Highlights
In the week, investors received comfort after it became clear that peak uncertainty did not necessarily mean that bad news was certain. U.S. equities posted strong gains for the week, with positive sentiment largely driven by news that the U.S. and China had agreed to a substantial de-escalation of trade tensions following talks in Switzerland over the weekend. The agreement between the world’s two largest economies will see most of their recently implemented tariffs suspended for 90 days while further trade negotiations continue, which will bring U.S. tariffs on most Chinese goods down from 145% to 30%, while China’s levies on U.S. imports will drop from 125% to 10%. A softer inflation print in the U.S. added to the cheer while an unexpected decline in the Producer Price Index (PPI) – which measures inflation at a wholesale level – pointed to declining producer margins, which could indicate that companies have thus far been absorbing some of the costs of higher tariffs. The positive sentiment reverberated across the Eurozone as well, supported by a slew of positive data releases. Industrial production in the euro area jumped in March, suggesting that the sector is emerging from a two-year recession. Also, the eurozone’s trade surplus swelled to a record EUR 36.8 billion in March, from EUR 22.8 billion a year earlier, fuelled by a sharp rise in exports, particularly to the U.S. Employment rose by 0.3% in the first quarter, accelerating from 0.1% in the previous period. In China, stocks kicked off the week on a strong note after the news of the de-escalation in U.S. trade tensions. However, the stocks gave up some of the gains from the middle of the week as a more favourable tariff outlook dimmed hopes for a substantial stimulus package from Beijing. It remains to be seen what the results of these trade negotiations will be as market participants remain cognitively aware that a tariff pause does not equate to a cancellation of the tariffs while it also remains to be seen what the contents of President Trump’s so-called “Big, Beautiful Tax Bill” will be and the impacts thereof.
Data highlights
U.S announced a cut on Chinese tariffs to 30% from 145% for the next 90 days. While China also cut U.S tariffs to 10% from 125% for the next 90 days too. The U.S Consumer Price Index dropped to 2.3% YoY, from 2.4% in March. The report came in lower than analysts’ expectation of 2.4%. In the U.S the retail sales YoY in April were up 5.2%. The U.K unemployment rate rose to 4.5% in March which matched market expectations. U.K Q1 2025, GDP Growth Rate was reported at 0.7%. A big increase from 0.1% reported for Q4 2024 and above analyst expectation of 0.6% growth. In the Eurozone, the employment change for Q1 YoY was reported at 0.8%. In Japan, Q1 2025 GDP Growth rate YoY report showed the economy shrank by 0.7% more than analyst’s expectation of 0.2%. Australia’s unemployment rate was reported at 4.1% in April which matched market expectations.
Week ahead
Eurozone Consumer Price Index – Monday | Australia Interest Rate Decision, Canada Inflation rate – Tuesday | U.K Inflation rate – Wednesday | Japan Inflation Rate – Friday
