Markets in April
April saw US equities markets continue to drop substantially before rebounding in the last week of April. US survey data in April revealed that consumers are at their least confident in five years, inflation fell, and Q1 GDP also fell. However, growth in Europe in the first quarter of 2025 increased by 0.4%. US equity markets ended the month mostly in negative territory. The S&P 500 experienced its third consecutive monthly decline in April. The S&P 500 was -0.76% MTD in April, the Dow Jones -3.51% MTD, while the Nasdaq 100 was +1.52% MTD. European equity markets also suffered from the tariff uncertainties, with the STOXX 600 -1.21 % MTD in April.
In the bond market, Treasury yield curves fell at the short and mid range and steepened at the long end on technical factors as tariff policy vacillations and weakening consumer sentiment data has strengthened fears of economic slowdown. The Fed looks unlikely to cut rates until it has greater clarity around the near- and medium-term impacts from higher tariffs or there is a material change in the labour market.
Although cuts in the euro area are expected, the uncertainty around tariff negotiations and the threat of growth slowdowns, means that rate cuts may be fewer than currently expected. The UK will walk a fine line between cutting rates to help grow the economy and concerns that inflation will remain well above target this year.
The economic picture
The dollar index was down approximately -4.37% in April. The dollar fell due to uncertainty over US tariff rates and implementation.
On the growth front, the US economy is starting to feel the tariff impact and confidence is falling. GDP growth for Q1 2025 came in negative, showing a -0.3% contraction vs the prior quarter. This was the first quarter of negative growth since Q1 of 2022. This was largely attributed to a rise in imports, which soared 41.3%, as companies and consumers sought to get ahead of the Trump tariffs implemented in early April. The Personal Consumption Expenditures (PCE) Price Index, the Fed's preferred inflation measure, increased by 2.3% in the 12 months through March, down from 2.7% in February. Annual core inflation also eased, rising by 2.6% after a 3.0% increase in February. The US labour market continued to show strength with Nonfarm payrolls increasing 228,000 in March, up from the revised 117,000 in February. The unemployment rate rose to 4.2% in March from 4.1% in February. Average hourly earnings were up 3.8% y/o/y and inflation-adjusted consumer spending climbed 0.7%. However private payrolls grew by just 62,000 in April, far fewer than the 115,000 expected and below the 147,000 new jobs added in March. Headline inflation rose by 0.1% m/o/m, down from February’s 0.2%, while core CPI, excluding food and energy, was up 0.1%, the least since July, and down from February’s 0.2%. Headline CPI came in at 2.4% y/o/y, down from February’s 2.8% and core CPI came in at 2.8% from February’s 3.1%. Consumer spending, which accounts for more than two-thirds of U.S. economic activity, surged 0.7% in March after an upwardly revised 0.5% gain in February. Personal consumption expenditures increased 1.8% in Q1, the slowest quarterly gain since Q2 of 2023 and down from a 4% gain in Q4 2024.
The April Flash PMIs showed the US economy still performing, but confidence falling. The Flash Composite PMI in April came in at 51.2, but down from March’s 53.5 and a 16-month low. The Flash Services PMI came in at 51.4, down from March’s 54.4 and a 2-month low. The Flash Manufacturing PMI improved, coming in at 50.7, up from March’s 50.2 and a 2-month high. However, as noted by S&P, sentiment among companies about their output over the coming year fell for a third successive month, dropping sharply to register the least optimistic outlook since July 2022." Consumers continue to feel less confident about the current state of and prospects for the US economy. The Conference Board's consumer confidence index fell by 7.9 points in April to 86.0, a thirteen year low. The Present Situation Index—based on consumers’ assessment of current business and labor market conditions—decreased 0.9 points to 133.5. The Expectations Index—based on consumers’ short-term outlook for income, business, and labour market conditions—dropped 12.5 points to 54.4, the lowest level since October 2011 and well below the threshold of 80 that usually signals a recession ahead. The University of Michigan consumer sentiment survey showed that US consumer sentiment fell from a downwardly revised 57.0 to 50.8, its lowest level since June 2022. Consumers anticipated inflation to rise at an annual rate of 4.4% over the next five to 10 years. Short-term inflation expectations rose to 6.5%.
