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Kuwait Times
26-05-2025
- Business
- Kuwait Times
Global markets in flux: Growth, inflation and trade tensions
Trump threatens 50% tariff on EU goods and 25% levy on iPhones KUWAIT: This week, global markets navigated heightened volatility, persistent trade tensions, and fiscal concerns amidst ongoing uncertainty, central bank policy decisions, and a flurry of economic data releases. In the United States, initial jobless claims edged down to 227K whilst the Flash Composite PMI rose to 52.1, reflecting an uptick in business activity. However, the 30-year Treasury yield surged to a high of 5.14 percent, following a weak bond auction and rising concerns over fiscal deficits and future tax policies. The USD Dollar Index (DXY) depreciated 1.96 percent against major currencies, closing the week at 99.112. In Canada, headline inflation slowed to 1.7 percent in April, but core inflation remained sticky at 3.2 percent, reducing expectations of a June rate cut. In Europe, the Euro Area Composite PMI slipped to 49.5, driven by services weakness in Germany and France, whilst the United Kingdom saw inflation accelerate to 3.5 percent and a contractionary composite PMI reading of and GBP/USD rose almost 2 percent on the week. The Swiss National Bank flagged potential deflation this year following zero inflation in April, citing CHF strength and tariff risk. In Asia-Pacific, China's April industrial output exceeded expectations at 6.1 percent YoY, although retail sales lagged; the People's Bank of China cut loan prime rates by 10bps to counter weak credit demand. USD/CNY rose 0.45 percent on the week to 7.1810. Japan saw export growth slow to 2 percent YoY in April, a trade deficit, and JPY strengthening to the 142.56 mark, whilst the Reserve Bank of Australia cut rates to 3.85 percent citing cooling inflation and global uncertainty. Equity markets fell over the week with the S&P 500 and Stoxx Europe 600 down 2.61 percent, and 0.75 percent respectively, with sharp drops on Friday after President Trump threatened new tariffs against the European Union and Apple. The US yield curve bear steepened on the week over fiscal concerns, with the 2s10s spread widening from 47 to 52bps, as July Brent futures fell 0.96 percent to $64.78 a barrel as OPEC+ considered boosting output. US and Canada President Donald Trump announced plans to impose a 50 percent tariff on goods from the European Union starting June 1, citing stalled negotiations, and separately threatened a 25 percent tariff on Apple unless iPhone manufacturing is relocated to the US. The announcements triggered sharp market reactions: S&P 500 futures fell 1.1 percent and Nasdaq 100 futures dropped 1.3 percent on the news. Market participants fear the proposed tariffs would target key transatlantic trade sectors, including automobiles and luxury goods. The EU has previously prepared countermeasures covering EUR 95B ($107 billion) in US exports, pending the outcome of ongoing trade talks. Amidst such uncertainty, swap markets currently discount an only 6 percent probability of a June Fed rate cut. DXY was last seen at 99.112. Yields on US Treasuries bear-steepened significantly on Wednesday and Thursday, with the 30-year yield rising to 5.14 percent - the highest since October 2023 - following a weak $16B 20-year bond auction that tailed 1.2bps versus the 5.035 percent when-issued yield with below average demand. After the auction, yields across the curve closed 4 to 12bps cheaper, with the 2s10s and 5s30s spreads steepening by 6.5bps and 4bps respectively. Dollar swap spreads continued their recent streak of compression, led by the long end of the curve. Investor concerns over the expanding budget deficit and President Trump's proposed tax bill have heightened risk aversion. Options markets reflected caution as risk sentiment deteriorated across fixed income and broader asset classes. US initial jobless claims fall Initial jobless claims in the United States declined by 2K to 227K in the week ending May 17, marking the lowest level in four weeks, according to the Department of Labor. Continuing claims rose to 1.9M in the prior week, whilst the four-week moving average increased to 231.5K - the highest since October 2024. Despite multiple announced corporate layoffs and fiscal tightening, the data signals a broadly stable labor market. Meanwhile, the S&P Global Flash Composite PMI rose to 52.1 in May from 50.6 in April, indicating renewed business expansion. Manufacturing and services PMIs both improved to 52.3. Price pressures intensified to the highest level since August 2022. Canadian inflation falls Canada's headline inflation decelerated to 1.7 percent YoY in April 2025, its lowest since September 2024, largely driven by the removal of the consumer carbon tax and an 18.1 percent decline in gasoline prices. However, core inflation - averaged across the Bank of Canada's (BoC) two preferred metrics - accelerated to 3.2 percent, up from 2.9 percent in March, with the three-month moving average rising to 3.4 percent. Retail activity remained resilient, with preliminary data indicating a 0.5 percent increase in retail sales in April, extending a 0.8 percent rise in March. Governor Tiff Macklem cautioned that escalating US-Canada trade tensions may weaken second-quarter GDP, stressing the need to balance growth and inflation risks associated with tariffs. Markets currently assign a 28 percent probability of a rate cut in the next BoC meeting on June 4. USD/CAD was last seen at 1.3731. Europe and the UK Private-sector activity in the euro area unexpectedly contracted in May, with the S&P Global Composite Purchasing