Markets Weekly Outlook – US-China trade talks & global economic data
The week ahead has several important data releases lined up. However, with US-China talks taking place over the weekend and the first trade deal already completed, markets may shift their attention to tariff updates, which could take the spotlight away from the economic data.
Asia Pacific Markets
Japan’s economy is set to shrink by 0.1% in the first quarter of 2025, down from a 0.6% rise in the last quarter of 2024. Household spending and more foreign tourists are boosting private consumption, but low external demand is holding growth back. The impact of rushing exports before tariffs has been smaller for Japan compared to other big exporters. Imports have shown a recovery. Due to weak growth, the Bank of Japan is likely to hold off on any rate hikes for now.
China’s inflation data for April will be shared this weekend, and consumer prices are expected to stay at -0.1% year-on-year, the same as March. Producer prices are likely to remain negative for the 31st month in a row. Deflation could get worse because of tariffs, forcing exporters to find new markets. China will also release its April credit data in the coming week. Credit growth has been improving this year, but April’s numbers are unlikely to reflect the latest measures by the People’s Bank of China to ease monetary policy. More time will be needed for the effects to be felt and transmitted through the data.
Europe + UK + US
The Federal Reserve has made it clear they’re not rushing to lower interest rates. They acknowledge that trade uncertainty could lead to both higher unemployment and inflation. April’s inflation data, due next week, is expected to show that inflation remains high. There may also be signs of early price increases as tariffs start to impact costs. By June, these price hikes could become more noticeable, as it takes time for goods to be shipped, stored, and finally sold in stores or online.
Retail sales are in focus this week. March was strong as people bought big-ticket items early, fearing tariff-related price hikes. This may continue in April for car sales, but worries about inflation, job security, and falling wealth could hurt non-essential spending. Key data like the Michigan sentiment index and industrial production are also due.
If we travel over the pond to the UK, the job market is cooling but not weakening significantly after recent tax hikes. Last month’s drop in payrolls will likely be revised higher. Unemployment is expected to rise, though the data isn’t always reliable. Wage growth should slow, mainly due to earlier high comparisons, with pay pressures easing later this year.
February’s GDP jumped 0.5%, and even with a possible dip in March, first-quarter growth looks solid. This surge is partly due to volatile manufacturing data. Growth in the second quarter is likely to slow but should remain steady, helped by government spending.
