InvestMacro

At the end of Monday, the Dow Jones Index (US30) was up 0.32%. The S&P 500 Index (US500) added 0.09%. The Nasdaq Technology Index (US100) closed higher by 0.09%. Surprisingly, markets digested positively the downgrade of the US credit rating by Moody’s to Aa1. Treasury Secretary Scott Bessent downplayed the move and urged trading partners to engage during the 90-day tariff pause.

The Mexican peso rose to 19.40 per dollar, nearing a seven-month peak of 19.38 reached on May 14, as Moody’s downgrade of the US sovereign debt rating to Aa1 on May 16 and rising bets on an imminent Federal Reserve rate cut reduced the dollar’s appeal. The Bank of Mexico’s unanimous 50 basis point rate cut to 8.50% on May 15 amid core and core inflation at 3.9% and Q1 GDP growth of just 0.2% drove down yields in Mexico, but a weaker dollar largely supported the peso’s rise.

The Canadian dollar is holding near 1.40 per dollar, remaining near the one-month low of 1.398 hit on May 14, amid US dollar softness offsetting dovish expectations for the Bank of Canada. However, longs remain constrained by expectations of a dovish Bank of Canada rate after disappointing April jobs growth and a rise in the unemployment rate to 6.9% fueled speculation of a rate cut in June, dampening investor appetite for Canadian assets. Canada’s inflation report will be released today, where the same reading as last month is expected.

Equity markets in Europe were mostly up on Monday. Germany’s DAX (DE40) was up 0.70%. France’s CAC 40 (FR40) closed down 0.04%, Spain’s IBEX35 (ES35) gained 0.25%, and the UK’s FTSE 100 (UK100) closed higher 0.17%. The positive sentiment was boosted by a landmark agreement between the UK and the European Union, which calls for closer cooperation in key areas such as energy, trade, defense, travel, and fisheries. The Eurozone’s annual inflation rate for April 2025 was confirmed at 2.2%, just above the European Central Bank’s target of 2.0%.

The US natural gas (XNG/USD) prices fell more than 6% to below $3.10/MMBtu, the lowest since April 25, and extended last week’s decline of more than 12%, driven by weaker near-term demand and lower LNG exports. Warmer-than-normal weather in late May is expected to curb heating demand.

Asian markets were mostly falling yesterday. Japan’s Nikkei 225 (JP225) fell by 0.68%, China’s FTSE China A50 (CHA50) lost 0.42%, Hong Kong’s Hang Seng (HK50) decreased by 0.05%, and Australia’s ASX 200 (AU200) was negative 0.58%.

The People’s Bank of China (PBOC) cut key lending rates to a record low during its May meeting, matching market expectations and marking the first cut since October. The move followed wide-ranging monetary easing measures announced by Beijing earlier this month to support a sluggish economy and mitigate the potential impact of ongoing trade tensions with the US. The one-year prime rate (LPR), the benchmark for most corporate and household loans, was cut by 10 basis points to 3.0%, while the five-year LPR, which determines mortgage rates, was cut by the same amount to 3.5%. The offshore yuan fell to around 7.22 per dollar, posting a third straight session of losses and hitting a one-week low.

The Australian dollar slipped to $0.643 on Tuesday, rebounding from the previous session’s gains, after the Reserve Bank of Australia cut its key interest rate by 25 bps, as expected, and signaled that risks to the economy were diminishing. Policymakers noted that data for the March quarter confirmed further easing in inflation and pointed to reduced upside risks to inflation. Updated expectations indicated that core inflation is likely to remain near the middle of the 2-3% target range. The RBA also pointed to developments in global trade as a potential impediment to growth, which strengthened the case for additional rate cuts and put pressure on the Australian dollar.