Managers' Index (PMI) falling to 49.5 from 50.4 in April - marking the first sub-50 reading this year and missing consensus expectations of 50.6. The decline was driven by broad-based weakness in services, which recorded their softest performance in 16 months. Germany's composite PMI dropped to a five-month low of 48.6 (April: 50.1), as services output saw its worst result in two and a half years, offsetting modest manufacturing gains. France's composite PMI remained in contraction for a ninth consecutive month, rising slightly to 48.0 from 47.8. Germany's German IFO Business Climate Index, however, improved to 87.5 (April: 86.9), indicating modest sentiment recovery. Markets are currently assigning a 97.5 percent probability of a rate cut in the ECB's next meeting on 5 June. EUR/USD was last seen at 1.1364. UK headline inflation accelerated to 3.5 percent in April 2025, up from 2.6 percent in March, exceeding both the Bank of England's forecast of 3.4 percent and market expectations of 3.3 percent. Services inflation, a key gauge for underlying pressures, rose to 5.4 percent from 4.7 percent. The S&P Global UK Composite PMI remained in contractionary territory at 49.4 in May, up slightly from 48.5 in April, as US tariffs weighed on export demand and private sector activity. Despite weaker external demand, retail sales volumes rose by 1.2 percent MoM in April, marking the fourth consecutive monthly increase. Rising input costs and global trade frictions continue to cloud the outlook, though consumer resilience remains notable. Swap markets are presently discounting an only 3 percent chance of a BoE rate cut in June. GBP/USD was last seen at 1.3539. Swiss National Bank Chair Martin Schlegel indicated that inflation may turn negative in some months during 2025, following a slowdown in annual consumer price inflation to 0 percent in April. Whilst domestic services continue to exert upward price pressure, imported goods are increasingly deflationary due to CHF appreciation. The SNB maintains a medium-term focus but acknowledged heightened inflation uncertainty, notably driven by global tariff developments. Schlegel reiterated the SNB's readiness to adjust its policy rate - including returning to negative territory if necessary - and to intervene in FX markets where appropriate. Swap markets are discounting 35bps of easing on June was last seen at 0.8210. China cuts loan prime rates The People's Bank of China (PBOC) reduced its benchmark one-year Loan Prime Rate (LPR) by 10bps to 3.00 percent, and five-year LPR to 3.50 percent from 3.60 percent, marking the first adjustment in seven months. The move aligns with earlier policy guidance and follows a cut to the seven-day reverse repo rate and a reduction in the reserve requirement ratio. These coordinated easing measures aim to lower borrowing costs amidst subdued consumer sentiment, deflationary pressure, and tariff-related uncertainty. China also lowered ceilings on deposit rates in a move aimed at protecting bank interest margins. New loan issuance in April declined 61 percent YoY, highlighting weak credit demand amidst the protracted US trade war. USD/CNY was last seen at 7.1810. China's industrial production expanded by 6.1 percent YoY in April 2025, significantly exceeding the consensus forecasts, despite a moderation from March's pace. Conversely, retail sales growth slowed to 5.1 percent from the prior month, undershooting market expectations and underscoring persistent consumer caution. Fixed-asset investment rose 4.0 percent in the January-April period, whilst the urban unemployment rate edged down to 5.1 percent. New home prices declined at an accelerated rate, and property sector investment weakened further. Manufacturing investment decelerated, partly reflecting trade-related uncertainty. The yield on China's 10-year government bonds declined marginally to approximately 1.70 percent. April's data reflect a bifurcated recovery trajectory amidst deflationary and employment concerns. The Reserve Bank of Australia (RBA) reduced its benchmark interest rate by 25bps to 3.85 percent - a two-year low and the second cut in 2025 - bringing total easing this cycle to 50bps. The Australian dollar weakened to 64.30 US cents whilst policy-sensitive 3-year yields fell to 3.58 percent following the announcement. Despite recent inflationary pressures, wage acceleration, and strong labour data, the RBA forecasts underlying inflation to remain within the 2–3 percent target range and assumes 85bps of total easing by mid-2026. Whilst economists expect two more cuts this year, the RBA remains cautious, citing global risks including US tariffs and fiscal expansion following domestic elections. AUD/USD was last seen at 0.6488. Japan recorded a JPY 115.8B ($797 million) trade deficit in April 2025 as export growth decelerated to 2 percent YoY, missing the expected 2.5 percent amidst yen appreciation and escalating US tariffs. Imports fell 2.2 percent, versus a projected 4.2 percent drop. The yen averaged 147.7 per USD in April, 2.6 percent stronger than a year earlier, suppressing nominal trade values. Exports to the US, China, and Europe declined by 1.8 percent, 0.6 percent, and 5.2 percent respectively. Concurrently, yields on long-dated 30- and 40-year Japanese Government Bonds, which rose to record highs this week amidst global fiscal concerns, a scale-back in Bank of Japan bond purchases as inflation rises, and reduced demand from insurers, eased late Friday - dropping 11.5bps to 3.1 percent and 13.5bps to 3.5 percent - on central bank intervention and a drop in US Treasury yields. USD/JPY was last seen at 142.56. Kuwait USD/KWD closed last week at 0.30665.
