
9 May 2025
Markets Firm Ahead of US–China Meeting
A review of the week’s top global economic and capital markets news
Jamie Coleman
Senior Strategist, Strategy and Insights Group
For the week ending 9 May 2025
As of midday Friday, global equities were modestly firmer on the week amid signs of a thaw in the US-China trading relationship. The yield on the US 10-year note firmed 9 basis points from a week ago to 4.36% while the price of a barrel of West Texas Intermediate crude oil rose $2 to $60.50. Volatility, as measured by the futures contracts on the Cboe Volatility Index (VIX), fell to 22.1 from 23.0.
US, UK reach first Trump 2.0 trade deal
On Thursday, the United States and Great Britain reached agreement on the framework for a new trade deal. The agreement keeps in place the 10% baseline levy with some exceptions while reducing the sectoral tariffs on the first 100,000 autos the UK exports to the US annually. It also exempts British steel and aluminum from those levies. The UK agreed to import more US goods, including 10 billion dollars’ worth of Boeing jets. The deal clears the way for increased US exports of farm products by lowering nontariff barriers. Prime Minister Keir Starmer said that the UK had been promised preferential treatment if US tariffs are imposed on the import of pharmaceuticals, a move that is expected in the coming weeks. Thursday’s agreement suggests that neither the 10% baseline nor the 25% sectoral tariffs will be easily negotiated away as talks with other countries proceed. .
US and China to hold talks in Switzerland
US Treasury Secretary Scott Bessent and US Trade Representative Jamieson Greer will meet in Switzerland this weekend with Chinese Vice Premier He Lifeng to discuss trade. The Wall Street Journal reported that Chinese outreach to the US over controlling the flow of fentanyl precursors jump-started the rapprochement. Bessent warned that the meeting is more about deescalation than reaching a major trade agreement. Trump said Thursday that the 145% tariff rate against China can’t go higher and “we know it’s going down.” The president added that, with progress being made on trade and Congress working on a tax bill, “you better go out and buy stock now.” On Friday morning, Trump said an 80% tariff on China “seems right,” though the number would be up to Bessent. Media reports suggest the US is considering cuts to between 50% and 54%.
Fed: Uncertainty high but economy solid
As expected, the US Federal Reserve held rates steady in a range of between 4.25% and 4.50% on Wednesday. In its statement, the Federal Open Market Committee said it believes the risks of higher unemployment and higher inflation have risen. Against a highly uncertain backdrop, Fed Chair Jerome Powell said that the central bank is well-positioned to wait for greater clarity and that it is appropriate for policymakers to remain patient.
Japan’s finance minister walked back comments that the country’s $1 trillion-plus of US Treasuries could be a bargaining chip in trade talks.
Australia’s Labor Party won an outright majority in last weekend’s general election, gaining Prime Minister Anthony Albanese a second term.
Eight OPEC+ countries are set to accelerate easing voluntary oil production cuts, increasing production by about 411,000 barrels a day in June. Crude oil futures fell to four-year lows on the news before rebounding.
The Wall Street Journal reported this week that China has stopped publishing hundreds of data points, including land sales, foreign investment and unemployment figures, making it more difficult to assess the health of the country’s economy.
Canada’s AAA sovereign rating was affirmed by S&P Global Ratings.
Friedrich Merz was elected Germany’s chancellor this week but not before failing to achieve a majority of the Bundestag on the first ballot. It was the first time in modern German history that a chancellor was not elected on the first ballot, suggesting Merz faces a challenge in passing difficult legislation.
The Financial Times reported that Chinese manufacturers are attempting to avoid the Trump administration’s tariffs by fraudulently undervaluing cargo sent to the US, exploiting a system that US authorities have struggled to police.
China lowered its benchmark policy rate to 1.4% from 1.5% and cut its reserve requirement ratio 0.5% to an average of 6.2%.
The Bank of England lowered its base lending rate to 4.25%, with two policymakers voting for a larger reduction and two of the nine members of the Monetary Policy Committee voting to hold rates steady. The BOE said more cuts are likely and that it continues to view a “careful and gradual” approach to easing monetary policy as appropriate.
Services sector purchasing managers’ indices were mixed in April.
Country or Region |
Services PMI |
Composite PMI |
US (ISM) |
51.6 from 50.8 |
N/A |
Eurozone |
50.1 from 51.0 |
50.4 from 50.9 |
United Kingdom |
49.0 from 52.5 |
48.5 from 51.5 |
Japan |
52.4 from 50.0 |
51.2 from 48.9 |
According to Deutsche Bank, US firms have announced a total of $518 billion in buybacks over the past three months, the largest tally on record.
The Taiwan dollar rallied strongly this week amid speculation that Taipei will allow the currency to strengthen to help ease trade tensions with the US.
On Wednesday, the Trump administration announced plans to repeal Biden-era AI chip restrictions and replace them with simpler rules.
Canadian Prime Minister Mark Carney met with President Trump on Tuesday and said he thinks that a good basis has been established for trade talks with the US.
In the wake of a recent terrorist attack in Kashmir by suspected Pakistani terrorists, India and Pakistan traded air, missile and drone strikes this week. However, while tensions remain high, analysts see the probability of all-out war as low as both sides appear to be calibrating their moves to avoid escalation.
Bloomberg reported Thursday that President Trump supports a tax hike on those who earn $2.5 million or more. The top rate would rise to 39.6% from 37%.
The Federal Reserve Bank of New York’s survey of inflation expectations was unchanged over the one-year horizon at 3.6%, up 0.2% to 3.2% at the three-year horizon and down 0.2% to 2.7% over the five-year horizon.
China’s exports expanded 8.1% in April as the country appeared to reroute the export of goods through Southeast Asia while trade with the US declined sharply.
With about 90% of the constituents of the S&P 500 Index having reported for Q1 2025, blended earnings per share (which combines reported data with estimates for those that have yet to report) show that earnings rose around 13.6% compared with the same quarter a year ago, according to data from FactSet. Blended sales rose 4.8% year over year.
Monday: eurozone CPI
Tuesday: UK unemployment, eurozone ZEW survey, US CPI
Thursday: UK GDP, industrial production, eurozone GDP, industrial production, US retail sales, industrial production
Friday: Japan GDP, US housing starts, University of Michigan survey
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Sources: MFS research, Wall Street Journal, Financial Times, Reuters, Bloomberg News, FactSet Research, CNBC.com.