Is the trade war really de-escalating?

Corporate Earnings Calendar 24 April - 30 April 2025

Thursday: Alphabet, Merck & Co., Pepsico, Procter & Gamble, Willis Towers Watson, Gilead Sciences, Intel Corporation, Bristol-Myers Squibb, T-Mobile US, Union Pacific Corp., Freeport- McMoRan
Friday: Abbvie, Aon, GE Vernova, SLB, Colgate-Palmolive, Phillips 66, Centene Corp.
Monday: Nucor, Waste Management Co., Cadence Design Systems, Teradyne, Universal Health Services, Domino’s Pizza
Tuesday: Amazon, Coca-Cola, PayPal Holdings, Pfizer, Novartis, AstraZeneca, Mondelez, Starbucks, Super Micro Computer, General Motors, Spotify Technology, Snap Inc., Lemonade, Visa, Kraft Heinz, Honeywell, Fair Isaac
Wednesday: Meta Platforms, Microsoft, ADP, Qualcomm, Caterpillar, Teladoc, Newmont

Global market indices

US Stock Indices Price Performance

Nasdaq 100 -3.04% MTD and -11.04% YTD
Dow Jones Industrial Average -6.70% MTD and -7.89% YTD
NYSE -3.94% MTD and -2.44% YTD
S&P 500 -4.21% MTD and -8.60% YTD

The S&P 500 is +1.90% over the past week, with 10 of the 11 sectors down MTD. The Equally Weighted version of the S&P 500 is +1.80% this week. Its performance is -4.90% MTD and -5.92% YTD.

The S&P 500 Consumer Staples is the leading sector so far this month, +0.95% MTD and +5.57% YTD, while Energy is the weakest sector at -12.82% MTD and -4.72% YTD.

Over this past week, Consumer Discretionary outperformed within the S&P 500 at +3.41%, followed by Communication Services and Financials at +2.73% and +2.55%, respectively. Conversely, Health Care underperformed at -0.47%, followed by Industrials and Materials at +1.28% and +1.39%, respectively.

Fuelled by the Trump administration's apparent shift in rhetoric regarding both China and the Fed, US stocks extended their rally for a second consecutive day. 

The Wall Street Journal reported that the administration was contemplating significant reductions in tariffs on Chinese imports, potentially by more than half in some instances, in an effort to ease tensions with Beijing. However, stocks pulled back from their earlier highs after Bloomberg News quoted Treasury Secretary Scott Bessent clarifying that President Trump had not offered to unilaterally remove US tariffs on China. 

Despite this retraction, the S&P 500 closed +1.67%, while the Nasdaq Composite added +2.50%. The Nasdaq 100 was +2.28%. The Dow Jones Industrial Average closed +1.07%, or up 419.6 points. 

The equal-weight version of the S&P 500 was +0.9% on Wednesday, underperforming its cap-weighted counterpart by 77 bps. 

This change in tone from the White House alleviated investor concerns that had driven a weeks-long selloff. Nevertheless, this rapid shift underscores the unprecedented sensitivity of markets and the economy to the pronouncements of the US president, suggesting the potential for further volatility ahead.

According to LSEG I/B/E/S data, y/o/y earnings growth for the S&P 500 in Q1 is projected to be 8.4%. This number jumps to 10.1% when excluding the Energy sector. Of the 110 companies in the S&P 500 that have reported earnings to date for Q1 2025, 74.5% have reported earnings above analyst estimates, with 60.9% of companies reporting revenues exceeding analyst expectations. Seven of the eleven sectors in the index expect to see an improvement in earnings y/o/y. Health Care, at 36.4%, and Technology. at 15.3%, have the highest earnings growth rates for Q1, while the Energy sector has the largest anticipated decline compared to the prior year, at 17.6%. The y/o/y revenue growth is projected to be 4.1% in Q1, increasing to 4.5% when excluding the Energy sector.

