The S&P 500 rallied 4.01% in sterling terms last week, amid indications that trade tensions may have peaked. US President Donald Trump suggested that his administration was open to negotiation with China on tariffs, stating that he had taken a call from President Xi on the subject, although Beijing has disputed the nature of the conversation. US tariffs on Chinese goods still stand at 145%, with a reciprocal 125% levy on US goods put in place by China, making any direct trade between the nations uneconomical. Reports indicate that some US businesses have been exempted from Chinese levies, indicating willingness from China to make a deal. The Shanghai Stock Exchange Composite rose 0.18% on the week.

Markets were also relieved that the spat between the US President and Chairman of the US central bank, Jermone Powell, appeared have cooled. Powell’s wait and see approach to monetary policy has been repeatedly criticised by Trump, who has asserted that interest rates need to be lowered immediately to avoid an economic slowdown. This criticism escalated following comments from Powell that suggested tariffs could worsen inflationary pressures and push back rate cuts even further, with Trump taking to social media to state that Powell’s “termination cannot come fast enough!”. Tensions appeared to have eased by the time Trump took questions from reporters last week, as he stepped back from his earlier treats and denied any intentions to fire Powell.

European markets also gained during the week. The FTSE All Share rose 1.71%, while the MSCI Europe ex UK, which represents continental European markets, climbed 2.87%. This was largely driven by relief that the worst of the trade war rhetoric may now be behind us, however there still remains huge uncertainty around where trade barriers will settle and the impact on the global economy. Policymakers gathered for the IMF and World Bank spring meetings last week expressed concerns over the lack of clarity, with the IMF warning of “further shocks, corrections of asset prices and tightening of financial conditions”. The IMF’s global growth forecasts were revised downwards, from 3.3% to 2.8%.

Gold experienced a sharp intra-week decline as trade tensions eased. Gold has been a key beneficiary of escalating hostility, given its status as a safe haven and investor aversion to US assets such as the Dollar and Treasury bonds that typically do well in a risk-off environment. The precious metal, which hit an all-time high of $3500 on 22nd April, tumbled over 5% from its peak to end the week at $3320.

Week Ahead

Source: ForexFactory, 28/04/25

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