European markets bounce back as the US continues to struggle. The TPP weekend wrap.

European Markets enjoy a rebound.

In amongst all the noise about tariffs last week, headline inflation in the UK slowed to 2.6% in March from 2.8% in February as the prices of gasoline, games, toys, and hobbies eased. The annual increase in consumer prices was below the 2.7% consensus forecast of economists in a FactSet poll. Furthermore, services inflation, which is closely monitored by policymakers, also decelerated faster than anticipated, to 4.7% from 5%.

The FTSE bounced nicely last week adding over 4% from last Friday’s low close.

Meanwhile, official data indicated that the labour market weakened but that wage growth remained strong. The official unemployment rate held at 4.4%. Data collected from employers by the tax authorities showed that the number of employees declined by 78,000 in March, the most since 2020. Still, weekly average earnings, excluding bonuses, grew 5.9% in the three months through February compared with the same period a year earlier, up from 5.8% in the previous three-month period.

Europe

The pan-European STOXX Europe 600 Index ended 3.93% higher over the seven days ended April 17, clawing back some of April’s sharp losses. President Trump’s decision to delay imposing higher tariffs and the European Central Bank’s signal that more interest rate cuts were likely bolstered investor sentiment. Major stock indexes also rose over the same period. Italy’s FTSE MIB climbed 4.97%, Germany’s DAX gained 3.13%, and France’s CAC 40 added 2.24%.

The ECB cut its key deposit rate by another quarter of a percentage point to 2.25%, as expected. The central bank dropped the language “policy is becoming meaningfully less restrictive” from its statement. The ECB reiterated that it would follow a data-dependent, meeting-by-meeting approach and that it was not pre-committing to a particular rate path. While the ECB viewed the disinflation process as well on track, it warned that the outlook for growth has deteriorated due to trade policy uncertainty.

The U.S.

In the U.S., major stock indexes finished the holiday-shortened week mixed (markets were closed Friday in observance of the Good Friday holiday). Smaller-cap indexes outperformed, with the S&P MidCap 400 and Russell 2000 Indexes posting gains, while the Dow Jones Industrial Average, S&P 500 Index, and Nasdaq Composite all closed the week lower. The information technology sector was a notable decliner during the week, due in part to news that the U.S. government would add new restrictions on exports of chips to China in a further escalation of the ongoing trade war between the world’s two largest economies. The news sent shares of NVIDIA, Advanced Micro Devices, and other companies with artificial intelligence exposure lower on Wednesday, weighing on the broader sector.

Comments from Federal Reserve Chair Jerome Powell appeared to add to the negative sentiment in the latter half of the week. Speaking at the Economic Club of Chicago, Powell echoed recent comments from Fed officials regarding their economic outlook, stating that tariff increases have been “significantly larger than anticipated,” and that “the same is likely to be true of the economic effects, which will include higher inflation and slower growth.” Powell also reiterated that policymakers are “well positioned to wait for greater clarity before considering any adjustments” to monetary policy, which some interpreted as ruling out any interest rate cuts in the near term.

The week’s economic data releases included several reports related to the housing market, starting with the National Association of Home Builders (NAHB) Housing Market Index. On Wednesday, the NAHB reported that the index—which gauges the overall sentiment of homebuilders—was 40 in April, inching up one point from March but remaining under the threshold of 50, indicating that a majority of homebuilders have a negative outlook on the market.

This uncertainty appeared to be reflected in Thursday’s housing starts data, which indicated that construction of new homes decreased by over 11% in March to an annualized rate of 1.32 million, falling short of consensus estimates for 1.42 million.

Elsewhere, the Census Bureau reported that retail sales rose by 1.4% in March, the highest monthly increase in over two years. The advance was broad-based, with 11 of the report’s 13 categories increasing from February. Sales at motor vehicle and parts dealers surged 5.3%, an indication that consumers were rushing to buy cars ahead of the Trump administration’s 25% tariff on automobiles. Building materials, sporting goods, and electronics also had notable increases in sales during the month.

Asia

Japan’s stock markets gained in the week ended Thursday, with the Nikkei 225 Index rising 2.36% and the broader TOPIX Index up 2.59%, in local currency terms, according to Bloomberg data. Sentiment toward the end of the period was boosted by tentative signs of progress in ongoing bilateral trade negotiations between the U.S. and Japan, where Japan is requesting that the tariffs imposed on its imports into the U.S. be reviewed and is pushing for more favourable trade terms.

On the monetary policy front, the latest comments by the Bank of Japan were interpreted by some investors as cautious and that, given uncertainties from factors such as tariff impacts, the central bank could delay the timing of its next interest rate hike. BoJ Governor Kazuo Ueda said that policy support may be warranted and that policy will be conducted appropriately in response to changing conditions. The BoJ’s stance remains that it will raise interest rates if its forecasts for the economy and prices are realised. The yield on the 10-year Japanese government bond fell to around 1.31% from the prior week’s 1.36%.

Mainland Chinese stock markets advanced for the week ended Thursday amid expectations that Beijing will ramp up stimulus to blunt the impact of higher U.S. tariffs. The onshore benchmark CSI 300 Index added 0.58%, and the Shanghai Composite Index rose 1.30% in local currency terms, according to FactSet. In Hong Kong, the benchmark Hang Seng Index advanced 2.30%.

China’s gross domestic product expanded 5.4% in the first quarter from a year earlier, the country’s statistics bureau said on Wednesday. The better-than-expected increase gave little comfort for policymakers, however, as it reflected growth before higher U.S. tariffs kicked in earlier this month and was driven by front-loaded shipments from buyers seeking to get ahead of the tariff hikes, according to analysts. The impact of the U.S. levies on China will likely become apparent in the coming months following the Trump administration’s decision to raise total tariffs on most Chinese goods to 145%.

The Week Ahead

A holiday-shortened week includes trading updates from the likes of Tesla, Unilever, Asos, AJ Bell and Google owner Alphabet.

Economic updates include flash PMIs surveys for the UK, Europe and US that could provide some of the first post-tariff data, along with UK retail sales, and confidence figures for both businesses and consumers.

Enjoy the rest of the long Easter Weekend and we’ll be back with a trading update on Wednesday.

Disclaimer: The views expressed in this article are the author’s own and should not be considered in rendering any legal, business or financial advice. Opinions and estimates offered constitute our judgment and are subject to change without notice, as are statements of financial market trends, which are based on current market conditions.

This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The views and strategies described may not be suitable for all investors. This material has been prepared for informational purposes only.

Past performance may not be indicative of future results. Therefore, you should not assume that the future performance of any specific investment or investment strategy will be profitable or equal to the corresponding past performance.

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