Communication Services, Real Estate, and Utilities are the sectors with most companies reporting above estimates. Industrials, with a surprise factor of 12.5%, is beating earnings expectations by the highest surprise factor. Within Consumer Discretionary, only 45.5% of companies have reported above estimates, and is the sector with the lowest earnings surprise factor at 2.2%. The S&P 500 surprise factor is 6.4%, which compares to a long-term average surprise factor of 4.2% (since 1994) and the average surprise factor over the prior four quarters of 6.6%. The forward four-quarter price-to-earnings ratio (P/E) for the S&P 500 sits at 19.3x.

Next week, 166 S&P 500 companies are expected to report quarterly earnings.

In corporate news, the Department of Justice is reportedly examining Disney's deal to acquire a controlling interest in FuboTV.

Baker Hughes estimates that tariffs could negatively impact its 2025 net earnings by $100 to $200 million.

Kering reported a larger-than-anticipated 14% drop in sales for the first quarter, primarily due to a continued decline in Gucci sales. 

The product head at OpenAI stated that the company would be interested in purchasing Chrome should Google be compelled to sell it.

Mega caps: The Magnificent Seven had an mostly positive performance this week with Apple +5.32%, Tesla +3.80%, Amazon +3.60%, Meta Platforms +3.58%, Alphabet +1.32%, and Microsoft +0.75%, while Nvidia -1.70%.

Energy stocks had a mostly strong performance this week, with the Energy sector itself +2.04%. WTI and Brent prices are -0.53% and +0.33%, respectively, this week. Over this past week Marathon Petroleum +8.25%, Phillips 66 +6.43%, ConocoPhillips +4.12%, Occidental Petroleum +3.59%, ExxonMobil +3.05%, Apa +1.82%, Hess +1.63%, BP +0.99%, Chevron +0.98%, and Energy Fuels +0.81%, while Shell -0.12%, while Halliburton -3.83%, and Baker Hughes -5.87%.

Materials and Mining stocks had a largely positive performance this week, with the Materials sector +1.39%. Over the past seven days, Albemarle +5.84%, Freeport-McMoRan +5.61%, and Yara International +4.11%, Mosaic +3.63%, Nucor +2.74%, and CF Industries +2.42%, while Sibanye Stillwater -1.06%, and Newmont Corporation -5.00%.

European Stock Indices Price Performance

Stoxx 600 -3.21% MTD and +1.80% YTD
DAX -0.91% MTD and +10.31% YTD
CAC 40 -3.96% MTD and +1.38% YTD
IBEX 35 +0.55% MTD and +13.91% YTD
FTSE MIB -5.53% MTD and +5.15% YTD 
FTSE 100 -2.96% MTD and +1.90% YTD

This week, the pan-European Stoxx Europe 600 index is +1.91%. It was +1.78% on Wednesday, closing at 516.77.

So far this month in the STOXX Europe 600, Retail is the leading sector, +5.98% MTD and +0.95% YTD, while Oil & Gas is the weakest at -11.72% MTD and -2.94% YTD.

This week, Basic Resources outperformed within the STOXX Europe 600, at +4.84%, followed by Banks and Autos & Parts at +3.99% and +3.01%, respectively. Conversely, Utilities underperformed at +0.08%, followed by Construction & Materials and Food & Beverages, at +0.38% and +0.52%, respectively.

Germany's DAX index was +3.14% on Wednesday, closing at 21,961.97. It was +3.05% for the week. France's CAC 40 index was +2.13% on Wednesday, closing at 7,482.36. It was +2.08% over the past week.

The UK's FTSE 100 index was +0.64%% over the past week to 8,328.60. It was +0.64% on Wednesday.

On Wednesday, within the European STOXX 600 index, the Basic Resources sector outperformed, primarily fueled by robust Q1 earnings from Boliden, which surpassed EPS expectations. Additionally, Anglo American experienced gains ahead of its forthcoming production update. The sector's positive momentum was further supported by broad strength in metals prices and growing optimism regarding a potential trade agreement between the US and China, following recent encouraging statements from both the White House and Beijing. 

