Global Markets Weekly Wrap KW 18 : Stocks Rise on Trade Optimism, Strong Tech Earnings, and Jobs Data
Stocks in the United States continued to trend upward, building on a wave of optimism that began earlier in the month. The positive momentum appeared to be driven by a combination of easing trade tensions and earnings reports from prominent companies that surpassed market expectations. This sentiment was reflected in a broad-based rally across large-cap technology stocks, mid-sized companies, and smaller firms alike. Large tech names led the charge, as investors responded positively to earnings that proved to be more resilient than feared. Small- and mid-cap stocks also posted strong performances, marking multiple weeks of gains.
Early in the week, hopes for progress in international trade relations buoyed market confidence. The administration announced modifications to its earlier trade policies, which included a partial rollback of planned tariffs on automobiles and related components. Officials signaled that negotiations were advancing toward a comprehensive agreement, helping to reduce some of the uncertainty that had been weighing on investor sentiment.
As the week progressed, the focus turned to corporate earnings, particularly as many major firms disclosed their quarterly results. Several large companies, particularly those in the technology sector, reported earnings that exceeded analyst expectations. Despite lingering concerns about slowing economic growth and disruptions from global trade tensions, the majority of investors appeared to believe that businesses were well-positioned to endure these challenges. Some companies acknowledged limited visibility into their near-term outlooks, but the market response remained constructive, underpinned by optimism about long-term resilience.
Labor market data provided a mixed picture of economic conditions. Job openings fell to their lowest level in several months, indicating a possible cooling in demand for labor. However, other reports showed that hiring activity remained solid. Private sector job creation came in below expectations midweek, but official government data later revealed stronger-than-anticipated payroll growth, suggesting that overall employment trends remained healthy. Wage growth was modest, but the unemployment rate held steady, offering reassurance that the labor market remained robust.
The broader economy showed signs of weakness in some areas. The government's preliminary estimate of economic output for the first quarter showed a contraction, the first in several years. The decrease in economic activity was attributed to a combination of increased imports, reduced consumer spending, and a pullback in government expenditures. Analysts noted that businesses may have front-loaded purchases ahead of tariff implementation, distorting the import figures. Despite this contraction, other data indicated that consumer spending remained relatively strong, and inflation appeared to be easing.
Bond markets reacted to the influx of economic data. Treasury yields were volatile throughout the week, initially declining in response to weak indicators but reversing course after the stronger-than-expected jobs report. Municipal bonds benefited from seasonal trends, while corporate bonds experienced mixed performance. High-yield debt found support from favorable supply-demand dynamics, though certain sectors, like energy, came under pressure due to signals from oil-producing nations about possible changes in production levels.
Meanwhile, European stock markets enjoyed gains as trade fears subsided. Regional indexes advanced, supported by economic data showing stronger-than-expected growth in the eurozone. Key countries such as Spain and Italy exceeded growth projections, while Germany and France also returned to expansion. Inflation in the eurozone remained slightly elevated, with core prices rising more than forecast. Still, consumer and business sentiment indicators pointed to a cautious outlook, with confidence measures falling in response to ongoing trade uncertainties.
In the United Kingdom, the housing market showed signs of deceleration. A decline in home prices and mortgage approvals suggested that buyer demand had softened. Businesses expressed increased concerns about future economic conditions, reflecting both domestic policy pressures and international trade developments. Confidence among firms fell to its lowest level in several months, and companies reported growing concerns about rising operational costs.
Japan's stock markets also rose, supported by speculation that the central bank might delay further interest rate hikes. Policymakers held rates steady and revised down their economic forecasts, signaling caution amid global trade and inflation uncertainties. The central bank emphasized a commitment to normalizing monetary policy gradually, provided that inflation trends remained consistent with its goals. Meanwhile, recent economic indicators from Japan painted a subdued picture, with manufacturing and retail data falling short of expectations.
In China, markets were subdued during a shortened trading week due to a national holiday. Despite the muted performance, investors responded to indications that Beijing might be open to restarting trade talks with the United States. The Chinese government signaled potential exemptions for certain U.S. goods from tariffs, suggesting a willingness to ease tensions. However, economic data reflected growing strain, with key indicators of manufacturing and services activity declining. Analysts noted that the latest figures suggested significant headwinds from the trade conflict, raising doubts about the country's ability to meet its annual growth targets. Officials were reportedly considering stimulus measures to cushion the economy from further shocks.