In the UK, inflation remains above the BoE’s target, with headline inflation coming in at 2.6%, down from 2.8% in February. Core inflation rose by 3.4% in the year to March, down slightly from 3.5% in February. This headline drop is likely to be temporary with the Bank of England (BoE) expecting inflation to rise towards the 4% mark later this year due to increasing energy and other utility prices.The willingness of the BoE to cut rates again in May may be balanced between rising growth fears and inflation expectations; growth forecasts were downgraded by the IMF in April to 1.1% from 1.6% due to the impact of US tariffs, an increase in government bond yields, and weaker private consumption amid higher inflation.
The poorer growth forecast but still-above-target inflation outlook will make things difficult for the BoE. In terms of business activity in April, the S&P Global Flash Composite PMI fell to 48.2 from 51.5 in March, a 29-month low. The Flash Services PMI also fell, coming in at 48.9 from March’s 52.5 and a 27-month low. The Flash Manufacturing PMI was also down, coming in at 44.0 from March’s 45.3 and a 20 month low. As noted by S&P, April’s fall in output was the largest recorded for nearly two and a half years, consistent with GDP declining at a quarterly rate of 0.3%, reflecting falling activity and demand across both manufacturing and services. Consumer confidence was also down with the GfK Consumer Confidence Index for April falling four points to -23. All measures were down compared to March.
The labour market is still relatively resilient, but continuing high wage growth may still worry the BoE. According to the Office for National Statistics, average pay excluding bonuses remained at 5.9% in the three months through February. Private-sector pay growth was 5.9%. The number of payrolled employees fell 78,500 in March and the unemployment rate remained at 4.4%.
In the eurozone, inflation fell to 2.2% in March 2025, down from 2.3% in February. Core inflation, which excludes energy and food, edged lower to 2.4% in March from 2.6% in February. Services inflation also fell, to 3.4% in March from 3.7% in February. On the growth front eurozone GDP grew 0.4% in the first quarter. However, the April eurozone HCOB Flash Composite PMI was down from March’s 50.9 to 50.1, a 4-month low. The HCOB Flash eurozone Services PMI was also down at 49.7 from March’s 51.0 and a 5-month low. However, the HCOB Flash eurozone Manufacturing PMI edged slightly up to 48.7 from 48.6 in March. This was a 27-month high. As noted by S&P, there was a sharp drop in business confidence in the euro area, with sentiment down to the lowest since November 2022. The drop in confidence was widespread, both in terms of sector and geographical coverage. However, the higher fiscal spending on infrastructure in Germany and defence spending across Europe should eventually benefit not just manufacturing but also the service sector, though with a bit of a lag.
The ECB wage tracker indicates average negotiated wage growth of 4.8% in 2024 and 3.1% in 2025. However, markets remain worried by trade tariffs from the Trump administration and whether the US and the eurozone will be able to come to some agreement. Further discussions are due next week.The EU agreed earlier this month to delay for 90 days the implementation of a set of counter-tariffs against the US over 25% duties imposed on the bloc’s steel and aluminum exports.
Global market indices
US:
S&P 500 -0.76% MTD and -5.31% YTD
Nasdaq 100 +1.52% MTD and -6.86% YTD
Dow Jones Industrial Average -3.17% MTD and -4.74% YTD
NYSE Composite -1.45% MTD and +0.09% YTD
The Equally Weighted version of the S&P 500 was -2.38% in April, 1.62 percentage points lower than the benchmark.
The S&P 500 Information Technology sector was the top performer in April at +1.58% MTD, while Energy underperformed at -13.73% MTD.
April was a wild ride for US markets, as evolving trade policies initiated by the Trump administration placed the S&P 500 near bear market territory; it was down almost 20% from its February peak by 8th April following the president's tariff announcement on 2nd April, with the S&P 500 falling nearly 11% within just three trading days. Indications of increasing strain within the bond market contributed to the US President's pause on retaliatory tariffs on 9th April. Investors faced renewed apprehension early last week when the US President's threats to dismiss Fed Chair Jerome Powell triggered another market downturn. Nevertheless, markets once again recovered as the US President backed off those warnings.The index managed to recoup approximately half of its decrease this month. However, it still registered its third consecutive monthly decline, the longest losing streak since 2023. I
Stocks initially declined when new data showed the US economy contracted in Q1—its first contraction since early 2022. However, markets rebounded, as investors exercised caution in overinterpreting the data, which was influenced by a significant influx of imports as businesses accelerated inventory accumulation in anticipation of new tariffs.
