Trade tensions remain in focus. ECB aims at further rate cuts

The Dow Jones Index (US30) gained 0.05% on Friday (+3.10% for the week). The S&P 500 Index (US500) gained 0.74% (for the week +5.59%). The Nasdaq Technology Index (US100) jumped 1.14% (for the week +7.82%). The US stocks closed higher on Friday, posting their fourth consecutive session of gains, helped by strength in large technology companies. Alphabet shares rose by 1.5% after beating earnings expectations, announcing its first-ever dividend, and revealing a $70 billion share repurchase plan. Tesla shares are up 9.8% after unveiling new rules for self-driving cars. Intel is down 7% due to weak expectations, and T-Mobile is down 11% due to low subscriber growth.

President Trump’s recent statements on tariffs have left trade tensions in the spotlight. Trump’s suggestion of 50% tariffs as a “total victory” added uncertainty, and Beijing disputed claims of ongoing negotiations, which offset optimism from China’s decision to exempt some US goods from tariffs.

The University of Michigan’s Consumer Sentiment Index showed inflation expectations for the year ahead jumped to 6.5%, the highest since 1981. However, the figure was slightly lower than the 6.7% in the preliminary release. Long-term inflation expectations rose to 4.4% from 4.1%.

Equity markets in Europe were mostly up on Friday. Germany’s DAX (DE40) rose by 0.81% (for the week +3.77%), France’s CAC 40 (FR40) closed 0.45% higher (for the week +3.07%), Spain’s IBEX 35 (ES35) gained 1.33% (for the week +3.35%), and the UK’s FTSE 100 (UK100) closed 0.09% higher (for the week +1.69%). This is the fourth consecutive session of gains, helped by strong corporate results across Europe and renewed hopes of easing trade tensions between the US and China. Reports that China may slap a 125% tariff on some US imports and President Trump’s more conciliatory tone toward Beijing eased fears of a potentially devastating global trade war.

European Central Bank (ECB) governors are becoming increasingly confident of cutting interest rates in June as inflation continues its downward march. Data from the Eurozone also showed that business activity growth slowed this month, and wage growth is expected to fall significantly. Crucially for inflation, the 20% tariffs tentatively imposed by Trump on European goods have been less harsh than the ECB had anticipated, and the risk of retaliatory measures from the European Union has so far been averted.

WTI crude oil prices rose nearly negative 0.4% to settle at $63/bbl on Friday, but posted a weekly loss of more than positive 1% amid lingering oversupply concerns and uncertainty over US-China trade talks. Market sentiment remained cautious as there were reports that the US and Russia are moving towards ending the conflict in Ukraine, although key terms have yet to be defined. Adding to geopolitical tensions was the fact that the US imposed new sanctions this week against a key Iranian figure involved in the transportation of oil and liquefied natural gas.

Silver prices (XAG/USD) slipped to as low as $33.30 an ounce on Friday, trimming gains made earlier in the week as signs of easing global trade tensions drove the dollar higher, putting pressure on dollar-denominated commodities.

Asian markets were mostly up last week. Japan’s Nikkei 225 (JP225) rose by 3.33%, China’s FTSE China A50 (CHA50) climbed 0.35%, Hong Kong’s Hang Seng (HK50) gained 4.34%, and Australia’s ASX 200 (AU200) posted a positive 2.66%.

China remains confident of achieving its 2025 economic growth target of around 5%. Despite the negative impact of US President Donald Trump’s tariffs, Chinese policymakers are optimistic that the US will soften its stance first, allowing Beijing to proceed with its planned stimulus measures. Central Bank deputy governor Zou Lan reiterated the continuation of moderately loose monetary policy, increased economic support and efforts to keep the yuan stable.

Singapore’s seasonally adjusted unemployment rate rose to 2.1% in Q1 2025, up from 1.9% in the previous three quarters, according to Express estimates. This is the highest unemployment rate in a year, driven by slowing economic activity and escalating global trade tensions. The worsening economic outlook is expected to affect companies’ hiring and wage expectations.