Market in Focus: Confidence Cracks, Central Banks Caught in the Middle!

April 22, 2025

Tariff Turmoil & Fed Pressure

Markets stayed volatile as President Trump’s mixed signals on tariffs and new investigations into tech and pharma created global uncertainty. A 90-day tariff pause brought short-lived relief, but tensions with China deepened. Trump’s attacks on Fed Chair Powell raised questions about central bank independence. Markets now expect three rate cuts starting June, though the Fed remains cautious.

Flight to Safety Intensifies

Investors rushed to safe havens. Gold surged past $3,495/oz, up 8% last week and 33% year-to-date. The yen and Swiss franc strengthened, while U.S. stocks fell sharply.

• S&P 500: -4.42%
• Nasdaq: -5.43%
• Dollar: -2.11%

Global Divergences

• U.S.: Strong retail sales masked broader weakness, with industrial production and manufacturing activity slowing. Inflation expectations climbed, complicating the Fed's path forward. Trump’s comments on Powell rattled confidence, dragging equities and the dollar lower.
• Eurozone: The ECB cut rates for the 7th time since last June amid weak growth and fresh tariffs. Germany is facing the brunt, with falling investor sentiment and potential layoffs. Inflation remains near target, but future rate cuts are expected.
• UK: Job losses surged, payrolls shrank, and inflation softened—but April tax hikes may push prices higher soon. The Bank of England is expected to cut rates starting in May.
• China: Q1 GDP beat expectations at 5.4% thanks to front-loaded exports and consumer subsidies. Still, analysts warn the boost may be short-lived without more policy support. The PBoC held off on easing measures for now.
• Japan: Core inflation hit 3.2%—its highest in a year—driven by skyrocketing rice prices. Expectations for a rate hike in July are growing despite weak consumer confidence.
• Australia: Job growth missed forecasts, and unemployment ticked up slightly. With tariffs beginning to affect exports, the RBA held rates steady, but markets still expect cuts this year.

Looking Ahead - This Week to Watch

This week’s key events include:

• U.S. Flash PMIs, Fed Beige Book, and inflation expectations
• Eurozone consumer confidence and PMI data
• UK retail sales and manufacturing updates
• Japan’s Tokyo CPI for signs of inflation trend

Markets remain sensitive to tariff news, central bank moves, and fresh economic data.