On Wednesday, the Dow Jones Industrial Average increased by +0.3%, or approximately 142 points, ending April -3.2%. The S&P 500 edged up by +0.1%, finishing the month down by -0.76%. The technology-heavy Nasdaq Composite decreased by -0.1% on the day but recorded a gain of +0.9% for April.
Both the Dow and S&P 500 have now risen for seven straight days, with the S&P 500 seeing its biggest percentage gain over that period since November 2020.
Big tech stocks have been at the centre of the market's ups and downs. Apple shares experienced a substantial decline due to its reliance on Chinese manufacturing but subsequently increased following the US administration's announcement of exemptions for phones, computers, and other technological devices.
Reflecting ongoing investor caution regarding the economic outlook, sectors perceived as offering greater stability during economic slowdowns, such as Utilities and Consumer staples, have been favoured. Conversely, Banks and Energy companies, which are more sensitive to growth, have lagged behind.
A persistent concern among investors is the relatively elevated valuation of equities on a historical basis, as indicated by price-to-earnings ratios and other metrics that consider the risk-free rate of return.
In corporate news, Alphabet CEO Sundar Pichai has expressed his ambition to integrate Gemini as a standard feature on iPhones within the current year. Separately, Pichai is advocating for a judge to dismiss a proposal that would mandate the sale of Chrome and necessitate data sharing.
The US President has indicated that IBM and RTX (formerly Raytheon Technologies), are potential candidates for a contract to modernize the nation's air traffic controller system.
Airbus’s Q1 results were affected by ongoing supply chain disruptions, which have limited the company's aircraft production output.
Rivian Automotive reportedly accumulated a supply of lithium-ion batteries sourced from China in anticipation of tariffs imposed by the Trump administration.
Europe:
Stoxx 600 -1.21% MTD and +3.91% YTD
DAX +1.50% MTD and +13.00% YTD
CAC 40 -2.53% MTD and +2.89% YTD
FTSE 100 -1.02% MTD and +3.94% YTD
IBEX 35 +1.16% MTD and +14.60% YTD
FTSE MIB -0.47% MTD and +10.79% YTD
In Europe, the Equally Weighted version of the Stoxx 600 was +0.52% in April, 1.73 percentage points higher than the benchmark.
The Stoxx 600 Retail was the leading sector in April, +5.81% MTD, while Oil & Gas has exhibited the weakest performance at -10.91% MTD.
On Wednesday, within the STOXX Europe 600 sectors, weaker-than-expected manufacturing data out of China weighed on Basic Resources, making it the biggest decliner. Shares of Glencore also fell after its Q1 copper production showed a sharp y/o/y decrease. Although ArcelorMittal outperformed EPS expectations, the company issued a cautious outlook.
The Travel & Leisure and Energy sectors faced pressure amid persistent macroeconomic concerns and uncertainties surrounding US tariffs and travel policies. Banks also experienced downward pressure following a series of weaker macroeconomic data releases and mixed earnings. Specifically, CaixaBank, Banco Santander, and Credit Agricole issued weaker guidance, with margin pressures negatively impacting sentiment despite exceeding topline earnings. In contrast, UBS reported lower Q1 net profit but still surpassed analyst forecasts amid the prevailing economic uncertainty. Societe Generale exceeded both profit and revenue estimates in Q1, benefiting from strong equities trading. Barclays saw its Q1 net profit increase by 19%, driven by higher investment banking revenue.
The Automobiles & Parts sector significantly lagged, with Mercedes and Stellantis withdrawing their earnings guidance due to tariff concerns and both companies reporting revenue misses. The Media sector showed strength, primarily driven by Universal Music Group Q1 results, which included an adjusted EBITDA beat and solid growth in both music and publishing. Industrials also trended higher, with Deutsche Post delivering a strong beat on both EPS and revenue, while maintaining its full-year guidance.
