U.S. Markets slumped early in the week in anticipation of the U.S. Federal Reserve’s (Fed’s) rate decision mid-week. Markets later recovered with the announcement of de-escalation talks scheduled between the U.S. and China in Geneva on Saturday. The (Fed) chose to hold interest rates steady citing the potential inflationary and unemployment risks from the ongoing tariff uncertainty. European Markets also recovered from political uncertainty, due to a depreciating Euro following the Fed’s decision. 

Canadian Prime Minister Mark Carney was amiable yet tough during his visit to the U.S. white House. In Germany Friedrich Merz failed to secure the votes to succeed Olaf Sholz as the new Chancellor. Armed conflict between India and Pakistan began this week. A U.S.-U.K. trade agreement providing access to U.S. exports and tariff exemptions to select U.K. exports, was also announced. India and the U.K. also announced a bilateral Free Trade Agreement.

Global Updates
  • The MSCI All Country World Index edged slightly lower this week, weighed down by the political uncertainty in Germany and anticipation of the Fed’s rate decision. Markets were also optimistic regarding possible tariff de-escalation during the upcoming U.S.-China trade talks in Switzerland. 
  • The Bank of England (BoE) lowered its interest rates by 25 bps to 4.25%. Governor Andrew Bailey suggested that the downward trend in interest rates would continue, with the BoE vigilant for external factors affecting the economy and markets.
  • U.S. President Donald Trump and British Prime Minister Keir Starmer announced a trade agreement between the U.S. and the U.K. The bilateral deal reduced tariffs on cars, steel and aluminum among other goods and expanded market access to American beef and ethanol. The 10% tariff on most British goods will be continued. 
  • India and the U.K. concluded a Free Trade Agreement after three years of negotiations. The agreement is expected to benefit the economy, investment and job creation in both countries.
  • Shell is exploring a possible takeover bid of BP amid a fall in stock prices. Shell could alternatively also opt for share buybacks.
  • The People’s Bank of China has announced a rate cut of 10 bps to 1.4% for its Reverse Repo Ratio with downstream impact on the LPR. The bank aims to release CNY 1 trillion liquidity in the financial system through a 50 bps cut in the reserve requirement ratio for all Chinese banks.
  • China’s current account surplus widened to $165.6 billion in the first quarter of 2025 driven by a 9.4% jump in exports coupled with a 6.6% decline in imports. 
  • Oil prices fell sharply after OPEC+ announced an increase of 411,000 barrels in oil production from June. The production hike is designed to penalize countries not adhering to the production quotas decided by OPEC+. Crude oil subsequently recovered buoyed by the hope of U.S.-China trade talks and the news of U.S. oil supply cuts.
U.S. Equity
  • The S&P 500, Dow Jones and Nasdaq indices recovered this week due to announcement of de-escalation talks between U.S. Treasury Secretary Scott Bessent and China’s Vice Premier He Lifeng. The markets were initially subdued early in the week as the markets looked to the policy stance the U.S. fed would adopt. The Fed’s cautious optimism and the U.S. and U.K. trade deal also contributed to the market’s optimism.
  • The U.S. Fed’s Federal Open Market Committee (FOMC) held the policy rates steady citing the prevailing uncertainty, as the markets expected. The committee adopted a cautious stance, due to unemployment and inflation risks, awaiting further developments in the tariff negotiations between the U.S. and other countries. The FOMC attributed the economic contraction in the first quarter to higher imports, even as the U.S. economy continued to expand. 
  • The U.S. added a higher than expected 177,000 jobs in April, driven by transportation and warehousing jobs despite tariff uncertainty. Job gains in February and March were also revised down by 58,000 jobs. 
  • Alphabet stock price fell on the fears of its Google search engine being replaced by  AI based search engines.
  • Berkshire Hathaway’s board selected Greg Abel to succeed Warren Buffett as the CEO of the company. Buffett will be continuing as the chairman of Berkshire.
  • Enphase energy stock price rose following the release of its plug and play solar energy system in Germany. 
  • Palantir’s stock fell despite raising its fully year outlook driven by demand for AI and a 39% jump in its quarterly revenue. Palantir’s first quarter’s adjusted earning per share (EPS) of 13 cents was in line with estimates despite a higher than expected revenue of $884 million.
  • The FDA has appointed Dr. Vinay Prasad as the top vaccine regulator. Vinay is a well-known critic of the U.S. strategy to handle the covid pandemic. The move has negatively impacted most pharmaceutical stocks. 
  • Nuclear energy company Constellation Energy posted 10% growth in its first quarter operating revenue to $6.79 billion due to AI driven energy demand, despite which its adjusted EPS of $2.14 was below expectations. 
  • Ford reported a higher than expected adjusted EPS of 14 cents on a revenue of $40.7 billion for the first quarter. The company suspended its full year outlook citing the ongoing tariff uncertainty.
Fixed Income
  • The Bloomberg U.S. Aggregate Bond Index edged lower this week.
  • The U.S. 10-year Treasury yield was slightly higher at 4.369% and the yield on the 2-year note edged up to 3.874% over the week. 
  • The U.S. Dollar Index appreciated to 100.78 this week. The U.S. Fed’s interest rate decision and cautious optimism strengthened the U.S. dollar against the Euro and the Yen.

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