While uncertainty remains high as US president Donald Trump's fast-moving tariff agenda has prompted big moves in stock markets, Barclays (BARC.L) analysts have highlighted six UK stock ideas for the second quarter.
Trump's unveiling of sweeping global tariffs, including higher custom levies on certain countries, on 2 April sparked a sell-off in global markets. The president's announcement a week later of a 90-day pause on most higher tariffs — effectively a U-turn on the duties — drove historic gains for US stocks.
Even as Trump hit pause on many higher tariff rates, trade tensions between the US and China have escalated, with a back-and-forth raising of duties in retaliation.
Bloomberg reported on Wednesday that China would be open to trade talks on certain conditions, though concerns about the economic fallout of tariffs remain in focus for investors.
Barclays (BARC.L) European analysts said: "The Trump 2.0 global order reset has brought chaos to global economies and markets. Reciprocal tariffs and retaliation are recessionary, protracted policy uncertainty will likely keep downward pressure on equities until Trump backs off."
At the same time, the analysts said that they had an "overweight" view on the UK market, "with a preference for FTSE 100 (^FTSE) which is defensively-tilted so it can somewhat benefit from stagflation/recession fear, and it remains very cheap".
"We remain more cautious on the domestically-tilted SMID cap (small and medium-sized) FTSE 250 (^FTMC) as confidence in a domestic recovery has faltered, although bearishness is now quite high, [the] UK is less exposed to tariffs and more BoE (Bank of England) cuts and government re-focus on growth may help," they added.
With that in mind, the Barclays (BARC.L) team highlighted six stock ideas for the second quarter, which they had given an "overweight" rating.
The UK's most valuable listed company AstraZeneca (AZN.L), which has a market capitalisation of £159bn, was the first stock on their list.
AstraZeneca is down 3.5% year-to-date and was trading at a share price of £101.04 at the time of writing, though Barclays' analysts Emily Field and Shirley Chen had a price target on the stock of £140.
They highlighted three major catalysts for the stock this year — its studies around cancer drugs Datroway and Camizestrant, as well as blood pressure medication Baxdrostat.
Pascal Soriot, CEO of AstraZeneca, said in the company's fourth-quarter results that it had delivered nine "positive high value Phase III studies in the year, which coupled with increasing demand for our medicines in all key regions, will help sustain our growth momentum into 2025."
"This year marks the beginning of an unprecedented, catalyst-rich period for our company, an important step on our Ambition 2030 journey to deliver $80bn (£60.5bn) total revenue by the end of the decade," he said.
The UK's most valuable listed company AstraZeneca was the first stock on Barclays' list. ·Peter Byrne - PA Images via Getty Images
AstraZeneca posted a 18% increase in revenue in 2024 at $54bn, as well as an 18% rise in reported earnings per share at $4.54.
Barclays analysts said three reasons why they liked AstraZeneca in an increasingly choppy market and macro-environment were that it offered "best-in-class science, [had] global geographic and product diversification [and had a] best-in-class management team."
At the same time, there is still uncertainty about the nature and extent of tariffs that could be imposed on pharmaceuticals, with the Trump administration having launched a probe into this area earlier this week.
Tobacco giant Imperial Brands (IMB.L) was also on the list, with Barclays analyst Gaurav Jain saying that the team believed stocks in the sector are "well placed versus other staples categories, as revenue and [earnings before interest and tax] growth in the tobacco space is re-accelerating, versus steady-state performance elsewhere."
"We think [Imperial Brands] will emerge as a key holding for European funds that can still own tobacco post the company's [capital markets day]," he said. "[Imperial Brand's earnings per share] growth may be high single digit and indeed low double digit, depending on the multiple at which it buys back its stock."
In addition, Jain said that there is "likely little tariff risk (based on currently proposed tariffs), zero China risk, ... and zero risk from changing regulatory attitudes in Washington on pharma advertising or packaged food formulation or alcoholic beverage labelling, while tobacco regulation is becoming less of a headwind."
He pointed out that Imperial Brands expects to make £1.25bn ($1.65bn) in share buybacks in its 2025 fiscal year and anticipates paying approximately £1.5bn in cash dividends. Barclays forecast Imperial Brand's total cash return to shareholders in the 2025 fiscal year would be around £2.8bn.
In 2024, Imperial Brands generated revenue of £32.4bn, which was little changed on the previous year, earnings per share of £3 was up 19% on 2023.
Shares are up 16% year-to-date and are trading at their highest point since the beginning of 2021.
UK financial services firm Legal & General (LGEN.L) has remained a popular stock with investors, with it appearing on platforms' most bought lists.
Last June, Legal & General (L&G) group CEO António Simões outlined the company's strategic plan, setting out its targets to 2028. In terms of its asset management business, this included aiming to achieve operating profit of £500m to £600m, as well as cumulative annualised net new revenues of £100m to 150m, and private markets platform assets under management of £85bn by 2028.
Barclays analyst Larissa van Deventer highlighted that the new CEO of L&G's asset management operations, Eric Adler, is set to share his vision for this segment of the business on the company's capital markets day in June.
"In our view, clarity in his plan on how the strategic targets will be achieved may act as catalyst," she said.
She added that the Barclays team believed this "should support the growth that we expect in the group’s UK bulk annuity segment (PRT)", a market in the UK that is showing "promising positive momentum".
In its full-year results in March, L&G reported a 6% increase in core operating profit to £1.6bn, which was in-line with estimates, as well as announcing a £500m share buyback for 2025.
