued high levels of customer engagement, acquisitions, and loyalty across its premium card member base. Card member spending continued to grow at a solid pace, up 6%, or by 7% excluding the leap year impact.

Consolidated provisions for credit losses fell from $1.3bn to $1.2bn, reflecting a modest net reserve release during the quarter compared to a net reserve build a year ago, partially offset by higher net write-offs driven by growth in Total loans and Card Member receivables. The first-quarter net write-off rate was 2.1%, flat year-over-year.

Consolidated expenses were up 10% to $12.5bn, primarily reflecting higher variable customer engagement costs driven by higher Card Member spending. In addition, operating expenses increased, while marketing expenses were roughly flat year-over-year. Net income per share was up 9% to $3.64, well above the market forecast of $3.47.

Based on the steady spending and credit trends the company has seen to date and the current economic outlook, AmEx is confirming its full-year guidance for revenue growth of 8%-10% and EPS of $15.00- $15.50, equal to growth of 12%-16%, subject to the macroeconomic environment.

Source: Bloomberg