USA
Last week, U.S. markets posted gains despite mixed macroeconomic signals. The April CPI report showed inflation easing to 2.3% year-over-year — a four-year low — raising expectations for potential Fed rate cuts later in 2025. However, first-quarter GDP growth was revised down to -0.3%, reflecting consumer caution and weak capital spending. Labor data remained stable, with initial jobless claims holding at 229,000, indicating no immediate deterioration in employment conditions. The S&P Global Manufacturing PMI ticked up to 50.7, suggesting moderate expansion in industrial activity. Notably, Moody’s downgraded the U.S. credit rating from Aaa to Aa1 due to persistent fiscal deficits, though markets remained resilient. A major positive catalyst came from the U.S.-China trade truce, which lowered tariffs on both sides for 90 days, improving investor sentiment. The S&P 500 climbed to 5,958, while the NASDAQ and Dow Jones posted 0.5% and 0.8% weekly gains, respectively.
Europe
European markets remained under pressure as the European Commission slashed its 2025 GDP growth forecast for the Eurozone to 0.9% (from 1.3%), citing soft global demand and U.S.-EU trade frictions. Germany, in particular, faces stagnation, which weighed on the DAX 40 index. Inflation in the euro area held steady at 2.2% in April, and the preliminary Q1 GDP figure showed a modest 0.3% quarterly expansion. However, manufacturing activity remained subdued, with the PMI at 48.6, still in contraction territory. The STOXX Europe 600 and FTSE 100 reflected these concerns with choppy performance, while the CAC 40 showed relative resilience due to strong earnings from French consumer and luxury goods companies. Uncertainty surrounding the broader trade environment and political stability, especially in southern Europe, also contributed to market volatility.
Japan
Japan’s economy contracted by 0.7% in Q1 2025, reversing the 2.4% growth in the previous quarter. The decline was driven by falling exports and weak domestic consumption, partly exacerbated by elevated inflation — Tokyo’s core CPI rose 3.4% year-over-year in April. Manufacturing continued to struggle, with the PMI at 48.7, pointing to ongoing softness in industrial output. The Bank of Japan maintained its policy rate at 0.5% but indicated it may raise rates further if inflation remains near or above its 2% target. Meanwhile, Prime Minister Shigeru Ishiba ruled out tax cuts funded by government debt, citing fiscal sustainability concerns amid growing social spending. Market sentiment was cautious, with the Nikkei 225 and TOPIX indices retreating slightly over the week in response to the negative GDP surprise and softening global demand outlook.
China
China's Q1 2025 GDP growth came in stronger than expected at 5.4% year-over-year, boosted by infrastructure investment and industrial output. However, underlying weaknesses persisted: the Caixin Manufacturing PMI edged down to 50.4, and April retail sales growth decelerated, reflecting subdued consumer sentiment. Inflation remained low, with the April CPI rising just 0.1% month-on-month, signaling continued deflationary pressures. Despite the temporary easing of trade tensions with the U.S., Moody’s downgraded its 2025 growth forecast for China to 3.8%, citing structural risks and weak private consumption. On the markets front, the Shanghai Composite rose modestly on strong GDP data, while the Hang Seng Index struggled due to tepid consumer activity and lingering geopolitical concerns surrounding Taiwan and U.S.-China relations. The outlook remains mixed as China attempts to balance stimulus measures with long-term structural reforms.