Global:
MSCI World Index +0.74% MTD and -1.41% YTD
Hang Seng -4.33% MTD and +10.27% YTD
Mega cap stocks had a mixed performance in April in reaction to the US tariffs. Microsoft +5.29%, Alphabet +2.69%, Amazon -3.07%, Tesla +8.87%, Apple -4.34%, Meta Platforms -4.75%, and Nvidia +0.05%.
Microsoft Q1 earnings. The company’s Q1 earnings report revealed robust growth in both revenue and earnings across all its business divisions, with its closely monitored Azure cloud service exceeding analysts’ projections. The company's outlook for Q2 also exceeded analysts' expectations.
In Q1, Microsoft's total revenue surged by 13% y/o/y, reaching just over $70 billion. Operating income amounted to $32 billion, which was 6% higher than the average forecast among analysts. Revenue from Microsoft's Azure cloud-computing service increased 35% y/o/y, outpacing the 31% growth rate anticipated by analysts.
For Q1, net income reached $25.8 billion, translating to $3.46 per diluted share, exceeding the analysts' consensus estimate of $3.22 EPS.
Furthermore, revenue for each of Microsoft's key business units surpassed the guidance provided by the company in January. The productivity and business processes unit, encompassing Microsoft 365 products, achieved revenue of $29.9 billion, a 10% y/o/y increase and exceeding the internal forecast which projected sales up to $29.7 billion.
Sales within Microsoft's personal computing segment also demonstrated strong performance, rising by 6% y/o/y to $13.4 billion, exceeding the company's own forecast range of $12.4 billion to $12.8 billion. See report.
Meta Q1 earnings. Meta Platforms announced that its Q1 sales reached $42 billion and suggested consistent growth in the near future, easing concerns that US tariffs might negatively impact its global digital advertising operations.
The company's sales rose 16% y/o/y, surpassing analyst forecasts. Net income for the Q1 totaled $16.6 billion.
Looking ahead, Meta anticipates that its Q2 revenue will grow between 8% and 16% y/o/y.
Meta revised its Capex forecast for the year upwards, from a range of $60 billion to $65 billion to a new range of $64 billion to $72 billion. This increase is primarily attributed to its ongoing investments in AI.
On Tuesday, Meta hosted its first-ever AI conference specifically for developers. During the event, the company launched a dedicated application for its AI assistant, which Meta aims to have one billion users engaging with by the end of the year. Meta also unveiled new tools designed for developers. See report.
Energy stocks experienced a negative performance in April, with the Energy sector -13.73% MTD. Energy Fuels was +17.64%, while Apa Corp -26.07%, Halliburton -21.88%, Occidental Petroleum -20.16%, Baker Hughes Company -19.45%, Chevron -18.67%, Phillips 66 -15.73%, ConocoPhillips -15.14%, Shell -13.61%, ExxonMobil -11.18%, and Marathon Petroleum -5.68%.
Materials and Mining stocks had a mixed performance for April. The Materials sector was -2.24% MTD. Gold was +5.83% MTD, while silver prices were -5.17% MTD and copper prices were -9.16% MTD. Mosaic +12.55%, Newmont Mining +9.11%, Yara International +6.11%, Sibanye Stillwater +3.22%, while Nucor Corporation -0.81%, Freeport-McMoRan -4.83%, Albemarle -18.70%, and Celanese Corporation -21.60%.
Commodities
Gold was +5.83% MTD in April and +25.70% YTD. Gold prices pared some losses on Wednesday as bets that the Fed will cut rates rose after weaker-than-expected Q1 US growth.
Spot gold was down -0.87% at $3,287.62 an ounce on Wednesday, but was on track to record its fourth consecutive monthly gain in April. Bullion had fallen over one percentage point earlier in the session.
Data showed US GDP product contracted at a 0.3% annualised rate last quarter, as businesses rushed to import goods ahead of expected tariffs from the White House.
Traders now await Friday's nonfarm payrolls report, which could shed more light on the Fed's interest rate outlook.
Traditionally viewed as a hedge against both uncertainty and inflation, gold is +25.70% so far this year. It last soared to a record high of $3,500.05 per ounce on 22nd April. One of the reasons gold has risen can be attributed to rising demand from China. As noted by the Financial Times, inflows into gold exchange traded funds in China total 70 tonnes — or about $7.4bn — in April, more than double the previous monthly record, according to the World Gold Council, an industry body.
