Financial markets remained volatile but closed the two weeks higher. Fears that Donald Trump was plotting to sack Fed chair Jay Powell caused another sell-off, but markets recovered when Trump said he had “no intention” of firing Powell although he reiterated his complaint that the Fed has been slow to cut borrowing costs.
Hopes of peace in Ukraine faltered as Donald Trump threatened to walk away if there was no progress soon.
UK
The FTSE 100 climbed 5.7% over the two weeks.
The S&P Global flash UK Composite PMI index fell to a 29-month low of 48.2 in April from 51.5 in March.
UK inflation slowed to 2.6% in March from 2.8% in February.
UK retail sales unexpectedly rose 0.4% in March.
US
The S&P 500 rose 3.8% over the two weeks while the Nasdaq rallied 4.6%. So far this year, US stocks have underperformed the rest of the world this year by the widest margin since 1993: the MSCI USA index has lost 11% over the first 16 weeks of the year, while the MSCI all world ex-US benchmark has climbed 4% in USD terms over the same period.
Federal Reserve (Fed) chair Jay Powell criticised President Trump’s tariff policy, saying “without price stability, we cannot achieve long periods of strong labour market conditions”.
President Trump’s more conciliatory tone when talking about trade tariffs on China received a cold response from Beijing which told the US to “completely cancel all unilateral tariff measures” if Washington wants trade talks. US Treasury secretary Scott Bessent described the US-China trade war as “not sustainable”. China said there
Europe
The Eurofirst 300 jumped 6.9% over the two weeks.
The European Central Bank (ECB) cut interest rates by 25 bps for the seventh time since June, taking rates to 2.25% as it pointed to a deteriorating outlook for growth over “rising trade tensions”. ECB president Christine Lagarde highlighted the “exceptional uncertainty” confronting the economy, while maintaining that inflation was on track to come down to the bank’s 2% target.
The flash HCOB Composite Eurozone PMI fell to 50.1 in April from 50.9 in March, while business confidence in April fell to its lowest level since November 2022. Germany fell back into contractionary territory as its composite PMI plunged to a four-month low of 49.7 in April, down from 51.3 in March.
Shares of Novo Nordisk tumbled after rival Elo lolly announced a new weight-loss pill.
Japan
The Nikkei 225 surged 6.3% over the two weeks.
The au Jibun Bank Japan Composite PMI climbed to 51.1 in April from a final reading of 48.9 in March.
Pacific Basin ex Japan
China’s GDP expanded by a stronger-than-expected 5.4% in the first quarter from a year earlier. However, the data reflected growth before the trade war hit.
China’s Politburo said it would “fully prepare” emergency plans in response to external shocks. The group also said that China would set up new monetary tools and policy financing instruments to boost technology, consumption, and trade. President Xi Jinping travelled to Vietnam as part of his broader SE Asia trip to make closer trade partnerships in the region. Factories in China have begun slowing production and furloughing some workers as the trade war dries up orders.
Chinese exports jumped 12.4% year on year in March as factories rushed out shipments in anticipation of significantly higher US tariffs. Industrial production was also stronger than expected in March, as were retail sales.
Emerging Markets
The MSCI EM Index advanced 6.2% in USD terms over the two weeks.
Turkey’s central bank unexpectedly raised its key interest rate by 250 bps to 46%. The decision comes after the lira lost ground sharply after the arrest of President Erdogan’s main rival.
Indian headline inflation declined to a five-and-a-half year low of 3.3% in March.
Bonds
The yield on the 10-year US Treasury bond fell 27 bps over the two weeks to 4.26%, while the yield on the 2-year note slid 16 bps to 3.77%.
The yield on Germany’s 10-year Bund declined 10 bps to close the two weeks at 2.47%, while 10-year UK gilt yields fell 29 bps to 4.55%.
Japan’s 10-year bond yield fell 1 bps to 1.33%.
Commodities
Gold breached $3,500 an ounce for the first time on record amid fears of threats to the Federal Reserve’s independence.
Oil prices were pressured by speculation that Opec will continue to accelerate production increases given continued tensions between key members of the cartel.
Currencies
The Swiss franc soared to a 10-year high against the US dollar, sparking rising speculation that the Swiss National Bank will have to lower interest rates to zero or below to curb the currency’s rise were “currently no economic and trade negotiations between China and the United States”.
President Trump also claimed to have agreed “200” trade deals since Liberation Day, although negotiations with Japan, one of the first countries to secure trade talks with the US, ended without a deal.
The IMF predicted Trump tariffs could drive public debt to 117% by 2027, a post war high.
The S&P Global Flash US Composite PMI fell to 51.2 in April from 53.5 in March, pointing to the slowest rate of private sector activity growth in 16 months.
NVIDIA said it expected the Trump administration’s plans to curb sales to China would dent its earnings by about $5.5bn.
Apple said it plans to shift the assembly of all US-sold iPhones from China to India as soon as next year.
Alphabet reported double-digit increases in first-quarter revenue and profit, driven by another good performance in its search business and the boom in artificial intelligence-related demand for cloud computing.