At the end of Friday, the Dow Jones Index (US30) increased by 0.78% (for the week +1.80%). The S&P 500 Index (US500) was down 0.70% (for the week +2.60%). The Nasdaq Technology Index (US100) closed higher by 0.43% (for the week +2.93%). Wall Street ended the week on a high note, with all three major indices posting solid weekly gains, helped by easing trade tensions between the US and China. However, soft consumer sentiment data somewhat dampened the rally: the University of Michigan Index fell to 50.8, the second lowest ever recorded, while annual inflation expectations jumped to 7.3%.

Moody’s Credit Ratings downgraded the US credit rating by one notch to Aa1 from Aaa amid concerns about rising debt and interest payments. The agency said it expects federal debt to increase to about 134% of GDP by 2035, up from 98% last year. At the same time, the federal budget deficit is expected to widen to nearly 9% of GDP by 2035, up from 6.4% in 2024, due to higher interest payments on debt, higher social spending, and lower government revenues from tax cuts.

Equity markets in Europe were mostly up on Friday. Germany’s DAX (DE40) rose by 0.30% (for the week +0.04%), setting a new all-time high. France’s CAC 40 (FR40) closed 0.42% higher (for the week +1.11%), Spain’s IBEX35 (ES35) gained 0.96% (+3.10% for the week), and the UK’s FTSE 100 (UK100) closed 0.59% higher (+1.52% for the week). The EU bloc is pushing for a more comprehensive deal with the US to reduce tariffs than those currently being discussed with the UK and China, adding that discussions are progressing positively.

WTI crude oil prices rose by 1.4% to settle at $62.5 a barrel on Friday, recording their second consecutive weekly gain of more than 2% as easing trade tensions between the US and China helped boost sentiment. A 90-day tariff truce between the world’s two biggest oil consumers helped ease fears of weakening demand. However, caution remained due to rising US crude inventories and the IEA’s expectations of a supply surplus in 2025 due to increased OPEC+ production. Analysts also lowered long-term oil price projections, citing trade policy uncertainty.

Asian markets were mostly up last week. Japan’s Nikkei 225 (JP225) rose by 0.15%, China’s FTSE China A50 (CHA50) gained 0.74%, Hong Kong’s Hang Seng (HK50) added 0.74%, and Australia’s ASX 200 (AU200) was positive 1.37%. Mainland equities declined for the second consecutive session as concerns over US tariffs continue to dampen sentiment. Market sentiment was further dampened by a sharp drop in Alibaba Group shares, down more than 4% in Hong Kong, after the e-commerce giant reported lower-than-expected quarterly earnings.

The foundation for China’s economic recovery “needs to be further strengthened” amid external uncertainties, the National Bureau of Statistics said in a statement. The remarks followed April activity data that showed mixed figures. China’s industrial production rose 6.1% y/y, beating expectations of 5.5% but slowing from March’s 7.7% growth, the fastest in nearly four years. Meanwhile, retail sales rose less than expected, reflecting weak domestic consumption and sluggish income growth. At the same time, the nation’s urban unemployment rate fell to a four-month low of 5.1% from 5.2% in March. Fixed asset investment for January-April, including real estate and infrastructure, rose 4.0%, below the 4.2% projections. China’s Central Bank is set to revise its benchmark lending rates, which have remained at record lows in recent months, as the economy faces domestic and external pressures. The People’s Bank of China (PBoC) is scheduled to meet tomorrow.

Hong Kong’s economy grew by 3.1% year-on-year in Q1 2025, in line with preliminary estimates and accelerated from an upwardly revised 2.5% in Q4 2024. Growth was mainly driven by strong external demand, especially in exports of goods and services, as businesses increased shipments in advance in anticipation of the upcoming tariff hike in the US. On a seasonally adjusted quarterly basis, GDP grew by 1.9%, the fastest pace in two years and an acceleration from the previous quarter’s upwardly revised 0.9%.