Despite solid results, L&G shares are up just 6.5% year-to-date, with the stock trading at £2.44 on Wednesday, though Barclays have a price target of £3.20 on the shares.
Another name in the financial sector on Barclays list of "overweight" rated UK stocks was Lloyds (LLOY.L), which analysts Aman Rakkar and Grace Dargan said is one of their top ideas among European banks.
They said that Lloyds offers "some of the strongest fundamentals across the sector with a potential catalyst from motor finance coming over the next few months."
A scandal over how consumers have been sold car loans has opened up the possibility that lenders could end up paying out tens of billions of pounds in compensation. In October, the court of appeal ruled it unlawful for dealerships to receive commissions on car finance deals without securing “fully informed consent” from buyers. Lenders Close Brothers (CBG.L) and FirstRand (FSR.JO) have sought to overturn the ruling, and the case headed to the UK's supreme court earlier this month to hear evidence, before it makes judgement on the issue, which is expected in July.
The Financial Conduct Authority (FCA), the UK regulator, has said the supreme court's decision would inform its next steps and would confirm if it was proposing a redress scheme within six weeks of the ruling.
UK domestic banks could be seen as 'relatively safe havens' compared to other European banks amid a trade war, according to Barclays. ·Peter Titmuss
Lloyds, which owns motor finance company Black Horse, said in its annual results in February that it had set aside £1.2bn to cover potential compensation costs.
Barclays' Rakkar and Dargan said: "Although full clarity on any redress scheme is unlikely before Q4, we expect the judgement and FCA announcement can eliminate the worse case tail-risks priced in by the market."
Lloyds posted a 20% drop in its annual profits in February, at £5.97bn, which was also below expectations of £6.39bn, according to consensus estimates compiled by Reuters.
However, Barclays analysts said they expected to see some of the highest earnings per share growth in the sector at around 65% over 2025 to 2027.
In addition, they said that UK domestic banks, including Lloyds, could be seen as "relatively safe havens" compared to other European banks amid a trade war.
In retail, high street stalwart Marks & Spencer (MKS.L) was another UK stock highlighted by Barclays analysts.
Barclays' analysts James Anstead and Matthew Clements said that their team expected the retailer's sales for the year to be up 6% at £13.9bn, when it reports its annual results in May. They forecast underlying profits before tax to increase by nearly 19% to £850m, which would be ahead of the average Bloomberg consensus estimate of £838m.
Anstead and Clements added that the market's main focus would likely be on any guidance for pre-tax profits for the coming year, with Bloomberg average consensus is for this figure to rise to £897m. "Although we are £12m ahead of FY24/25 consensus, we are £2m behind FY25/26 consensus — preferring to err on the side of caution given the significant opex increases faced in the year ahead," they said.
The analysts said that they would be looking for more colour on factors such as cost saving opportunities and any subtle changes to longer-term margin targets.
Barclays analysts expect Marks and Spencer's sales for the year to be up 6% at £13.9bn. ·Kathy deWitt
"The M&S share price appears to have been impacted to some degree by the announcement from Asda that it is planning to invest materially in price," they said. "Some sort of share price reaction is not surprising to us, but we certainly feel that M&S should be relatively well protected from Asda given the stark differences in their customer propositions."
Supermarket Asda warned last month that profits would be lower this year, as it looked to invest in lowering prices. This has sparked fears of price war in the sector, with Tesco (TSCO.L) having warned in its preliminary full-year results that it had seen a "further increase in the competitive intensity of the UK market" over the past few months.
Shares in food retailers, including M&S, fell following Asda's update. However, M&S shares have since rebounded and are trading back at their highest point since 2016.
Barclays head of European consumer staples research Warren Ackerman said that consumer goods giant Unilever (ULVR.L) was "one of the first big cap companies to indicate a slow start to 2025" in its annual results, with many others later following suit.
"Since then, visibility has only worsened, with volatile geopolitics weakening consumer confidence alongside the looming threat of tariffs," he said.
Ackerman said that while the majority of fast-moving consumer goods companies are indicating that their organic sales growth would accelerate after the first quarter, "investors will need to decide for which companies they believe growth willactually accelerate, and which ones where this expectation is not realised. We believe Unilever is in the camp where [organic sales growth] will accelerate in the balance of the year."
He said that Barclays expected the first quarter to be weak for many of its peers, expecting organic sales growth in the range of -3% to 3%. If Unilever were able to deliver on Barclays' forecast of 2.5% organic sales growth, Ackerman said that it could end up being a top quartile performer compared to peers in the first quarter.
"Clearly there are also a number of watch-out regions," he added. "The US is clearly slowing for almost all Consumer companies and that is a risk factor and Latin America is also under pressure with Mexican economy at risk from tariffs. Europe has been holding up well by comparison but is unlikely to be completely spared by the macro volatility."
"All of this means it is imperative for outperforming companies to be winning share in whatever growth is available, and on this front, Unilever seems to be doing that (albeit with one of two notable exceptions such as Indonesia) helped by a slate of very promising innovations," Ackerman added.
For the rest of the year, he said that Barclays' confidence in Unilever was based on factors, including a strong product innovation pipeline and improving relative market share momentum.
For each of these stocks, Barclays' analysts focused on the fundamental ideas behind the ratings and the catalysts that could drive their share prices higher this quarter, despite uncertainty posed by tariffs.