Qatar Tribune
26-05-2025
- Business
- Qatar Tribune
Global central banks face inflation dilemma amidst shifting economic winds
Agencies This week, global markets navigated heightened volatility, persistent trade tensions, and fiscal concerns amidst ongoing uncertainty, central bank policy decisions, and a flurry of economic data releases. In the United States, initial jobless claims edged down to 227K whilst the Flash Composite PMI rose to 52.1, reflecting an uptick in business activity. However, the 30-year Treasury yield surged to a high of 5.14 percent, following a weak bond auction and rising concerns over fiscal deficits and future tax policies. The USD Dollar Index (DXY) depreciated 1.96 percent against major currencies, closing the week at 99.112. In Canada, headline inflation slowed to 1.7 percent in April, but core inflation remained sticky at 3.2 percent, reducing expectations of a June rate cut. In Europe, the Euro Area Composite PMI slipped to 49.5, driven by services weakness in Germany and France, whilst the United Kingdom saw inflation accelerate to 3.5 percent and a contractionary composite PMI reading of and GBP/USD rose almost 2 percent on the week. The Swiss National Bank flagged potential deflation this year following zero inflation in April, citing CHF strength and tariff risk. In Asia-Pacific, China's April industrial output exceeded expectations at 6.1 percent YoY, although retail sales lagged; the People's Bank of China cut loan prime rates by 10bps to counter weak credit demand. USD/CNY rose 0.45 percent on the week to 7.1810. Japan saw export growth slow to 2 percent YoY in April, a trade deficit, and JPY strengthening to the 142.56 mark, whilst the Reserve Bank of Australia cut rates to 3.85 percent citing cooling inflation and global uncertainty. Equity markets fell over the week with the S&P 500 and Stoxx Europe 600 down 2.61 percent, and 0.75 percent respectively, with sharp drops on Friday after President Trump threatened new tariffs against the European Union and Apple. The US yield curve bear steepened on the week over fiscal concerns, with the 2s10s spread widening from 47 to 52bps, as July Brent futures fell 0.96 percent to $64.78 a barrel as OPEC+ considered boosting output. President Donald Trump announced plans to impose a 50 percent tariff on goods from the European Union starting June 1, citing stalled negotiations, and separately threatened a 25 percent tariff on Apple unless iPhone manufacturing is relocated to the US. The announcements triggered sharp market reactions: S&P 500 futures fell 1.1 percent and Nasdaq 100 futures dropped 1.3 percent on the news. Market participants fear the proposed tariffs would target key transatlantic trade sectors, including automobiles and luxury goods. The EU has previously prepared countermeasures covering EUR 95B ($107 billion) in US exports, pending the outcome of ongoing trade talks. Amidst such uncertainty, swap markets currently discount an only 6 percent probability of a June Fed rate cut. DXY was last seen at 99.112. Yields on US Treasuries bear-steepened significantly on Wednesday and Thursday, with the 30-year yield rising to 5.14 percent - the highest since October 2023 - following a weak $16B 20-year bond auction that tailed 1.2bps versus the 5.035 percent when-issued yield with below average demand. After the auction, yields across the curve closed 4 to 12bps cheaper, with the 2s10s and 5s30s spreads steepening by 6.5bps and 4bps respectively. Dollar swap spreads continued their recent streak of compression, led by the long end of the curve. Investor concerns over the expanding budget deficit and President Trump's proposed tax bill have heightened risk aversion. Options markets reflected caution as risk sentiment deteriorated across fixed income and broader asset classes. Initial jobless claims in the United States declined by 2K to 227K in the week ending May 17, marking the lowest level in four weeks, according to the Department of Labor. Continuing claims rose to 1.9M in the prior week, whilst the four-week moving average increased to 231.5K - the highest since October 2024. Despite multiple announced corporate layoffs and fiscal tightening, the data signals a broadly stable labor market. Meanwhile, the S&P Global Flash Composite PMI rose to 52.1 in May from 50.6 in April, indicating