Weekly Overview 28. Apr – 4. May 2025

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The Week in Global Markets

FINANCIAL MARKETS SUMMARY:

– EUROPE: Positive macro releases this week were probably the main factor driving investor optimism in Europe. Benchmark stock indices rose across the continent on the acceleration of real GDP growth for Q1 in Germany and the Eurozone as a whole. Additionally, preliminary headline inflation figures for Germany and the euro area were also stable or slightly lower, but core inflation unexpectedly rose in both cases, driven mainly by the higher contribution from services. The European economic sentiment index declined for both the EU and the EA as a result of worse employment expectations, falling business confidence in the services sector, and a marked decrease in consumer confidence. Retail trade confidence dropped as well due to deteriorating sentiments concerning past and expected business situations, while confidence in industry and construction was more or less stable. In Germany, consumer sentiment for May is recovering, reaching levels higher than all months so far this year, as both income expectations and the willingness to buy improved notably. Economic expectations are also up, with negative effects from the US policy shifts likely being offset by the successful coalition negotiations for the new German government. This removes a key driver of uncertainty – namely, the political situation in the country, which had previously caused a spike in the propensity to save rather than spend. In the UK, the Nationwide index of housing prices fell on a monthly basis due to a declining demand after the end of tax benefits for home purchases, but was still up YoY. Mortgage approvals kept rising in March, while business sentiment worsened in April due to the expected adverse impact of the US tariff policy. Both German and UK 10y yields increased slightly and the euro and the pound depreciated against the US dollar.

– UNITED STATES: US stocks have largely managed to recover the losses they suffered since “Liberation Day”. This development accelerated this week as news came in that China is considering talks with the US, potentially signaling its readiness to begin working on a plan to break the ice between the two largest economies in the world. This has caused some optimism, but the recent rise seems significantly driven by retail investors “buying the dip”, while overall trading volumes remained low, raising concerns about a possible bull trap. Some of the major Magnificent 7 companies reported earnings this week and some of them were particularly notable. Microsoft and META have achieved better results than expected during Q1 and have thus outperformed so far this year the other Mag 7 stocks. META’s results were fueled by strong AI-related demand and advertising revenue growth, while Microsoft surged 7% on continuing impressive growth in its cloud-computing business, Azure, and no signal of slowing AI growth. The forecasts for future growth also remained rather optimistic, while the other two giants – Apple and Amazon – are very much getting hit by the new tariff policy of the US administration and have issued clear warnings about future revenue growth. We are finally clearly seeing the hit of the shift in economic policy on the US economy, as GDP contracted by a 0.3% annualized rate in Q1, according to the first advance estimate (that number will,l of course, be revised). Mathematically, this was due to the increase in imports by companies attempting to front-run the tariffs, and by declines in consumer spending and government spending. The GDP price index is similarly pointing towards a possible rise in prices, despite a further decline in the PCE index for March (closely tracked by the Fed). The job market shows some signs of further weakening, with job openings declining and a rise in ADP payrolls by much less than previously reported and than what was expected. In the last week of April, weekly unemployment claims reached the highest level in 2 months, with continuing claims climbing to the highest level since November 2021. There is now roughly one unemployed worker for each open job and the number of job quits has also risen. One figure, however, which surprised to the upside, was the NFP – with the economy adding 177k jobs in April vs. 130k consensus expectations. Of course, we need to keep in mind that these indicators are lagging, so the effect of the most recent policies is likely to take a while to impact them. The same applies to the unemployment rate, which stayed stable and solid at 4.2%.

– ASIA-PACIFIC: Japanese stocks kept rising this week in the expectation that the next BoJ hike might be postponed for longer than previously expected in light of the downgrade of the economic forecasts. The central bank kept interest rates unchanged and now projects that inflation will stay on course to hit the 2% target in 2026, being “pushed back” as trade tensions impact the outlook. Growth is now projected to fall to 0.5% for the next fiscal year, down from a previous forecast of 1.1%. Governor Ueda stated that “recent developments surrounding tariffs will weigh on Japan’s economy by slowing global growth, hurting corporate profits, and prodding households and companies to hold off on spending due to heightening uncertainties.” But they also expect downward pressures to recede after that, with a return of other economies to a “moderate recovery”. The yen weakened to almost 145 per dollar, while the 10y JGB yield declined to 1.27%. Major Chinese stock indices decreased a little week-on-week, even as the country’s government sent some signals about its willingness to hold trade talks with the US. It was reported that Beijing is evaluating an offer from the US to engage in negotiations, but that Washington would need to show “sincerity” in such a process and that it should not use coercion and extortion. Factory activity and exports both took a clear hit last month, with manufacturing PMI declining more than expected and entering contraction territory. In India, the benchmark Nifty 50 rose WoW, with some financial analysts expecting that if the US economy enters a recession, India could benefit as it has little correlation with the US and the overseas slowdown could help the economy outperform due to its economic resilience and strong domestic growth drivers. Nevertheless, rising tensions with Pakistan are clouding such prospects, as India’s neighbor seems unafraid of military escalation, which was demonstrated by the recent test launch of a surface-to-surface ballistic missile (capable of carrying nuclear warheads) aimed at ensuring operational readiness. The country recently claimed that India might be preparing for an attack within days.

– BITCOIN: The largest cryptocurrency remained confidently above the $93k mark this week, climbing to nearly $98k at some point and currently hovering around $95.5k. The Fed’s decision next week might turn out to be the key driver of its performance – volatility is likely to be higher around the decision itself. The odds are telling us that the probability for a rate cut now (or before July) is low and therefore, BTC could be down against USD before Tuesday, but then analysts expect that a rally could occur if the Fed decides as expected. The CoinTelegraph reported this week that institutional investors are increasing their investments in Bitcoin mining as a result of the improving regulatory environment in the US. According to research by EY-Parthenon and Coinbase, 83% of the 352 global institutions plan to increase their crypto allocations this year, while 51% of the asset managers are considering investments in digital asset companies, including mining companies.