Global Economy & Markets, Weekly Roundup 28/04/25
Investors’ attention turns to i) how trade negotiations proceed and ii) corporate earnings
Global equity markets rose in the past week, as the US Administration indicated progress on bilateral trade negotiations, as well as due to signs of de-escalation in the trade war between the US and China. In addition, President Trump stated that he has no intention of removing Fed Chair Powell.
The MSCI ACWI ended the week up by +3.9% (-2.0% ytd), with emerging markets (+2.7% wow) underperforming their developed market peers (+4.1% wow) in relative terms. Speculative corporate bond spreads narrowed by 20 to 30 bps across the board (USD, EUR). All told, risk assets have recouped a large portion of their policy-induced losses month-to-date, with equities overperforming spread products.
Corporate profitability will be a focal point for investors given the potential impact of announced tariffs and the expected slowdown in foreign growth, amid still optimistic expectations for 2025 S&P500 EPS growth (+10%).
As far as the earnings season is concerned, out of the 180 companies that have reported results so far, 74% have surpassed analyst estimates (broadly in line with the 10-year average “beat-rate” of 75%), while results from Amazon, Apple, Meta and Microsoft take center stage in the current week.
Macro events will also be in focus in the current week, with Q1 GDP announcements (euro area, US), US labor market data (consensus estimates: 130k for non-farm payrolls from 228k in March) and euro area CPI inflation for April (NBG estimates: 2.0% year-over-year from 2.2% in March).
Regarding monetary policy, the European Central Bank, as expected, lowered for a sixth consecutive meeting its policy interest rate, by -0.25% to 2.25% (Deposit Facility Rate). The decision came on the back of continued confidence that the target of 2% inflation is on track. Market pricing, according to overnight index swaps, has brought forward additional policy easing in 2025 (circa -75 bps).
According to the ECB, international trade developments entail risks for eurozone inflation both to the upside (e.g. via a possible fragmentation of global supply chains pushing up import prices) and to the downside (e.g. via potentially lower global energy prices, a stronger euro, a hit in demand due to weaker confidence and a re-routing of exports into the euro area from countries with overcapacity).
The balance of these risks was deemed as inconclusive, albeit President Lagarde in recent comments has implied that bearing retaliatory action from the European Union, the balance of inflation risks could tilt to the downside due to the possible re-routing of Chinese exports towards the euro area.
For economic growth, the balance of risks was clearly characterized as tilted to the downside, as trade tensions could weigh on exports and respective uncertainty hurts business and consumer confidence. Note that the consumer confidence indicator decreased to a 17-month low of -16.7 in April from -14.5 in March and the composite PMI fell by -0.8 pts mom to 50.1 in April.
The IMF revised, compared with three months ago, its projection for euro area real GDP growth down by -0.2 pps in both 2025 and 2026, to +0.8% & +1.2%, respectively, from +0.9% in 2024. These estimates incorporate the US baseline scenario for additional +10% tariff on imports of goods from the euro area.
Global equity markets rose in the past week, as the US Administration indicated progress on bilateral trade negotiations, as well as due to signs of de-escalation in the trade war between the US and China. In addition, President Trump stated that he has no intention of removing Fed Chair Powell.
The MSCI ACWI ended the week up by +3.9% (-2.0% ytd), with emerging markets (+2.7% wow) underperforming their developed market peers (+4.1% wow) in relative terms. Speculative corporate bond spreads narrowed by 20 to 30 bps across the board (USD, EUR). All told, risk assets have recouped a large portion of their policy-induced losses month-to-date, with equities overperforming spread products.
Corporate profitability will be a focal point for investors given the potential impact of announced tariffs and the expected slowdown in foreign growth, amid still optimistic expectations for 2025 S&P500 EPS growth (+10%).
As far as the earnings season is concerned, out of the 180 companies that have reported results so far, 74% have surpassed analyst estimates (broadly in line with the 10-year average “beat-rate” of 75%), while results from Amazon, Apple, Meta and Microsoft take center stage in the current week.
Macro events will also be in focus in the current week, with Q1 GDP announcements (euro area, US), US labor market data (consensus estimates: 130k for non-farm payrolls from 228k in March) and euro area CPI inflation for April (NBG estimates: 2.0% year-over-year from 2.2% in March).
Regarding monetary policy, the European Central Bank, as expected, lowered for a sixth consecutive meeting its policy interest rate, by -0.25% to 2.25% (Deposit Facility Rate). The decision came on the back of continued confidence that the target of 2% inflation is on track. Market pricing, according to overnight index swaps, has brought forward additional policy easing in 2025 (circa -75 bps).
According to the ECB, international trade developments entail risks for eurozone inflation both to the upside (e.g. via a possible fragmentation of global supply chains pushing up import prices) and to the downside (e.g. via potentially lower global energy prices, a stronger euro, a hit in demand due to weaker confidence and a re-routing of exports into the euro area from countries with overcapacity).
The balance of these risks was deemed as inconclusive, albeit President Lagarde in recent comments has implied that bearing retaliatory action from the European Union, the balance of inflation risks could tilt to the downside due to the possible re-routing of Chinese exports towards the euro area.
For economic growth, the balance of risks was clearly characterized as tilted to the downside, as trade tensions could weigh on exports and respective uncertainty hurts business and consumer confidence. Note that the consumer confidence indicator decreased to a 17-month low of -16.7 in April from -14.5 in March and the composite PMI fell by -0.8 pts mom to 50.1 in April.
The IMF revised, compared with three months ago, its projection for euro area real GDP growth down by -0.2 pps in both 2025 and 2026, to +0.8% & +1.2%, respectively, from +0.9% in 2024. These estimates incorporate the US baseline scenario for additional +10% tariff on imports of goods from the euro area.