The Davy Digest - 6th May 2025

US equities posted gains last week as investors digested a broad range of macro data points. US GDP fell 0.3% in Q1, mainly due to surging imports as US companies try to front-run tariffs. The Fed’s preferred inflation measure, Core PCE, softened to 2.6% as expected. Friday’s nonfarm payrolls report showed that employers added 177k jobs in April, down slightly from March but well ahead of estimates for 135k. In the Eurozone, consumer confidence declined in April as expected, as tariff related uncertainty started to take hold. Q1 GDP in the Eurozone came in stronger than expected at 0.4%, showing the EU economy started 2025 stronger than activity surveys suggested. In the UK, business sentiment fell as employers were concerned about the implications of US tariffs and higher employment costs. In China, the Caixin Manufacturing PMI beat forecasts at 50.4, indicating modest expansion. The Bank of Japan met on Thursday and decided to leave rates unchanged due to increasing economic growth concerns.

Last week's highlights

	Preliminary Q1 GDP (30/04) – GDP Fell 0.3%, mainly due to surging imports.  Inflation (PCE) (30/04) -  Core PCE softened in line with forecasts at 2.6% YoY.  Nonfarm Payrolls and Unemployment (02/05) – Employers added 177k jobs in April, stronger than 135k forecast.
	Eurozone Consumer Confidence (29/04) – Declined in April as expected.  Eurozone Preliminary Q1 GDP (30/04) – Stronger than expected at 0.4%, showing EU economy started 2025 stronger than activity surveys suggested. Eurozone Inflation (02/05) – Came in at 2.2%, slightly above 2.1% forecast.
	UK Business Sentiment (30/04) – Sentiment fell as employers were concerned about the implications of US tariffs and higher employment costs.
	China Caixin Manufacturing PMI (30/04) – Beat forecasts at 50.4, indicating expansion despite rising US tariff pressures. Bank of Japan Meeting (01/05) – Left rates unchanged due to tariff related economic uncertainty.

This week, the Federal Reserve (Fed) will meet on Wednesday and are expected to leave rates unchanged. The Fed will need to see more progress on inflation or a deterioration in growth before cutting rates further. Initial jobless claims are due out on Thursday and will provide investors with further clarity on any weakening in the US labour market. In Germany, the HCOB services PMI is due out today while industrial production data will be released on Thursday. In the UK, the Bank of England will meet on Thursday and are expected to cut rates by 0.25%. Finally, in China, export data is due out on Friday.

What's on the radar

	ISM Services PMI (05/05) FOMC Meeting (07/05) Initial Jobless Claims (08/05)
	Germany HCOB Services PMI (06/05) Germany Industrial Production (08/05)
	BRC like-for-like Retail Sales (05/05) Bank of England meeting (08/05)
	China Caixin Services PMI (06/05) China Exports Data (09/05)

Chart of the moment

Trump Themed Turbulence

Source: DataStream as of 30/04/2025

• April was a volatile month in US equities. A sharp drawdown after “Liberation Day” was followed by a strong recovery after the announcement of a 90-day pause on some tariffs.
• More recently, signs of trade war de-escalation have emerged as negotiations have started with several countries.
• Trump has dialled back his rhetoric towards Fed Chair Jerome Powell, saying he has no intention of firing him - a welcome sign for investors concerned about Fed independence.