The biggest news last week concerned a development in trade negotiations between the EU and the US. At the meeting between President Donald Trump and European Commission President Ursula von der Leyen last week, President Trump agreed to delay increasing tariffs until July 9th, extending the timeline for ongoing trade negotiations.
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US Equity Market:
Revised official statistics for US GDP confirmed that the US economy contracted by an annualised 0.2% in the first quarter, a marginal change on the preliminary 0.3% contraction figure reported last month. As was the case before, this figure was distorted by a surge in imports driven by global trade concerns.
Nvidia, the world’s largest chipmaker, had a strong start to 2025. Nvidia reported revenue 70% higher than the same period last year and came in above analyst expectations. Following the announcement, Nvidia shares rose 6% in early trading last Thursday.
Overall, US stock markets had a positive week. The S&P 500 closed 2.1% higher last Tuesday after President Trump’s positive comments on the progress of the EU-US trade deal but fell marginally by last week’s close. The S&P 500 and NASDAQ closed the week to Friday up 1.9% and 2.0% respectively.
UK Equity Market:
In line with the Government’s bid to increase UK investment, Chancellor Rachel Reeves announced that the Government has plans to create a “backstop” power that would force large UK pension funds to invest in British private assets as part of the upcoming Pension Schemes Bill. This is an important development in UK investment as it is the first time that such a rule is written into legislation.
Following the announcement of the trade deal with the US on May 8th, the UK government is now working to speed up the deal’s implementation. They are doing this to ensure that UK industries are not affected by tariffs.
The FTSE 100 rose by 0.7% over the week to Friday’s close, and sterling has appreciated against the dollar, now trading at 1.35.
Inflation, Interest Rates and Bond Markets:
Since 4th April, yields on 30-year US Treasury bonds have risen by over 50 basis points, and even climbed above the 5% mark recently. Japan has seen particularly sharp movements in its bond market, with yields on 30-year government bonds increasing by over 70 basis points since the 7th April.
In the UK, bond markets were also under pressure last week. Jessica Pulay, the UK’s head of debt issuance, has signalled a shift toward issuing more short-term debt, due to worryingly high borrowing costs on longer-term debt.
The sharp rise in bond yields across major economies, particularly in long-term debt, indicates growing investor concern about high levels of government borrowing and spending in economies that appear to be slowing down.
What’s on the horizon:
On Wednesday, the Bank of Canada is set to announce its latest interest rate decision, followed by the European Central Bank on Thursday. Investors will be watching both the decisions and the statements closely, hoping that they provide further insight into the monetary policy stance of the two economies.
Eurozone first-quarter Gross Domestic Product (GDP) figures will be released on Friday, offering a clearer picture of the region’s economic performance amid ongoing inflationary pressures and geopolitical uncertainty.