The US stocks ended Wednesday trading mixed as investors weighed changing trade policies and recent strength in the technology sector. The Dow Jones Index (US30) was down 0.21% at Wednesday’s close. The S&P500 Index (US500) added 0.10%. The Nasdaq Technology Index (US100) closed higher by 0.72%. Nvidia was up 3% after reports of artificial intelligence chip shipments to Saudi Arabia, while AMD jumped 4% after unveiling a $6 billion share repurchase plan. A broader rally in support of artificial intelligence contributed to a 17% rise in Super Micro Computer shares, helping to lift overall market sentiment. Meanwhile, President Trump’s visit to the Middle East led to several new business deals, including an agreement between Boeing and Qatar Airways and artificial intelligence initiatives in the Gulf.

The Canadian dollar weakened to 1.40 per dollar, retreating from a five-month high of 1.378, which reached May 6 amid dovish Bank of Canada (BoC) expectations and ongoing trade uncertainty. A marginal jobs increase of just 7,400 and a rise in the unemployment rate to 6.9% in April reinforced market bets on a possible rate cut by the Bank of Canada as early as June, weakening the loonie’s appeal.

Equity markets in Europe were mostly down yesterday. Germany’s DAX (DE40) was down 0.47%, France’s CAC 40 (FR40) closed down 0.47%, Spain’s IBEX35 (ES35) added 0.52%, and the UK’s FTSE 100 (UK100) closed down 0.21%. Meanwhile, President Trump’s visit to the Middle East led to several new business deals, including an agreement between Boeing and Qatar Airways and artificial intelligence initiatives in the Gulf. The consumer discretionary sector continued its volatile performance, recording record losses, with LVMH and Kering down 2 and 3% and L’Oreal down 3.3%. In turn, the healthcare sector continued to decline as US President Trump was expected to adopt a policy to cap drug prices, with Sanofi and Bayer losing 1% and 2%, respectively.

WTI crude oil prices fell more than 2% to $61 per barrel on Thursday, extending losses from the previous session amid renewed oversupply concerns following an unexpected increase in US crude inventories. EIA data showed a 3.454 million barrel increase in crude inventories last week after industry data reported a significant 4.3 million barrel increase. On the supply side, OPEC lowered its forecast for non-OPEC+ production growth in 2025 to 800,000 bpd from 900,000 bpd, citing softer expectations for producers such as the US.

Asian markets were predominantly up. Japan’s Nikkei 225 (JP225) was down 0.14%, China’s FTSE China A50 (CHA50) added 1.71%, Hong Kong’s Hang Seng (HK50) was up 2.30%, and Australia’s ASX 200 (AU200) was positive 0.13% for yesterday.

China lifted export restrictions on rare earth metals and military technology for 28 US companies just two days after a major agreement between the US and China to reduce tariffs temporarily. In a sign of further improvement in relations, China also announced the temporary lifting of trade and investment bans for 17 US companies, calling the latest developments a potential reset in bilateral relations.

The Australian dollar rose to $0.644 on Thursday, rebounding some of the previous session’s losses after stronger-than-expected employment data underpinned a more hawkish outlook for monetary policy. Official data showed the Australian economy added 89,000 new jobs in April, bringing total employment to a record 14.64 million, well above the forecast of 20,000. The unemployment rate remained unchanged at 4.1%, which aligns with expectations. Although the Reserve Bank of Australia (RBA) is expected to cut the money rate by 25 basis points to 3.85% at next week’s meeting, traders have lowered expectations of further easing. Markets now estimate a total rate cut to end the year at around 76 basis points, down from 100 basis points a few weeks earlier.

The Dow Jones Index (US30) was down 0.64% at Tuesday’s close. The S&P 500 Index (US500) was up 0.72%. The Nasdaq Technology Index (US100) closed higher by 1.58%. Weakening inflationary pressures boosted stocks after Tuesday’s smaller-than-expected US consumer price report for April. The US Consumer Price Index for April rose 2.3% y/y, slightly weaker than expectations of 2.4% y/y and the lowest increase in 4 years. The Consumer Price Index excluding food and energy for April rose by 2.8% y/y, unchanged from March and in line with expectations.

