2025 Weekly Update

Market update

The S&P 500 closed the week at 5,282.70, -1.50% lower. The Dow Jones closed at 39,142.23, -2.66%, with the Nasdaq lowerby -2.62%. The volatility index VIX closed the week at 29.65, down from 37.56. The Euro Stoxx 600 rose +4.03%.

The 10-year UST closed at 4.33%, down from 4.49% a week before. The yield curve is slightly inverted with the yield spreadbetween the 3-month and 10-year UST at -0.3bps. US Corporate Bond spreads: Investment Grade spreads tightened -9bpsat 193bps and High Yield spreads tightened -13bps at 445bps. German 10-year Bunds yield closed at 2.47% down from2.57% a week before. In Europe, Corporate Investment Grade spreads tightened -3bps at 125bps and High Yield tightened -11bps at 420bps.

The US Dollar Index (DXY) depreciated -0.87% last week and closed at 99.23. The Euro closed at 1.1393 (+0.33%); the Yenappreciated +0.95%, closing at 142.18 and the Swiss Franc depreciated -0.25%, closing at 0.8168. Gold closed at$3,326.85, appreciating +2.76%. Oil was lower, Brent closed at $67.96 (+4.94%) and WTI at $64.68 (+5.17%).

Macroeconomy

On tariffs

Trump made some more concessions the previous weekend (4/11) when the administration exempted several tech/electronics items from the bulk of his China tariffs along with the 10% baseline global tariff which followed the 4/990-day pause. Last week, the focus was on chipmakers with new restrictions from the Trump administration on semiconductor exports to China. AMD said they could face up to $800m of charges because of the new export controls, which followed Nvidia’s announcement that it’d report $5.5bn in write downs. Bloomberg report suggested that China was open to trade talks, if the US met various conditions, including showing more respect and holding a more consistent position. However, it seemed that China ordered its domestic airlines to halt acceptance of Boeing jets. There were also some positive noises around the US-Japan trade discussions, as President Trump claimed that there was “Big Progress!” with the Japanese delegation.

Fedspeak

Fed’s Chair Powell spoke at Economic Club of Chicago. The language was somewhat hawkish/negative as he warned that tariffs are “significantly larger than anticipated” and will likely pressure growth and push inflation higher. While the Fed will monitor both sides of its mandate (price and economic stability), Powell acknowledges the central bank could find itself in a situation where the two goals are in conflict and if that’s the case, he implies inflation may take precedent (he notes that the Fed’s “obligation is to keep longer-term inflation expectations well anchored”). Whatever happens, the Fed is sitting and waiting to see how things in Washington unfold and the effects it will all have on the economy.

ECB

The European Central Bank cut its main policy rate by 25bps to 2.25%, a move that was widely expected. Since commencing the easing process in the middle of 2024, the ECB has now reduced its policy rate by 175bps in aggregate. The forward guidance evolved in a slightly hawkish direction as the ECB removed a prior reference to policy being restrictive (back in March the ECB statement included this line: “monetary policy is becoming meaningfully less restrictive”), although the central bank remains comfortable with inflation (“the disinflation process is well on track”) and noted rising downside growth risks (“the outlook for growth has deteriorated owing to rising trade tensions”), which means they could ease further if such a move is justified by the data.

US data

The inflation expectations component of the New York Fed consumer survey was encouraging in that they were flat-to-down over the medium and long-term, providing credence to the view that tariffs may only cause a one-time shift higher in prices. US retail sales for March posted a sharp 1.4% m-o-m jump thanks to strength in autos. The price indices in the Empire Manufacturing Survey spiked in Apr. (“Both price indexes climbed for a fourth consecutive month to their highest levels in more than two years: the prices paid index rose six points to 50.8, and the prices received index rose six points to 28.7”) as firms turn increasingly pessimistic in the outlook (“the index for future general business conditions fell twenty points to -7.4; the index has fallen a cumulative forty-four points over the past three months”). The Philadelphia Fed index tumbled to -26.4 in Apr., down from +12.5 in Mar. and below the +2.2 forecast. This was the lowest level since Apr 2023. Inflation pressures persist: the prices paid index rose from 48 to 51 (the highest level since Jul 2022) and the prices received index advanced 1 point to 30.7. The indicators for current activity, new orders, and shipments fell notably and turned negative. The survey’s broad indicators for future activity were little changed and continued to suggest subdued expectations for growth over the next six months.

Highlights

Earnings season

In the US, 13.6% of the S&P 500’s market cap has reported. Earnings are beating estimates by 6.6% in aggregate, with 68% of companies so far topping projections. 1Q expectations are for revenues to grow 3.9% and EPS by 4.2%. Projected EPS growth among groups varies significantly. Consensus expectations are for Cyclicals ex-Energy margins to contract -6.6%, only slightly worse than consensus expectations for Non-Cyclicals -5.3%. However, Non-Cyclicals sales are expected to grow 4.8%, largely offsetting the margin impact, led by Healthcare (+7.6%) and Utilities (+6.8%). This week, 120 companies representing 22.1% of S&P 500’s market cap will report results, including Tesla, General Electric, IBM, AT&T, Alphabet, PepsiCo, Gilead Sciences and AbbVie. In Europe, we are in the early innings with only 6% of the Euro Stoxx 600 companied having reported. Consensus expects full-year EPS to grow at around 6%, well below the optimistic circa 10% estimate last summer. Q1 is expected to be the weakest quarter, with EPS projected to fall roughly 1% y-o-y. Earnings momentum has turned negative across most sectors, with only utilities and financials bucking the trend. Sales momentum remains broadly positive, but margin dispersion is widening. Many corporates are downgrading or softening their outlooks, and several are opting for scenario-based guidance over firm forecasts. Key watchpoints this season include how management teams frame cost control, pricing flexibility, and geopolitical exposure, all of which may determine whether markets will reward caution or opacity.

What to watch

• Tuesday: Taiwan Exports; Eurozone Consumer Confidence; US Fed's Philadelphia Non-Manufacturing, Richmond Manufacturing and Business Conditions
• Wednesday: Asia PMI; Indonesia's Rate Meeting; Eurozone and UK PMI; US Flash April PMI, Fed Beige Book
• Thursday: Korea Q1 GDP; Germany's IFO; US Fed Chicago Activity and Kansas Manufacturing, Durable Goods, and Initial Jobless Claims
• Friday: Japan CPI; UK Retail Sales; US University of Michigan Consumer Survey, Fed's Kansas City Services Activity