China's markets will be closed from 1st - 5th May for the Labour Day holiday.
Oil prices have fallen significantly in April with WTI -18.46% MTD and -16.51% YTD and Brent -15.55% MTD and -18.26% YTD. These represent the biggest monthly percentage declines since November 2021.
Oil prices ended Wednesday's trading session lower, marking their most significant monthly decline in nearly three and a half years. This fall followed signals from Saudi Arabia indicating a potential shift towards increased production and market share expansion, compounded by concerns that the ongoing global trade war would moderate fuel demand.
Brent crude futures settled at $63.12 a barrel, a decrease of $0.81 or -1.27%. WTI crude futures declined $1.92 or -3.19%, closing at $58.22, their lowest settlement point since March 2021.
Both benchmarks experienced a downturn following indications from Saudi Arabia suggesting an unwillingness to support the oil market with further supply reductions and a capacity to manage an extended period of lower prices. Earlier in April, Saudi Arabia had advocated for a larger-than-initially planned output increase from OPEC+ for May.
Furthermore, several OPEC+ members are expected to propose an acceleration of output increases for a second consecutive month in June. The group is scheduled to meet on 5th May to discuss future production plans.
Adding to the downward pressure on oil prices were persistent concerns regarding a weakening global economy. Wednesday's data revealed that the US economy contracted in Q1, primarily due to a surge in imports as businesses sought to avoid anticipated higher costs related to tariffs.
EIA report: US crude inventories down amid higher export and refining demand. According to the EIA's report released on Wednesday, US crude oil stockpiles unexpectedly decreased last week due to increased export and refinery demand, while gasoline inventories saw their ninth consecutive weekly decline.
Crude inventories fell by 2.7 million barrels to 440.4 million barrels in the week ending 25th April. However, crude stocks at the Cushing, Oklahoma, delivery hub for futures experienced a rise of 682,000 barrels during the same period. Net crude imports decreased by 663,000 barrels per day (bpd) as exports increased to 4.1 million bpd, marking a rise of 572,000 bpd.
Refinery crude runs saw an increase of 189,000 bpd, leading to a 0.5 percentage point rise in refinery utilization rates, reaching 88.6% of total capacity. Domestic crude production slightly increased by 5,000 bpd to 13.5 million bpd.
Gasoline stocks experienced a significant drop of 4 million barrels, reaching 225.5 million barrels. This marked the ninth consecutive week of decline, representing the longest such streak in the US since an 11-week drop that concluded in June 2022. In contrast, distillate inventories, including diesel and heating oil, rose by 900,000 barrels to 107.8 million barrels.
Currencies
The dollar had a difficult April due to continuing uncertainty over the Trump administration’s tariffs and the global response to them. The dollar index was -4.37% MTD in April and -8.16% YTD. The GBP was +3.17% MTD and +6.49% YTD against the USD. The EUR was +4.72% MTD against the USD and +9.40% YTD.
Despite a report revealing a contraction in the US economy during the first quarter, the US dollar strengthened against major currencies on Wednesday. The Commerce Department's initial estimate showed a 0.3% GDP decline in Q1, a figure worse than market expectations but still above the more pessimistic forecasts from some of the largest US banks. This contraction was largely attributed to a significant surge in imports, which jumped 41.3% as businesses seemingly tried to accelerate purchases before the White House's planned implementation of tariffs. This Q1 GDP drop followed a 2.4% increase in Q4 2024.
Further economic data revealed that US personal income increased by 0.5% in March, and spending climbed by 0.7%, both exceeding economists' forecasts. The Personal Consumption Expenditures (PCE) Price Index, the Fed's preferred inflation measure, increased by 2.3% in the 12 months through March, down from 2.7% in February. Annual core inflation also eased, rising by 2.6% after a 3.0% increase in February.
Following the release of this data, the dollar gained ground against the yen, rising +0.56% to ¥142.77, while the euro weakened by -0.47% to $1.1326. The dollar experienced its largest monthly decline against the yen since July 2024, having fallen by -4.62% against the Japanese currency in April. Conversely, the euro recorded its most significant monthly gain since November 2022, appreciating by +4.72% in April against the dollar.
Sterling also weakened on Wednesday, -0.57% to $1.3324. Nevertheless, the British pound experienced its most substantial monthly increase against the dollar since November 2023, having risen by +3.17% in April.