Additionally, a rally by chip makers on Tuesday supported the overall market on news that Nvidia and Advanced Micro Devices will supply semiconductors to Saudi Arabian artificial intelligence company Humain for a data center project. On Tuesday, the Commerce Department said it was rescinding President Biden’s artificial intelligence proliferation rule, and the Trump administration plans to overhaul export rules for semiconductors used in artificial intelligence, which could move toward customized deals with countries.

The Mexican peso strengthened to 19.4 per US dollar, hitting a seven-month high, as a sharp pullback in the US dollar drove it higher. Meanwhile, the Bank of Mexico is expected to make its seventh consecutive 50 basis point rate cut on Thursday, bringing the policy differential into line, although much of this has already been factored into the price.

Equity markets in Europe were mostly up yesterday. Germany’s DAX (DE40) rose by 0.31%, France’s CAC 40 (FR40) closed 0.30% higher, Spain’s IBEX35 (ES35) Index gained 0.83%, and the UK’s FTSE 100 (UK100) closed negative 0.02%. Frankfurt’s DAX Index closed at a new record high of 23,620 on Tuesday, marking its fourth session of gains, helped by upbeat German sentiment data and a cooler-than-expected US inflation report. The ZEW Index of German economic sentiment rose to 25.2 in May, well above the expectation of 11.9, thanks to optimism about domestic stability and improved trade dynamics. European stocks rose in the previous session after the US and China eased the trade war for the next 90 days to renegotiate trade terms, which supported the macroeconomic backdrop for all sectors. The auto sector led the gains, with shares of Volkswagen, BMW, and Stellantis adding between 4.5% and 3%. Industrial companies also rose strongly, with Siemens, Airbus, and Schneider gaining 1.5%.

WTI crude prices rose to $63.8 a barrel on Tuesday, hitting their fourth consecutive high in more than a month, amid new sanctions threats against Iran and an improving outlook for global trade flows. Speaking to Saudi Arabian officials, US President Trump reiterated his threat to impose sanctions on Iranian oil unless they agree to a nuclear deal. In turn, fears of widespread economic pain eased after the US and China agreed to reduce tariffs against each other temporarily.

Silver prices rose nearly 2% to above $33 an ounce on Tuesday, recovering from losses in the previous session as initial enthusiasm over the US-China trade agreement began to wane, giving way to broader market caution.

Asian markets were predominantly up yesterday. Japan’s Nikkei 225 (JP225) rose by 1.43%, China’s FTSE China A50 (CHA50) gained 0.31%, Hong Kong’s Hang Seng (HK50) declined 1.87%, and Australia’s ASX 200 (AU200) was positive 0.43%.

The Australian dollar climbed above $0.648 on Wednesday, posting its second consecutive session of gains, amid dollar weakness following softer-than-expected US inflation data. Given the heavy reliance of Australian exports on China, especially commodity exports, the local currency remains highly sensitive to trade dynamics between the US and China. On the domestic front, data showed that Australia’s first-quarter wage growth exceeded expectations. The Reserve Bank of Australia (RBA) is expected to cut interest rates by 25 basis points at its meeting next week, continuing to support economic growth amid global uncertainty.

India’s annual inflation rate for April 2025 fell to 3.16%, the lowest since July 2019, from 3.34% in the previous month and well below market expectations of 3.3%. This brought the inflation rate even lower than the Reserve Bank of India’s average target of 4%, strengthening the case for additional rate cuts by the Central Bank.

