Highlights:
U.S stock indices finished the week narrowly lower despite increased prospects of tariff de-escalation and a semblance of light at the end of the tunnel with regards to trade policy uncertainty. The U.S. and the Uk announced the first new trade deal since the Trump administration’s reciprocal tariffs were unveiled on April 2, which helped fuel investors’ hopes of more deals to come. Additionally, reports emerged that U.S. and Chinese officials plan to meet in Switzerland this weekend for trade discussions, potentially paving the way for broader negotiations and tariff de-escalation. It is anticipated that market participants will remain increasingly vigilant on the progress and indeed the particulars of the agreements that emerge from these deliberations. On Wednesday, the Federal Reserve concluded its monetary policy meeting and announced it would be holding the fed funds target rate steady in the range of 4.25% to 4.50%, as was widely expected. The Fed Chair, Jerome Powell, noted that Fed officials remain in a “wait and see” mode as they continue to assess incoming data to determine the economic impacts of the Trump administration’s significant policy changes, particularly wide-ranging tariffs, which are “likely to generate a rise in inflation, a slowdown in economic growth, and an increase in unemployment.” Across the Atlantic, the Bank of England’s (BoE) Monetary Policy Committee voted 5–4 to cut its key policy rate by 25-basis points to 4.25% though the vote split prompted markets to price in reduced odds of a third rate cut this year. Meanwhile, Chinese stock markets advanced in a holiday-shortened trading week ahead of U.S. trade talks. Similarly, an unexpected policy boost by the central bank also added to positive sentiment with the People’s Bank of China (PBOC) reduced its seven-day reverse repurchase rate to 1.4% from 1.5% and cut its reserve requirement ratio by half a percentage point, a move that will release roughly RMB 1 trillion in long-term liquidity in the economy reflecting China’s increased efforts to protect the economy from the downside effects of trade policy uncertainty.
Data Highlights:
In the U.S the Federal reserve held its key interest rates steady at 4.5%, which matched market expectations. Canada’s unemployment rate rose to 6.9% in April. This came in higher than analysts’ expectation of 6.8% unemployment rate. In the Eurozone, retail sales YoY, increased by 1.5%. This came in slightly lower than the 1.6% increase expectation by analysts. In the U.K, the Bank of England cut interest rates by 25 basis points bringing the interest rate to 4.25%. This matched market expectations.
Week Ahead:
U.S & China Trade Policy Announcement – Monday | U.K Unemployment Rate, U.S Consumer Performance Index | Australia Unemployment Rate, U.K GDP Growth Rate, Eurozone Q1 Unemployment Change, U.S Retail Sales – Thursday | Japan GDP Growth Rate – Friday