Cryptocurrencies
Bitcoin +14.97% MTD and +1.50% YTD to $94,461.69.
Ethereum -1.41% MTD and -46.10% YTD to $1,793.38.
Bitcoin was -0.25% on Wednesday and Ethereum was -0.29%. . Bitcoin recovered ground in April as the overall cryptocurrency market cap approached $3 trillion. This rise came despite tariff concerns which are feeding into broader fears of stagflation given a lower than expected Q1 GDP and a drop in job openings as reported by ADP, making investors unsure about when or how much the Fed might cut rates. Spot Bitcoin ETFs had a mixed performance in April. The end of the month saw an outflow of $56 million, breaking an eight-day streak that saw nearly $3 billion flow into these products. The prolonged consolidation and negative funding rates may lead to a strong upward move in cryptocurrencies, particularly Bitcoin. Much will depend on how tariffs continue to evolve and their implications for the macroeconomy influencing market sentiment.
Note: As of 5:30 pm EDT 30 April 2025
Fixed Income
US 10-year yield -0.84 basis points MTD and -41.15 basis points YTD to 4.161%.
German 10-year yield basis points -21.20 MTD and +8.80 basis points YTD to 2.442%.
UK 10-year yield -17.2 basis points MTD and -12.20 basis points YTD to 4.441%.
The 10-year Treasury yield reached 4.161% on Wednesday, -0.78 bps from the previous day. Conversely, the two-year yield stood at 3.595%, -5.94 bps on Wednesday, resulting in a drop of -27.93 bps for the month. On the longer end of the curve, the 30-year yield was +5.64 bps to 4.692%, a rise of +5.64 bps for April.
The German 10-year yield was -21.20 bps in April to 2.442%, while the UK 10-year yield was -17.2 bps MTD to 4.441%. The spread between US 10-year Treasuries and German Bunds has risen 16.6 bps from 154.4 bps at the end of March to 171 bps now.
Current sentiment in the Fed funds futures market suggests that the Fed is most likely to resume its programme of interest rate cuts in June, with a 65.5% probability of doing so, up from 58.6% last week, but down from 78.5% at the end of last month. According to CME's FedWatch Tool, markets priced in 102.1 bps of rate cuts this year on Wednesday, compared to 80.6 bps a week ago, and 74.0 bps a month ago.
The Italian 10 year bond yield, a eurozone periphery benchmark, was -20.60 bps in April to 3.565%. Consequently, the spread between Italian and German 10-year yields currently stands at 112.3 bps, 0.3 bps higher from 112.0 bps at the end of March.
Across the Atlantic, eurozone government bond yields declined on Wednesday, influenced by a mixed economic data from both Europe and the US, against a backdrop of ongoing concerns regarding a potential US economic slowdown triggered by trade policy uncertainty. .Eurozone yields slightly extended their decline following US data that showed the US economy contracted in Q1 for the first time in three years, largely due to a surge in imports.
Data released on Wednesday revealed that while German and French inflation figures slightly exceeded expectations, they continued their cooling trend. Conversely, Italian inflation came in lower than anticipated. Consequently, Germany's 10-year yield fell by -5.2 bps to 2.442%.
Current market expectations indicate that the ECB's key deposit facility rate is expected to reach 1.60% in December. This pricing suggests two likely 25 bps rate cuts from the current level, with a third such reduction likely. A 25 bps cut in June is now fully priced in.
Germany's 2-year yield, which is more sensitive to shifts in ECB policy rate expectations, decreased by -6.0 bps to 1.688%. It decreased by -31.50 bps in April. On the long-end of the curve, the German 30-year bond yield fell -2.50 bps to reach 2.891%. Throughout April the German 30-year yield decreased by -12.50 bps, primarily due to safe-heaven demand for German bunds.
Investors were also closely monitoring developments in Germany, where the Social Democrats (SPD) on Wednesday approved a coalition agreement with the CDU/CSU conservatives. This marked the final step in forming a new government in Europe's largest economy.
The agreement paves the way for election winner Friedrich Merz to become chancellor on 6th May and has renewed attention on the coalition partners' plans for a significant increase in fiscal spending aimed at funding infrastructure and defence investments.