The US stocks soared yesterday after the US and China announced massive tariff cuts for 90 days following trade talks. The US said it would cut tariffs on Chinese goods from 145% to 30%, while China would cut duties on US imports from 125% to 10%. At Monday’s close, the Dow Jones Industrial Average (US30) was up 3.26%. The S&P 500 Index (US500) added 2.81%. The Nasdaq Technology Index (US100) closed higher by 4.35%. Technology stocks rose strongly, with Apple (+6.3%), Nvidia (+5.4%), Amazon (+8.1%), Meta (+7.9%), Alphabet (+3.4%), and Tesla (+6.7%). On the other hand, pharmaceutical stocks declined after Trump said he would sign an executive order to lower prescription drug prices.

Traders will be watching inflation data closely today, looking for signs of how the new tariff regime could affect prices. If the inflation data matches market expectations, it will likely have a moderately negative impact on the dollar. However, an unexpected jump in inflation could be a driver for the Dollar Index while adding pressure to stock markets. The scenario of accelerating inflation amid stagnant or declining GDP raises the risk of recession.

The Canadian dollar slipped below 1.4 per US dollar, retreating from the strongest level since October at 1.378, recorded on May 6. A rebound in the US dollar, driven by a 90-day tariff truce between the US and China, has attracted fresh capital into dollar assets, boosting the US dollar and pressuring the Loonie into broad-based appreciation. Domestically, Friday’s jobs report, which showed disappointing job growth along with a rise in the unemployment rate, dampened expectations of further policy tightening by the Bank of Canada, and markets cut bets on Fed policy easing, pushing US and Canadian yield spreads higher.

The Mexican peso weakened to 19.6 per dollar as the 90-day tariff truce between the US and China sparked renewed demand for US assets, strengthening the dollar’s appeal, while the Bank of Mexico is widely expected to cut the benchmark rate by another 50 basis points this Thursday. This policy easing continues to narrow the rate differential between Mexico and the Federal Reserve, reducing the attractiveness of the peso.

Equity markets in Europe were mostly up yesterday. Germany’s DAX (DE40) rose by 0.29%, France’s CAC 40 (FR40) closed 1.37% higher, Spain’s IBEX35 (ES35) Index gained 0.75%, and the UK’s FTSE 100 (UK100) closed positive 0.59%.

WTI crude oil prices rose to $63 per barrel on Monday, hitting a two-week high, after the US and China agreed to cut most tariffs on each other’s goods. This major trade breakthrough signaled a reduction in tensions between the world’s two largest oil consumers, reducing risks to oil demand. Meanwhile, exerting a bearish influence on oil, OPEC+ plans to accelerate production increases in May and June.

Asian markets were predominantly rising yesterday. Japan’s Nikkei 225 (JP225) rose by 0.38%, China’s FTSE China A50 (CHA50) gained 0.88%, Hong Kong’s Hang Seng (HK50) added 2.98%, and Australia’s ASX 200 (AU200) posted a positive 0.03%.

Signs of weakening demand from China, New Zealand’s largest trading partner, had a negative impact on the NZD. Chinese data released over the weekend showed a third consecutive monthly decline in consumer prices and the sharpest fall in producer prices in six months. On the domestic front, the currency remains under pressure amid expectations that the Reserve Bank of New Zealand will cut interest rates by 25bps later this month. The current cash rate of 3.5% is expected to fall to 2.8% by the end of the year.

The Bank of Japan (BoJ) is taking a cautious stance amid uncertainty over US tariff policy, according to a summary of its April 30-May 1 meeting. The prolonged persistence of high tariffs could prompt Japanese exporters to restructure operations, including shifting production to the US and rationalizing supply chains, which could hurt small and medium-sized firms, which account for 70% of employment in Japan. On the other hand, if the current economic and price outlook persists, the Bank of Japan plans to continue gradually raising interest rates while remaining flexible to changing conditions.

Stocks in the US traded lower on Friday afternoon as investors became more cautious ahead of trade talks between the US and China. At Friday’s close, the Dow Jones Index (US30) decreased by 0.29% (for the week +0.18%). The S&P 500 Index (US500) was down 0.71% (for the week +0.05%). The Nasdaq Technology Index (US100) closed higher by 0.27% (for the week +2.07%). Sentiment briefly improved following the announcement of a trade agreement between the US and UK, but concerns remain that negotiations with China may not succeed.