renewed business expansion. Manufacturing and services PMIs both improved to 52.3. Price pressures intensified to the highest level since August 2022. Canada's headline inflation decelerated to 1.7 percent YoY in April 2025, its lowest since September 2024, largely driven by the removal of the consumer carbon tax and an 18.1 percent decline in gasoline prices. However, core inflation - averaged across the Bank of Canada's (BoC) two preferred metrics - accelerated to 3.2 percent, up from 2.9 percent in March, with the three-month moving average rising to 3.4 percent. Retail activity remained resilient, with preliminary data indicating a 0.5 percent increase in retail sales in April, extending a 0.8 percent rise in March. Governor Tiff Macklem cautioned that escalating US-Canada trade tensions may weaken second-quarter GDP, stressing the need to balance growth and inflation risks associated with tariffs. Markets currently assign a 28 percent probability of a rate cut in the next BoC meeting on June 4. USD/CAD was last seen at 1.3731. Private-sector activity in the euro area unexpectedly contracted in May, with the S&P Global Composite Purchasing Managers' Index (PMI) falling to 49.5 from 50.4 in April - marking the first sub-50 reading this year and missing consensus expectations of 50.6. The decline was driven by broad-based weakness in services, which recorded their softest performance in 16 months. Germany's composite PMI dropped to a five-month low of 48.6 (April: 50.1), as services output saw its worst result in two and a half years, offsetting modest manufacturing gains. France's composite PMI remained in contraction for a ninth consecutive month, rising slightly to 48.0 from 47.8. Germany's German IFO Business Climate Index, however, improved to 87.5 (April: 86.9), indicating modest sentiment recovery. Markets are currently assigning a 97.5 percent probability of a rate cut in the ECB's next meeting on 5 June. EUR/USD was last seen at 1.1364. UK headline inflation accelerated to 3.5 percent in April 2025, up from 2.6 percent in March, exceeding both the Bank of England's forecast of 3.4 percent and market expectations of 3.3 percent. Services inflation, a key gauge for underlying pressures, rose to 5.4 percent from 4.7 percent. The S&P Global UK Composite PMI remained in contractionary territory at 49.4 in May, up slightly from 48.5 in April, as US tariffs weighed on export demand and private sector activity.
Yahoo
22-05-2025
- Business
- Yahoo
France's private sector contracts for ninth month in May, PMI shows
By Sudip Kar-Gupta PARIS (Reuters) -France's private sector continued to contract in May, marking the ninth consecutive month of decline, as weakness in the services sector weighed on the euro zone's second-biggest economy, according to S&P Global's HCOB Flash France PMI survey. The flash PMI for France's dominant services sector stood at 47.4 points in May from 47.3 in April, marking the ninth month in a row in which it has been below the 50 points level signalling a contraction in activity. Any figure below 50 points shows a contraction while above 50 shows an expansion. A Reuters poll had forecast 47.5 points for the May flash services figure. The flash PMI for the manufacturing sector in May rose to 49.5 points, up from 48.7 in April and ahead of a Reuters poll which had forecast 48.9 points. The flash composite PMI - which comprises both the manufacturing and services sectors - for May stood at 48.0 points, exactly in line with a Reuters poll forecast and up from 47.8 in April. However, that composite PMI figure also marked the ninth consecutive month in which it had been below the 50 points level and therefore in contraction territory. "France's private sector remained subdued in May. The Flash Composite PMI continues to signal contraction, reflecting the economic challenges France is facing amid domestic political instability and a fragile macroeconomic environment," said Hamburg Commercial Bank junior economist Jonas Feldhusen. "Despite improvements in manufacturing and President Macron's recent efforts to position France as an attractive destination for investment, research and development, the overall outlook for the private sector remains bleak, as seen by the business outlook falling sharply in May, especially in the service sector," he added.
