SUMMARY
Markets are off to a strong start this week, lifted by encouraging developments on the geopolitical and trade fronts. Following high-level discussions, the United States and China have agreed to a 90-day reciprocal tariff reduction—U.S. tariffs will fall from 145% to 30%, while China’s will decrease from 125% to 10%. In addition, news of a ceasefire agreement between India and Pakistan has eased geopolitical tensions, further boosting investor sentiment.
The improved risk appetite is reflected in broad-based gains across European equity markets, while U.S. futures are pointing higher. U.S. Treasury yields have also moved up, offering additional support to the U.S. dollar.
In the UK, attention this week will be on key economic indicators. Labor market data is expected to show a modest rise in unemployment to 4.5% in Q1, alongside a slight cooling in wage growth from 5.8% to 5.7%. On Thursday, GDP figures are projected to show 0.6% quarterly growth for the start of the year. However, this momentum may prove short-lived amid global economic headwinds and elevated uncertainty.
In the U.S., inflation data will be the focal point, with both CPI and PPI due this week. Consumer prices are forecast to rise 0.3% month-over-month in April, while producer prices are expected to increase by 0.2%. These readings are likely to reinforce last week’s hawkish signals from the Federal Reserve and support the market’s recent shift away from pricing in multiple rate cuts in 2024.