On the corporate front, Pinterest rose by 5.4% amid strong ad revenue projections, while Expedia fell by 7.7%, missing expectations.

The US futures rose Monday as the US said “substantial progress” in trade talks with China after two days of negotiations in Switzerland over the weekend. The US officials highlighted a deal to reduce the trade deficit, while Chinese leaders characterized the outcome as reaching an “important consensus”. Asian stocks and European futures also rose.

In Canada, the April employment report showed a net gain of 7,400 jobs, beating expectations. The unemployment rate rose to 6.9%, the highest level since November, underscoring the vulnerability of the tariff-prone manufacturing sector. Market odds suggest the odds of a rate cut in June are more than even, after the Bank of Canada noted high levels of household debt and hedge fund activity at bond auctions in its Financial System Review.

Equity markets in Europe were mostly up on Friday. Germany’s DAX (DE40) rose by 0.63% (up +1.54% for the week), France’s CAC 40 (FR40) closed 0.64% higher (+0.10% for the week), Spain’s IBEX35 (ES35) gained 0.48% (+0.34% for the week), and the UK’s FTSE 100 (UK100) increased by 0.27% (+0.68% for the week). On Friday, the Frankfurt DAX Index rose by 0.6%, surpassing the 23,500 mark and reaching a new all-time high, continuing Thursday’s gains and following the dynamics of global markets. The rise was driven by the US-UK trade agreement, which reinforced expectations of progress in a broader US-EU agreement.

Norway’s annualized consumer inflation rate eased to 2.5% in April 2025 from 2.6% in the previous month, matching market expectations. This marked the second consecutive month of slowing inflation.

Ukrainian and European leaders, backed by US President Donald Trump, agreed to an unconditional 30-day ceasefire starting May 12. The leaders threatened Russian President Vladimir Putin with new “massive” sanctions if he did not comply.

WTI crude oil prices rose by 1.8% to hit $61 a barrel on Friday, posting a weekly gain of more than 4%, as easing trade tensions between the US and China boosted market sentiment. Optimism was fueled by news that US Treasury Secretary Scott Bessent will meet with China’s vice premier in Switzerland on May 10, signaling possible progress in resolving trade disputes.

Asian markets were predominantly up last week. Japan’s Nikkei 225 (JP225) rose by 3.57%, China’s FTSE China A50 (CHA50) gained 2.09%, Hong Kong’s Hang Seng (HK50) climbed 3.04%, and Australia’s ASX 200 (AU200) posted a positive 0.24%. Asian markets jumped at the open on Monday. The rally followed a significant rise in US futures amid signs of progress in trade talks between the US and China over the weekend. Investor sentiment was further boosted by easing geopolitical tensions, including a fragile ceasefire between India and Pakistan and Ukrainian President Zelensky’s willingness to meet with Putin.

Chinese consumer prices in April 2025 were 0.1% year-on-year, maintaining the same pace for the second month and in line with market expectations. This is the third consecutive month of consumer price deflation, driven by the combined impact of ongoing trade tensions with the US, weak domestic demand, and continued employment uncertainty. China’s producer prices in April 2025 came in at 2.7% y/y, slightly short of the market consensus expecting 2.6% y/y, following 2.5% y/y in March. It was the 31st consecutive month of producer price deflation and the sharpest pace since last October.

The Australian dollar climbed above $0.642 on Monday and rose for the second consecutive session as progress in US-China trade talks over the weekend boosted risk appetite. Markets now expect the Reserve Bank of Australia to cut the money rate to 3.1% by the end of the year, down from previous expectations of 2.85%. The RBA is expected to cut the rate again by 25 basis points at its meeting next week.