The Technology sector also saw a boost, buoyed by SAP's Q1 results, which were considered solid. Revenues were in line with expectations and both operating profit and EPS exceeded expectations. BE Semiconductor Industries reported an 8.2% increase in Q1 order bookings, driven by robust demand from Asian subcontractors for AI applications. The Energy sector also registered gains due to rising crude oil prices. BP’s shares were higher amid activist pressure from Elliot Management to enhance cash flow. The Chemicals sector was lifted by strong Q1 earnings reports from Akzo Nobel and Croda International.

Conversely, Health Care sentiment moderated, largely influenced by news reports suggesting the US is considering cutting domestic drug prices to international levels. Adding to the sector's concerns, European pharmaceutical leaders urged the EU to raise drug prices to encourage innovation. The Defensive sectors including Telecom, Utilities, and Food & Beverages were the biggest underperformers on Wednesday.

Other Global Stock Indices Price Performance

MSCI World Index -3.88% MTD and -5.93% YTD
Hang Seng -4.53% MTD and +10.03% YTD

This week, the Hang Seng Index was +4.82% and the MSCI World Index was +0.56%.

Currencies

EUR +4.62% MTD and +9.27% YTD to $1.1311.
GBP +2.63% MTD and +5.94% YTD to $1.3255.

Hopes for easing trade tensions and reassurance from the US President that he will not fire Fed Chair Jerome Powell spurred a Wednesday rebound for the US dollar against major currencies including the euro and the safe-haven Swiss franc and Japanese yen. 

The prospect of the Trump administration potentially lowering tariffs on Chinese imports, contingent on upcoming talks with Beijing, fuelled optimism that the trade war might de-escalate. However, US Treasury secretary Scott Bessent has stated that any de-escalation in the US-China trade war would have to be mutual. 

The US dollar index experienced a swift surge at the beginning of the Asian trading day on Wednesday, but later stabilised as market sentiment remained somewhat fragile, ultimately registering a +0.28% increase to 99.92. The Dollar Index is +0.65% so far this week, but -4.13% MTD and -7.91% YTD.

The euro was -0.20% to $1.1311 on Wednesday, retreating from the $1.15 level reached earlier in the week, its highest point in approximately three and a half years. The euro is -0.77% against the USD over the past week, while the British pound is +0.05% against the dollar. 

On Tuesday, sterling reached a new seven-month high against the dollar. Although the pound experienced a decline against the euro, it remained significantly above the five-month low recorded a couple of weeks prior. 

Sterling edged up by +0.06% to $1.3255 on Wednesday, having earlier touched $1.3423, its highest level since 26^th September. Traders have fully priced in a 25 bps interest rate cut by the BoE next month, with a total of 87 bps of cuts expected by the year's end.

The euro slipped -0.13% to 85.94 pence, after reaching 87.38 pence on 11^th April, its strongest level against the pound since November 2023.

Against the yen, the US dollar was +0.33% to ¥143.49. It was +1.32% against the Swiss franc, reaching 0.8298. Despite this slight recovery, the dollar remains close to its multi-year lows against the euro and the Swiss franc and its seven-month low versus the yen.

Note: As of 5:00 pm EDT 23 April 2025

Fixed Income

US 10-year yield +18.4 bps MTD and -18.2 bps YTD to 4.394%.
German 10-year yield -24.4 bps MTD and +13.5 bps YTD to 2.504%.
UK 10-year yield -12.6 bps MTD and -0.5 bps YTD to 4.563%.

US Treasury yields steadied on Wednesday after rallying earlier in the session. The yield on the 10-year Treasury note was -0.6 bps to 4.394% as traders reacted to President Trump’s statement that he would not fire Fed Chair Jerome Powell and to Treasury Secretary Scott Besent’s statement that there may soon be some easing in tensions between China and the US as such high tariffs between the US and China are ‘not sustainable’. The 10-year yield is +11.2 bps this week.

Analysts viewed Wednesday's $ 70 billion auction of 5-year bonds as a sound one.The high-yield offering achieved a rate of 3.995%. The bid-to-cover ratio was 2.41x, slightly above the 6-month average of 2.40x. Dealer participation stood at 11.12%. Direct bidders accounted for 24.8% of the allocation, and indirect (international) investors took up 64.04%.

