United States
U.S. markets navigated a turbulent April as President Trump enacted his promised sweeping “Liberation Day” tariffs. These included a universal basic tariff of 10% on most trading partners, alongside additional country-specific reciprocal tariffs ranging from 10% to 50%. The unexpectedly large tariffs triggered a decline in the US dollar, decoupling it from interest rate trends and posing a significant threat to long-term global growth and U.S. inflation. Although President Trump has temporarily suspended most tariffs while negotiations progress, substantial tariffs remain in effect pending any formal agreement.
The U.S. stock market is currently on track for its weakest performance in the first 100 days of a presidential term in over half a century. Both the S&P 500 and Nasdaq indices briefly entered bear market territory in early April, experiencing declines exceeding 10%. While they have since recovered some ground, they remain below their levels prior to the unveiling of President Trump’s “reciprocal” tariffs on April 2nd. Investor confidence in the S&P 500 has notably weakened.
Adding to the market unease, U.S. Treasuries have also experienced substantial losses during this period of volatility. The yield on the 10-year Treasury note has receded to 4.16% after an early April spike, but the recent fluctuations have unsettled investors. Furthermore, the US dollar index, which measures the dollar’s strength against a basket of six foreign currencies, has fallen sharply by 8.5% this year.
The annual inflation rate in the U.S. continued its downward trend for the second consecutive month, reaching 2.4% in March 2025—the lowest level since September and down from 2.8% in February. Disappointing U.S. spending growth in the initial months of the year, coupled with weak consumer sentiment, suggests that the new administration’s policies are negatively impacting consumer expenditure. Beyond tariffs, attempts to curtail government spending are contributing to the uncertainty weighing on consumption. Consequently, the IMF has downgraded its U.S. GDP growth forecast for 2025 to 1.8%, citing trade instability and a deteriorating domestic outlook.
Eurozone
The Eurozone’s economic recovery faltered in April. The HCOB Composite PMI edged down to 50.1, signaling near-stagnant growth. While German manufacturing showed a modest improvement, this was offset by a weakening in services activity, particularly in France. Business confidence across the Eurozone also declined in April, reaching its lowest point since November 2022.
According to J.P. Morgan, European corporations maintain a solid financial footing, with net leverage currently below the long-term average at 1.6x and EBITDA margins remaining stable at 12%, well above the lows experienced during the Covid-19 pandemic.
The European Central Bank (ECB) responded to the deteriorating economic outlook by cutting its benchmark interest rate to 2.25%, citing “exceptional uncertainty” and a worsening growth outlook due to “rising trade tensions.” Analysts anticipate further rate reductions at the ECB’s June meeting. The annual inflation rate in the Eurozone also eased, falling to 2.2% in March 2025 from 2.3% in February.
Germany has revised its growth forecast for the year down to zero, as its export-dependent manufacturing sector is expected to be significantly impacted by ongoing trade tensions. Friedrich Merz, anticipated to become the next German chancellor next month, has pledged to revitalise the economy through increased debt-financed spending on infrastructure and defence, alongside tax subsidies for investment and deregulation.
United Kingdom
The FTSE 100 continued its upward trajectory throughout April, supported by gains in energy and financial stocks. Mining companies also performed well, benefiting from stable metals prices and a weaker dollar. Nevertheless, macroeconomic headwinds persist. The UK economy experienced a 0.5% expansion in February, following a revised flat reading in January and exceeding expectations of a 0.1% increase. Growth was broad-based across both services and manufacturing sectors, marking the fastest monthly pace since March 2024.
The generally cautious outlook for UK interest rates has remained consistent, showing little change since September. UK inflation fell more sharply than anticipated to 2.6% in March, strengthening the argument for the Bank of England (BoE) to implement interest rate cuts next month as it braces for the economic consequences of U.S. President Donald Trump’s tariffs.
Gilt yields remain elevated, reflecting the complex balancing act required in fiscal and monetary policy. The BoE has been navigating the risks of a weakening labor market against persistent pressures from strong wage growth and higher household expenses.
China
China’s economy faced increasing pressure in April. Factory activity contracted, with the Manufacturing PMI dipping below 50, indicating a decline in export orders due to escalating tariffs. Beijing responded with unveiling of further stimulus measures aimed at supporting its 5% growth target, including injecting credit into major banks and infrastructure spending.
China’s first-quarter economic growth, at 5.4%, surpassed expectations, driven by robust consumption and industrial output. However, analysts express concern that this momentum could significantly weaken as U.S. tariffs pose the most substantial threat to the Asian powerhouse in decades. While China’s tech sector remains a positive area, broader macroeconomic challenges persist.
“China’s economy faces two significant headwinds simultaneously: the ongoing property sector issues domestically and the unprecedented U.S.-China trade war externally,” Nomura economists noted. The yuan continues to remain under pressure as U.S.-China trade tensions intensified, leading to weakened investor sentiment.
Japan
Japan presented a more stable economic picture. The Nikkei 225 index saw a modest increase of 1.2%, supported by a weaker yen and strong corporate earnings. Although recent broad-based dollar weakness has provided some support to the yen, the Bank of Japan’s (BOJ) gradual approach to interest rate hikes has maintained pressure on the Japanese currency.
The Bank of Japan is expected to maintain steady interest rates at its upcoming meeting on Thursday as U.S. tariffs continue to negatively impact confidence. The BOJ faces renewed pressure in its efforts to balance supporting economic growth while addressing persistent inflation. Japan’s annual inflation rate edged down to 3.6% in March 2025 from 3.7% in the previous month, marking the lowest point since last November.
The composite PMI for the manufacturing sector showed a slight increase to 48.5 in April 2025, marking the tenth consecutive month of contraction. Output contracted at the slowest pace in four months. However, new orders declined at a significant rate, the fastest since February 2024, with new export business also falling at an accelerating pace.
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Disclaimer
This Market Review is for general information only and does not constitute financial, legal, or tax advice. Data is sourced from publicly available materials, including the Federal Reserve, ECB, Bank of England, IMF, JPMorgan, Schroders, Reuters, and other official institutions. Past performance is not indicative of future results. Always seek personalised advice from a qualified adviser.
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