Market Commentary 28th April 2025 – from Charlie Hancock

An initial reading for a UK Purchasing Managers’ Index (PMI) indicated that business activity shrank during April, with both the services and manufacturing sectors experiencing a difficult month. Firms reported that domestic demand weakened, while rising global uncertainty prompted a decline in exports. The PMI data also indicated that input cost inflation accelerated to the highest level seen since February 2023.

A consumer confidence survey carried out by research firm GfK showed that stock market volatility and rising energy bills dented consumer sentiment this month. Meanwhile, the International Monetary Fund (IMF) revised their estimate for 2025 UK economic growth lower, with the IMF expecting the economy to expand by 1.1%, down from their previous estimate of 1.6%.

PMI data for the Eurozone pointed to slowing growth during April. The services sector saw a decline in activity, while the manufacturing sector continued to see expansionary conditions. Business confidence appeared to be impacted by concerns around global trade tensions.

The European Central Bank (ECB)’s chief economist, Philip Lane, stated that uncertainty surrounding US tariffs would have a negative impact on economic growth, but added that he feels the Eurozone will avoid a recession. The central bank’s president, Christine Lagarde, indicated that economic growth forecasts may be cut following the ECB’s June policy meeting.

Growing speculation regarding a de-escalation in the US-China trade dispute helped to lift investor confidence last week. In addition, President Donald Trump stated that he would not fire the Federal Reserve’s chair, Jerome Powell, which helped to alleviate fears of Trump interfering with central bank independence.

An initial reading for US PMI data showed that growth slowed during April. The services sector saw a notable slowdown, while manufacturing activity improved during the month. Input cost inflation accelerated, with firms citing the impact of the Trump administration’s tariffs. Existing home sales in the US declined by 5.9% in March, with the National Association of Realtors reporting that high mortgage rates were a deterrent for buyers.

Authorities in China indicated that further fiscal stimulus efforts would be implemented to shore up the domestic economy, amidst the ongoing trade war with the US. Policymakers stated that they were considering emergency plans in response to “external shocks”. China’s President Xi indicated that he was focussed on supporting the domestic economy and was not seeking further escalation in trade tensions with the US.

Core consumer price inflation in Japan accelerated by more than expected in April, rising to 3.4% year-on-year from the 2.4% recorded for March. Analysts cited reduced government support for household energy bills and rising food prices as the main drivers for inflation rising during the month. The Japanese government announced new ‘emergency economic relief measures’ in response to concerns around the impact of US tariffs. The measures included efforts to increase lending in the economy, with policymakers keen to stimulate domestic consumption.

Investors appeared more confident about UK government finances last week and yields around the developed world remained stable.

European economic data painted a mixed picture, but concerns about a hit to economic growth from trade tensions with the US appeared to contribute to downward pressure on Eurozone government bond yields.

US fixed income investors appeared to react positively to President Trump’s softer tone regarding Fed chair Jerome Powell, while expectations for the US economy to slow in the near future also contributed to yields moving lower.

GBP / EUR – Current 1.1714 Previous 1.1666

The Pound was relatively stable against the US Dollar, moving 0.14% higher. Against the Eurozone currency, the Pound gained 0.41%. Relatively downbeat UK economic data appeared to have little impact regarding sentiment on the Pound amongst currency traders.