The upcoming week will be a bit quieter but still busy nonetheless. Asia Pacific markets get a slight break while the market will shift focus to high impact data from the US and UK in particular with tariff developments still being monitored closely.
Asia Pacific Markets
China’s April trade data, due Friday, will reveal the impact of rising tariffs on its trade. US-bound exports from China likely saw a sharp drop, potentially causing a double-digit decline in both exports and imports compared to last year. Since 14-15% of China’s exports go to the US, a lot of this trade might have slowed drastically in April. Import data shows a similar trend, with signs of a decline evident in purchasing managers’ index reports.
While some trade between the US and China may have shifted to other regions, the shift isn’t happening smoothly and won’t fully offset the losses. On Wednesday, China will also release foreign reserves data, which investors will analyze for signs of significant changes, like the possible selling of US Treasuries.
Europe + UK + US
The Federal Reserve is expected to keep interest rates unchanged next week despite pressure from the President. Fed Chair Jay Powell emphasized the need to maintain price stability and prevent temporary price hikes from becoming long-term inflation. Fed Governor Chris Waller also ruled out rate cuts in May or June, noting the pause on tariffs likely won’t influence data until after July.
Meanwhile, the ISM Services Index, out Monday, risks dipping into contraction, signaling a cooling economy and potential recession.
Europe gets a bit of a data breather this week with Retail Sales the only high impact data release. Focus will shift to UK data next week.
The Bank of England is likely to cut rates by 25 basis points on Thursday but isn’t expected to adopt a significantly more cautious stance. Tariffs are less of an issue compared to other parts of Europe, but services inflation remains persistent. This could shift by summer, but for now, I expect the BoE to stick to its message that any future cuts will be “gradual.”
