Weekly Overview 21. – 27. Apr 2025

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The Week in Global Markets

FINANCIAL MARKETS SUMMARY:

– EUROPE: Indications of potential easing of the trade war between the US and China led to a rise in investor optimism across many regions, including Europe. European equities advanced, with major indices up in Germany, France, Italy, the UK, as well as pan-European stocks. Nevertheless, the flash PMI data for April show that, while the composite index remained barely above 50, it came in lower than consensus expectations and manufacturing and services PMIs were both in contraction. German PMIs also declined further, despite an improvement in the Ifo business climate index. The expectations for Germany are getting gloomier with uncertainty anticipated ahead and the economy preparing for turbulence, according to the Ifo survey. There were fewer new orders in April, both in the euro area and in Germany in particular. Business confidence has also dropped significantly in Germany and the Eurozone. The ECB has warned again that growth is likely to slow once again, although a recession is not expected. The IMF has also updated its growth projections, showing that the slowdown is expected to be much less severe in Europe than in the US, Mexico, Canada and even China, if the tariff policies remain in place. The German government forecast was also revised down to 0%, compared to 0.3% growth expected previously for 2025.

– UNITED STATES: US President Trump and Treasury Secretary Bessent made comments about reported trade negotiations with China this week, although Beijing quickly dismissed these in a defiant statement. China not only says there are no economic and trade negotiations with the US, but also that they ask that all unilateral tariff measures be completely cancelled if Washington expects trade talks to start. They only see this tariff standoff being resolved with an “equal dialogue”. Scott Bessent separately told the participants at a private investor summit in Washington hosted by JPMorgan Chase that he expects de-escalation soon because the status quo is unsustainable. Stocks pumped on the news of the statements and generally managed to keep it up by the end of the week, with the S&P 500, the Dow, the Russell 2000 and the Nasdaq all ending higher. Treasury yields also finally seemed to calm down a bit more, although the 10y remained firmly above 4%. However, despite some still-positive corporate earnings releases, the S&P Global PMIs did not paint an optimistic picture. Manufacturing activity was slightly up in April, but services were down sharply, marking a significant slowdown in growth. Durable goods orders increased, but this was mostly due to transportation (aircraft) orders, with businesses attempting to front-run the tariff impact. The numbers were flat for all other categories in aggregate. Existing home sales dropped considerably due to affordability issues and high mortgage rates. The sentiment data from the University of Michigan are once again showing a deterioration and a further increase in consumer inflation expectations.

– ASIA-PACIFIC: Japanese stocks had a similar reaction to the US-China news, with the Nikkei and TOPIX indices both advancing week-on-week. The yen weakened a bit, moving above the 143 mark, while 10y JGB went up 4bp to 1.34%. Tokyo-area inflation data showed that consumer prices growth is not slowing down, which makes it more likely than not that the BoJ might do another hike sooner rather than later. In China, the benchmark stock indices also gained this week, as the Politburo announced that it will be fully ready with an emergency plan against external shocks. This is likely to include new monetary and funding tools to enhance technology, trade, and consumption.

– BITCOIN: The largest cryptocurrency finally managed to stage a breakout this week, ending at around $94k. The rebound was so unexpected that, according to Cointelegraph, bearish traders were caught off guard and were scrambling to cover their shorts. If the price of Bitcoin keeps rising this way, and exceeds $95k, an additional $700m in short futures positions could be liquidated, according to CoinGlass data, which would be a tough short squeeze. Data show that between 21-23 April, investment inflow into Bitcoin ETFs once again increased substantially.