Fin-X Weekly Update 22nd April 2025

Source: Bloomberg, S&P Dow Jones, MSCI, FTSE Russell, 21st April 2025

Global investors continued to process tariff updates last week, with many continuing to rotate out of American assets.

The ECB highlighted the impact of trade tension on financial conditions as it lowered interest rates as expected. The chairman of the Federal Reserve also outlined the likely effects of tariffs, quickly attracting the ire of the president.

There was evidence of tariff front running in data from the US and China, ahead of this week's flash PMIs and updated IMF forecasts. The global reporting season continues.

US Treasury yields moved higher last week, while European yields moved lower as the ECB cut its policy rate by a quarter point to 1.25%, as widely anticipated. Nevertheless, the US dollar weakened as investors continued to rotate out of US assets due to the ongoing threat of tariffs on all imports. Gold, oil, copper and iron ore made gains in US dollar terms.

The Australian dollar also strengthened after better-than-expected Chinese activity, and a slightly better-than-anticipated employment report that saw +32.2k new jobs added to the economy. At the same time, the headline unemployment rate was 4.1%. Economists had expected a tick up in March to 4.2%.

While the labour market remains in relatively good health, the Australian party leaders’ pre-election debate centred on the cost of living, housing affordability, US tariffs, and global security. The betting odds indicate that a Labor minority or majority government are perceived to be the more likely outcomes of the election on 3rd May.

Stocks rose early last week after Donald Trump paused additional import duties on consumer electronics. However, he later said the US will place those goods in a different “tariff bucket”, implying that new tariffs would follow.

The administration also imposed new license requirements for selling Nvidia’s H20 and AMD's MI308 AI-focused chips. Broadcom has so far been excluded. Nvidia responded with a US$ 5.5 billion inventory charge, effectively bracing for a complete block in shipments. AMD booked a US$ 800 million hit of its own. Bloomberg reported that J.P. Morgan analyst Harlan Sur estimated these measures would shave off 8%-10% of both companies’ earnings this year.

In contrast, President Trump said he's ready to consider some reprieve on autos, potentially introducing new complexity into tariff calculations. The share prices of most auto manufacturers rose over the week, including Ford (+3.2%), Stellantis (+6.3%), and General Motors (+2.2%). Tesla shares slipped by -4.3% ahead of this week’s results.

In response to the 90-day pause, the EU warned the administration by outlining more than 200 goods that would otherwise be part of retaliatory moves. However, the EU is taking a slow and measured approach and trying not to antagonise the US. Services have so far been left out of retaliatory measures.

Nevertheless, the impacts of tariffs were mentioned in the ECB’s statement that accompanied the rate cut: “Most measures of underlying inflation suggest that inflation will settle at around the Governing Council’s 2% medium-term target on a sustained basis. Wage growth is moderating, and profits are partially buffering the impact of still elevated wage growth on inflation. The euro area economy has been building up some resilience against global shocks, but the outlook for growth has deteriorated owing to rising trade tensions. Increased uncertainty is likely to reduce confidence among households and firms, and the adverse and volatile market response to the trade tensions is likely to have a tightening impact on financing conditions. These factors may further weigh on the economic outlook for the euro area”.

The White House also confirmed that China faces up to 245% tariffs, once sectoral charges are factored in.

China responded by warning other nations not to give in to US coercion and outlined conditions for negotiations. It also told its airlines to stop taking further deliveries of Boeing jets and related equipment and spares.

President Trump expressed optimism on Thursday that the US would be able to conclude trade deals with both the EU and China. However, it is understood that the Japanese negotiators left Washington without yet having an agreement in place.

While US industrial production slipped by -0.3% in March, retail sales surged by +1.4% as consumers sought to front-run tariffs. It appears that a significant proportion of the sales were on new cars, as ex-auto sales were up just +0.5%.

Official first-quarter Chinese data was also stronger than expected. GDP rose by +5.4% yoy compared to consensus forecasts of +5.2% yoy, while industrial production rose by +7.7% yoy (+5.9% yoy expected), and retail sales were up by +5.9% yoy (+4.3% yoy expected). The strength in these numbers is expected to fade later in the year as tariffs begin to take effect. Prime 1yr & 5yr interest rates were held steady yesterday at 3.1% and 3.6%, respectively.

Federal Reserve Chair Jerome Powell spoke at the Economic Club of Chicago, echoing that tariffs would likely raise inflation and lead to slower growth. President Trump responded to the lack of will to cut rates on social media by saying, “Powell’s termination cannot come fast enough!" It’s unclear whether the president will seek to remove Mr Powell before his term ends in May 2026. However, former Fed governor Kevin Warsh has already emerged as his most likely successor.

The latest IMF forecasts, flash PMIs, and IFO surveys will be the most important data released during the short week ahead. The global Q1 reporting season continues.

Significant Upcoming Data:

US Earnings:

Monday 21st:                 Home Bancorp (BHCP), SmartFinancial (SMBK), Comerica (CMA)

Tuesday 22nd:                Tesla (TSLA), GE Aerospace (GE), Verizon (VZ), Lockheed Martin (LMT)

Wednesday 23rd:           Philip Morris (PM), IBM AT&T (T), ServiceNow (NOW), Boeing (BA)

Thursday 24th:               Alphabet (GOOG), P&G, Merck & Co (MRK), Intel (INTC)

Friday 25th:                    AbbVie (ABBV), Colgate-Palmolive (CL), Phillips 66 (PSX)

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