On the long end, the thirty-year bond yield was -5.8 bps to 4.825% on Wednesday. The 30-year yield is +9.3 bps over the past week.

The two-year yield, which is more sensitive to interest rate expectations, ended Wednesday trading +6.0 bps to 3.885%; it is +9.9 bps this week.

The probability for a Fed 25 bps rate reduction at its June meeting on Wednesday was 56.3% according to the CME Group's FedWatch Tool. Traders are currently pricing in 80.8 bps of cuts by the Fed this year, above projections of 89.9 bps last week.

Across the Atlantic, euro area government bond yields hit a six-day peak on Wednesday following a Wall Street Journal report indicating that the White House is considering reducing tariffs on Chinese goods by 50 - 65%.

The yield on Germany's benchmark 10-year bond was +5.7 bps higher at 2.504%. Germany's 2-year yield, which is more reactive to expectations regarding ECB policy rates, was +8.2 bps to 1.743%. This followed Tuesday’s low of 1.622%, the lowest level observed since October 2022. Earlier in Wednesday’s session, euro area borrowing costs had briefly edged upwards after the release of flash PMI data revealing that business growth in the eurozone had stagnated, while both Germany and France experienced contractions. Separately, ECB data indicated that wage growth is projected to moderate considerably this year.

Traders have adjusted their expectations for ECB rate cuts in light of the latest US government actions, which have alleviated concerns about an escalating trade conflict with China. Money markets now anticipate the ECB deposit facility rate to be at 1.63% in December, an increase from the 1.55% priced in late Tuesday, though still below the 1.72% level seen shortly before the ECB's policy meeting last Thursday.

The German 10-year yield is -0.1 bps this week. Germany's two-year bond yield is -0.1 bps this week to 1.751%. On the longer end of the curve, Germany's 30-year yield is +0.1 bps this week to 2.915%.

The spread between US 10-year Treasuries and German Bunds is now 189 bps, 12.2 bps higher than last week’s 176.8 bps.

Italian bond yields, a benchmark for the eurozone periphery, -7.6 bps this week to 3.617%. Consequently, the yield spread between Italian and German bonds decreased 6.6 bps to 111.3 bps from 117.9 bps last week. 

The spread between French and German 10-year bond yields is 73.2 bps this week, 1.9 bps lower than last week at 75.1 bps, at the mid-level of the trading range since early June, after Bloomberg News reported on Tuesday that French President Emmanuel Macron had suggested the possibility of snap elections.

UK gilts declined this week. The UK 10-year yield is -4.6 bps over the past 7 days to 4.563%. On Wednesday the 10-year British gilt yield was +0.3 bps to 4.563%. The yield on 30-year gilts also fell this week as the UK Debt Management Office (DMO) said it would cut long-dated bond sales to £29.8 billion from £40 billion previously. As noted by Bloomberg news, that reduces the share of these notes in total sales to just 10%, the lowest in the history of the DMO, from 13.4% in March and 18% a year ago.

Commodities

Gold spot +4.92% MTD and +24.61% YTD to $3,285.68 per ounce.
Silver spot -3.05% MTD and +14.75% YTD to $33.50 per ounce.
West Texas Intermediate crude -12.79% MTD and -12.09% YTD to $62.27 a barrel.
Brent crude -11.52% MTD and -12.62% YTD to $66.13 a barrel.

Gold prices are -1.67% this week. Earlier this week investors moved towards safe haven gold and currencies such as the Japanese yen and the Swiss franc following President Trump’s repeated calls for the Fed to cut interest rates immediately and his threats to remove its Chair, Jerome Powell. Gold prices reached an unprecedented peak of $3,500.05 on Tuesday before falling on Wednesday following assurances by President Trump that he has no intention of firing Fed Chair Jerome Powell. Spot gold was -1.37% to $3,285.68 per ounce.

Gold is +24.61% YTD, buoyed by central bank purchases and concerns surrounding the trade war.

This week, WTI and Brent are -0.53% and +0.33%, respectively. 

