Fin-X Weekly Update 28th April 2025

After a negative start to the week’s trading, President Trump appeared to heed the warnings from the market and the latest polls, providing a more optimistic but unconvincing outlook for tariffs.  The Treasury Secretary outlined a new vision for global trade and a narrower role for official institutions. But investors warmed to a less aggressive tone from the White House. 

The IMF cut its global GDP growth forecasts while the PMI surveys revealed a widespread deterioration in business confidence. 

Elections will be held in Canada and Australia this week. Plenty of new data will also be released, including Australian quarterly inflation figures, American Q1 GDP growth, and the monthly labour report. The Bank of Japan is expected to keep rates on hold.

American markets were open on Easter Monday while President Trump continued his attacks on the Federal Reserve Chair Jerome Powell, raising concerns that the independence of the American central bank was under threat. 

Investors responded negatively across the board. The S&P500 fell by over -2%, bonds sold off, the US dollar fell, and gold closed above US$ 3,400 per oz for the first time.  

Before the open on Tuesday, the former head of the New York Fed, Bill Dudley, told Bloomberg that the Fed “would have a credibility problem” if lowered rates after pressure from the White House, raising the prospect of a prolonged tightening of financial conditions, and pushing gold to briefly touch US$ 3,500 per oz. 

It was reported that the CEOs of Walmart, Target, and Home Depot had met with the president and warned of empty shelves, supply chain disruptions, and price hikes within weeks due to tariffs. 

President Trump was also frustrated by the failure to secure a peace deal for Ukraine within the self-imposed 100-day deadline. The US administration threatened “to walk away” if an agreement could not be reached, despite signing a memorandum of intent with Ukraine on minerals. He later met with President Zelenskyy while attending Pope Francis’ funeral, before openly wondering whether the Russians were genuine in their desire to reach an agreement. In a Truth Social post over the weekend, he wrote, “[…] there was no reason for Putin to be shooting missiles into civilian areas, cities and towns, over the last few days. It makes me think that maybe he doesn’t want to stop the war, he’s just tapping me along, and has to be dealt with differently, through “Banking” or “Secondary Sanctions?” Too many people are dying!!!” If pursued, secondary sanctions could place upward pressure on the oil price, compounding the inflationary risks. 

Elon Musk confirmed that he will be leaving the Department of Government Efficiency (DOGE) after a difficult few months that have seen his popularity wane. On Tuesday, Tesla reported a -20% drop in car sales for the first three months of the year, compared with the same period last year, while profits fell - 71%. Chinese competitor BYD, which unveiled a battery that can recharge for 400km in 5 minutes earlier this month, reported soaring sales and US$ 1.3 billion in net income, surpassing that of Tesla. Mr Musk told investors that he would "be allocating far more of my time to Tesla", but suggested he would not leave the Trump administration completely, calling the work "critical" and pledging to stay on "as long as the president would like me to do so and as long as it's useful". 

Also on Tuesday, the IMF published the April World Economic Outlook, slashing its 2025 US economic growth forecast from +2.7% to +1.8%. The global GDP growth forecast was also lowered from +3.3% to +2.8%.  

Chief economist, Pierre-Olivier Gourinchas, said, “The April 2 Rose Garden announcement forced us to jettison our projections — nearly finalised at that point — and compress a production cycle that usually takes more than two months into less than 10 days.” 

The first two paragraphs of the front-page summary said: “After enduring a prolonged and unprecedented series of shocks, the global economy appeared to have stabilised, with steady yet underwhelming growth rates. However, the landscape has changed as governments around the world reorder policy priorities and uncertainties have climbed to new highs. Forecasts for global growth have been revised markedly down compared with the January 2025 World Economic Outlook (WEO) Update, reflecting effective tariff rates at levels not seen in a century and a highly unpredictable environment. Global headline inflation is expected to decline at a slightly slower pace than what was expected in January. 