Italy's 10-year yield also saw a decrease on Wednesday, falling by -4.9 bps to 3.565%
Note: Data as of 6:00 pm EDT 30 April 2025
What to think about in May 2025
Will we get tariff resolution? We enter May with uncertainty around tariffs still disturbing markets. China's not backing down easily and doesn’t appear to even be responding to US attempts to discuss the tariffs. The additional levies have reached 145%, while Beijing has imposed a 125% retaliatory duty. As noted by Bloomberg news, the US government recently reached out to China through various channels. Yuyuantantian, a Weibo account affiliated with China Central Television that regularly signals Beijing’s views on trade, said in a post that China will talk to the US until it takes meaningful measures. However, according to the Financial Times, Yuygantantian said in a social media post on Thursday that there would be “no harm” in holding trade talks with the Trump administration. President Trump has said that a fall in cargo flows indicated that Beijing would soon need to engage with him. He is also reported to have said that he is “not happy” with the sharp decline in trade between the two nations because he wanted “China to do well” while treating the US fairly.
Although President Trump announced a 90-day pause on his ‘reciprocal’ tariffs and the EU agreed to delay for 90 days the implementation of a set of counter-tariffs against the US over 25% duties imposed on the bloc’s steel and aluminum exports, the possibility for the EU to strike a bargain to reduce the 20% figure is highly uncertain. Europe appears to be willing to compromise and also to support the US against China (at least to some degree). The EU is expected to share a paper with the US next week that will propose lowering trade and non-tariff barriers, boosting European investments in the US, and cooperating on global challenges. Although the EU experienced stronger than expected growth in Q1, inflation was down to 2.2%, and the German parliament has approved a €500 billion investment fund that’s exempt from the country’s constitutional limits on debt, the risks to sentiment from these tariffs have lowered expectations for the EU’s largest economy, Germany.
Other major economies, such as Canada are telling Trump "no" as forcefully as they can. Canada’s election of former BoE and BoC Governor Mark Carney as Prime Minister was a clear signal of Canada’s resentment of American tariffs and Trump’s threats to its sovereignty. Carney told voters that the decades-long trade and security relationship with the US was “over”. Carney is being urged to frame the expected negotiations with the US as a review and extension of the US, Mexico and Canada agreement (USMCA), the free trade deal agreed in President Trump’s first term. Carney’s election victory speech outlined a plan to strengthen relations with “reliable partners” in Europe, Asia and the rest of the world. “If the US no longer wants to be in the forefront of the global economy, Canada will. We are masters in our own home. We will build millions of housing units. We will become an energy superpower,” he said.
Key events in May 2025
The potential policy and geopolitical risks for investors that could affect corporate earnings, stock market performance, currency valuations, sovereign and corporate bond markets and cryptocurrencies include:
1 May Bank of Japan Monetary Policy Meeting. The BoJ held rates at 0.50% today. Governor Kazuo Ueda noted that uncertainty from trade policies has heightened sharply, but the BoJ is expecting to keep raising rates if prices move in line with projections.
4 May Romania Presidential Elections. The presidential election result was annulled in December 2024, citing Russian election interference. The rescheduled election is unlikely to fundamentally change the political landscape. Four candidates have a chance of finishing in the top two of the 4 May first round and advancing to the second-round runoff on 18 May. George Simion, leader of Romania’s second-largest party, the nationalist Alliance for the Union of Romanians (AUR), is in the lead, but it will remain a closely contested race. Simion is highly critical of the EU and aims to stop military aid to Ukraine.
6-7 May Federal Reserve Monetary Policy meeting. The Fed is widely expected to keep rates on hold during this meeting. Fed Chair Jerome Powell has said that although growth is slowing, the labour market is still strong. However, the impact of the new tariffs are yet to be seen and therefore the Fed is likely to wait for greater clarity around their level and suggested impact.
6-7 May ECB Annual Retreat. This is the annual event, hosted by the Banco de Portugal,
8 May Bank of England Monetary Policy Meeting. The BoE is widely expected to cut rates another 25 basis points at this meeting given the expected slow down in the growth forecast and the surprise drop in inflation in March.
30 May - 1 JuneThe IISS Shangri-La Dialogue, Singapore. This will gather the defence and security community to discuss Indo-Pacific security challenges.
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