Oil prices declined more than two percentage points on Wednesday following reports that OPEC+ might consider accelerating its oil output increases in June. However, these losses were partially offset by news indicating that the US President was considering reducing tariffs on Chinese imports. 

Brent crude futures fell by $1.69, or -2.49%, to settle at $66.13 a barrel, while WTI crude was down $2.10, or -3.26%, to $62.27. Brent crude had reached a session high of $68.65, its highest point since 4^th April, before the OPEC+ news was released.

Sources familiar with OPEC+ discussions informed Reuters that several members of the group would propose accelerating oil output increases for a second consecutive month in June. This comes amid ongoing tensions within OPEC+ regarding adherence to production quotas. Both benchmarks saw some recovery in early afternoon trading after Kazakhstan's Energy Ministry affirmed its commitment to predictability and the balance of supply and demand. This statement followed reports of Kazakhstan exceeding its allocated production quota, which had caused friction with other OPEC+ members.

According to a Wall Street Journal report citing a White House official, the US administration is considering lowering tariffs on imported Chinese goods, pending discussions with Beijing. However, Treasury Secretary Scott Besent stressed that any such action would not be unilateral. It has been suggested that the China tariffs were likely to be reduced to between 50% and 65%. 

The US announced new sanctions targeting an Iranian shipping magnate whose network handles Iranian liquefied petroleum gas and crude oil valued at hundreds of millions of dollars.

EIA weekly report: Higher US crude stocks amid higher imports. For the week ending 18^th April, the EIA report said that US crude oil inventories were up by 244,000 barrels to 443.1 million barrels. This was driven by a significant increase in net imports, which surged by 1.14 million barrels per day (bpd) to 2 million bpd – the largest weekly rise since November 2024. 

Gasoline stockpiles decreased by 4.5 million barrels to 229.5 million barrels. Distillate inventories fell by 2.4 million barrels to 106.9 million barrels, their lowest level since November 2023. 

Refinery crude runs and utilisation rates both saw increases, rising by 325,000 bpd and 1.8 percentage points to 88.1%, respectively. 

Additionally, the four-week average for jet fuel supplied reached its highest point since December 2019, at 1.86 million bpd. Crude stocks at the Cushing, Oklahoma delivery hub saw a slight decline of 86,000 barrels.

Note: As of 5:00 pm EDT 23 April 2025

Key data to move markets

EUROPE

Thursday: German IFO Business Climate, Current Assessment, and Expectations surveys, Bundesbank Monthly Report, and speeches by German Bundesbank President Joachim Nagel and ECB Chief Economist Philip Lane.
Tuesday: German GfK Consumer Confidence, Spanish GDP and Harmonised Index of Consumer Prices, Eurozone Consumer Sentiment, Business Climate, and Economic Sentiment Indicator. 
Wednesday: German GDP and Retail Sales, French GDP, German Unemployment Change, German Unemployment Rate, Italian GDP, Eurozone GDP, Italian CPI, German CPI and German Harmonised Index of Consumer Prices.

UK

Thursday: A speech by the BoE Deputy Chief Economist Claire Lombard and GfK Consumer Confidence.
Friday: Retail Sales and a speech by the BoE external member Megan Greene.
Tuesday: A speech by BoE Deputy Governor Dave Ramsden.
Wednesday: BoE Quarterly Bulletin.

US

Thursday: Initial and Continuing Jobless Claims, Durable Goods, Non-Defense Capital Goods Orders, Existing Home Sales Change and a speech by Minneapolis Fed President Neel Kashkari.
Friday: Michigan Consumer Sentiment Index, Michigan Consumer Expectations Index, and UoM 1-year and 5-year Consumer Inflation Expectations.
Tuesday: Consumer Confidence, Housing Price Index, and JOLTS Job Openings. 
Wednesday: GDP, Employment Cost Index, Core Personal Consumption Expenditures Price Index, Core Personal Consumption Expenditures, Personal Consumption Expenditures Price Index, Personal Consumption Expenditures Prices, Personal Income, Personal Spending, Chicago Purchasing Managers’ Index, and Pending Home Sales.