In other global markets, central banks in Hungary and Chile opted to maintain interest rates, citing ongoing uncertainties in the international economic environment. Policymakers in Hungary expressed concern about inflation and emphasized the need to maintain a restrictive policy stance to anchor price expectations. They warned that global trade tensions and potential delays in investment projects could dampen economic momentum. In Chile, while inflation appeared to be stabilizing, authorities opted for caution, noting that external risks had grown and that inflation was likely to remain elevated in the near term. Officials also acknowledged recent improvements in domestic financial conditions, crediting export activity and a gradual recovery in internal demand.
Market participants continued to monitor global developments, including shifts in trade policy, economic indicators, and corporate performance. Despite intermittent volatility, U.S. equity markets displayed resilience, reflecting a tentative optimism about the ability of the economy and businesses to weather near-term disruptions. Notably, large financial firms posted strong earnings, lifting the financial sector. Meanwhile, the U.S. dollar weakened against other currencies, a reflection of investor concerns about the impact of trade tensions on the broader economy. Precious metals, particularly gold, attracted increased attention as a hedge against market uncertainty and inflation risk, with prices reaching new highs.
Oil markets rebounded from recent lows, with crude prices rising as traders responded to adjustments in demand forecasts and signals from major producers. Despite some concerns about slowing global growth, sentiment in the energy sector was supported by expectations that potential production cuts or geopolitical developments could constrain supply.
Statements from the U.S. central bank indicated that it remained vigilant in assessing the economic implications of new trade measures. While the Federal Reserve emphasized its long-term commitment to price stability, officials acknowledged that trade disruptions could complicate the path of future policy decisions. Market expectations began to shift, with a growing consensus that rate cuts might be needed if economic headwinds intensified.
In macroeconomic developments, some indicators pointed to potential softening ahead. A regional manufacturing survey showed weakening conditions, with declines in new orders and shipments. Construction activity also slowed, particularly in the residential segment. Nonetheless, consumer spending remained strong in several categories, hinting at resilience despite trade-related price increases. Analysts speculated that some of the spending may have been accelerated in anticipation of higher costs.
In Europe, monetary authorities responded to economic headwinds by cutting interest rates. This marked another step in their efforts to stimulate growth amid rising trade tensions and reduced investment activity. The decision underscored growing concern about the outlook, even as inflation remained relatively contained.
In the United Kingdom, inflation eased slightly in the most recent reading, driven by declines in specific categories like digital entertainment and fuel. However, analysts warned that underlying cost pressures could push prices higher in the coming months, especially as household bills and basic necessities became more expensive. The Bank of England faced a balancing act, weighing domestic inflation dynamics against the risks posed by the global slowdown.
China's first-quarter economic performance exceeded expectations, thanks to government incentives and front-loaded exports. However, analysts cautioned that the growth may not be sustainable given the escalating trade conflict. Officials were reportedly exploring further economic support measures to offset potential losses and encourage domestic consumption.
On the corporate front, the technology sector faced new challenges. A leading semiconductor firm disclosed a significant financial impact from export restrictions, illustrating how policy decisions were affecting business operations. Other major chipmakers also reported softer demand and uncertainty, reflecting broader concerns about global supply chains. Meanwhile, a major streaming service outlined ambitious long-term goals, focusing on expanding its global reach and boosting revenue. The company's executives remained upbeat about its prospects, despite the near-term volatility in the tech sector.
Some hardware companies benefited temporarily from exemptions to trade tariffs, which boosted their stock prices. However, those gains were short-lived, as the policy direction shifted again. One prominent manufacturer responded by accelerating production shifts to other countries, aiming to minimize exposure to future tariff risks.
Looking ahead, markets were expected to focus on a range of upcoming economic indicators. Data on jobless claims, sentiment, manufacturing, and housing would offer fresh insights into the health of the U.S. economy. Globally, attention would turn to reports from France and other key economies, as well as policy decisions that could influence investor confidence and capital flows.
Checklist for the Next Two Weeks
Major economic events in the US include:
Initial Jobless Claims; U of Mich Sentiment; Durable Goods Orders; Leading Index; MBA Mortgage Applications; S&P Global Manufacturing PMI; New Home Sales
Major economic events around the world include:
France Manufacturing PMI; Germany IFO Business Climate; Singapore CPI; Japan Manufacturing PMI; Eurozone Manufacturing PMI; Tawain Exports YoY