Intensifying downside risks dominate the outlook, amid escalating trade tensions and financial market adjustments. Divergent and swiftly changing policy positions or deteriorating sentiment could lead to even tighter global financial conditions. Ratcheting up a trade war and heightened trade policy uncertainty may further hinder both short-term and long-term growth prospects. Scaling back international cooperation could jeopardise progress toward a more resilient global economy“. 

The negative tone was echoed in the global flash PMI surveys, which mentioned falling confidence in the outlook across all major currency blocs. In contrast, the Australian PMI highlighted the strength of the domestic economy. 

From the low on Tuesday morning, sentiment steadily improved throughout the week as the US administration appeared to sense the limits of its disruptive power. The falling stock market, economic warnings, and disappointing polls prompted the president to row back some of his previous comments, saying that he had "no intention of firing Powell". 

The US Treasury Secretary then said he expected a “de-escalation” in the trade war with China “in the very near future” further improving sentiment. Speaking at a private investor summit on the sidelines of the World Bank meetings, he described the sky-high tariff fight between Washington and Beijing as “unsustainable”. 

In a lengthy interview with Time magazine, the president added that his administration was actively engaged in discussions with China regarding trade. He stated that Chinese President Xi Jinping had reached out to him and that talks were ongoing, before claiming he had already "made 200 deals" on trade and expected negotiations to be "finished" within three to four weeks. However, Beijing subsequently denied the reports. Ministry of Commerce Spokesperson He Yadong said, “At present, there are absolutely no negotiations on the economy and trade between China and the U.S. […] If the U.S. really wants to resolve the problem ... it should cancel all the unilateral measures on China.” 

Having withdrawn from the World Health Organisation and suspended contributions to the World Trade Organisation earlier this year, investors half expected that the Treasury Secretary would seek to distance the US from the IMF and World Bank when he addressed the Institute of International Finance. Mr Bessent instead announced that the administration intended to play a larger leadership role. He criticised the IMF and World Bank for encroaching beyond their original Bretton Woods objectives, saying they needed to “reconnect with their founding missions to create balance in the global system and make sure that they serve their stakeholders, not the other way around.” He added that “America first does not mean America alone” and called for deeper collaboration and mutual respect among trade partners, while singling out the Chinese for fostering the most obvious imbalances between the domestic economy and external trade. The speech signalled an intention to manipulate the global institutions to further its policy objectives. 

American attempts to reorganise the world order will be key themes in the final days of election campaigning in Canada and Australia this week. Betting markets suggest that a hung parliament is the most likely outcome in Canberra, with Labor tipped to form a minority government. The Liberal Party’s Mark Carney is expected to remain as prime minister in Canada. 

A relatively large volume of data is also due out this week. However, it's likely too soon to see the effects of this month's tariff announcements appear in any “hard” data series. Friday’s American labour report is expected to show that unemployment remained at 4.2% in April. However, US GDP is expected to have fallen to just +0.4% (annualised) in Q1.  

Australian quarterly inflation data is expected to reveal a further slowing in headline and core CPI measures.  

The Bank of Japan is also expected to keep interest rates on hold at 0.5% despite Tokyo CPI rising to +3.5% yoy in April.

US Reporting Calendar: 

Monday 28th – Cadence Design (CDNS), Teradyne (TER), Waste Management (WM) 

Tuesday 29th – Visa (V), Novartis (NVS), Pfizer (PFE), American Tower Corp (AMT), Starbucks Corp (SBUX), Paypal (PYPL), BP 

Wednesday 30th – Microsoft (MSFT), META, Qualcomm (QCOM), Equinix (EQIX), GSK, Crown Castle (CCI),  

Thursday 1st _ Dell Technologies (DELL), Marvell Technology (MRVL), American Eagle Outfitters (AEO), Ultra Beauty (ULTA), NetApp (NTAP) 

Friday 2nd – Crowdstrike (CRWD), HP (HPQ), C2,ai (AI)Foot Locker (FL) 

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