CHINA

Wednesday: NBS Manufacturing PMI, NBS Non-Manufacturing PMI, and Caixin Manufacturing PMI.

JAPAN

Thursday: Tokyo CPI.
Tuesday: Large Retailer Sales and Retail Trade.

GLOBAL

IMF/World Bank Spring Meeting 24-26 April

Global Macro Updates

Eurozone economic activity stable but confidence declines: April PMI. Eurozone composite PMI registered a four-month low of 50.1 in April, falling short of the 50.3 consensus and the previous 50.9 reading. This deceleration in overall activity was primarily attributed to a slowdown in the services sector, despite further indications that the contraction in manufacturing was stabilising. The manufacturing PMI reached a 27-month high of 48.7, exceeding both the 47.6 consensus and the prior 48.6. Conversely, the services sector PMI declined to a five-month low of 49.7, below the 50.4 forecast and the previous 51.0. 

Overall, the composite reading suggests a largely stable eurozone economy, although growth was constrained by a faster decline in new orders and diminishing confidence regarding the year-ahead outlook, with business sentiment reaching its lowest point in two and a half years. The subdued activity resulted in easing cost pressures, as input prices rose at their slowest rate since November 2024, and output prices fell to a five-month low. Employment increased for the first time in eight months, with job losses in manufacturing being offset by a modest rise in service sector employment. Similar trends were observed in the German and French readings, where improvements in manufacturing were counteracted by a weaker performance in the services sector.

Weakening global demand and domestic concerns hit UK PMI. UK composite PMI fell to a 29-month low of 48.2 in April, below the 50.4 consensus and the previous 51.5, signaling a potential 0.3% contraction in q/o/q growth. This decline was primarily driven by a drop in the dominant services sector, which hit a 27-month low of 48.9, falling considerably short of the 51.5 consensus and the prior 52.5. The manufacturing sector also remained weak, registering a 32-month low of 44.0, matching forecasts but down from the previous 44.9. This marked the first contraction in UK private sector output in a year and a half. 

Weaker demand from international markets exerted downward pressure on activity across both sectors, with total new work from abroad declining at its fastest pace in five years. Concerns highlighted the deteriorating global economic prospects amid tariffs and subdued confidence in domestic conditions. Decreased workloads coupled with rising payroll costs led to staff reductions for the seventh consecutive month, with ongoing job shedding observed in both manufacturing and services. Despite the weakening demand, cost pressures remained elevated, as input cost inflation accelerated to its fastest rate since February 2023, and output charge inflation reached its highest level in nearly two years.

US business sentiment continues to falter. The Flash US Composite PMI fell to 51.2 from 53.5 in March, a16-month low. The Flash Services PMI was also down, falling to 51.4 from March’s 54.4 reading and a 2-month low. However, the Flash Manufacturing PMI edged upwards to 50.7 from March’s 50.2. According to S&P business expectations about the year ahead dropped to one of the lowest levels seen since the pandemic. Average prices charged for goods and services rose in April at the sharpest rate for 13 months, especially in manufacturing, where the rate of inflation hit a 29-month high. Prices were also up in services. Higher charges were attributed to rising costs due to tariffs, rising import prices, and increased labour costs.with an especially steep increase reported for manufactured goods, linked to tariffs. Chris Williamson, Chief Business Economist at S&P Global Market Intelligence said, “The early flash PMI data for April point to a marked slowing of business activity growth at the start of the second quarter, accompanied by a slump in optimism about the outlook. At the same time, price pressures intensified, creating a headache for a central bank which is coming under increasing pressure to shore up a weakening economy just as inflation looks set to rise.”

Also on Wednesday, as noted by Bloomberg news, in the latest report from the Fed’s Beige Book, using information gathered on or before 14 April, tariff mentions came up 107 times, more than double the number seen in the prior Beige Book as uncertainty around international trade policy was “pervasive”. The report indicates that prices increased across the twelve district despite economic activity being little changed from March, with businesses expecting elevated input costs as a result of the levies. 

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