Issue #10 - Behind the Headlines: Trade Deals and Economic Forecasts

What’s in this issue;

Crazy issue #10 already feels like last week that I announced this newsletter in the WhatsApp group.

In Issue #10 of our newsletter, we delve into the dynamic shifts shaping global markets. The U.S.-China trade truce has sparked optimism, with major indices posting significant gains. Inflation shows signs of cooling both in the U.S. and the UK, easing investor concerns.

However, global growth projections have been downgraded due to persistent trade tensions, casting a shadow over long-term economic prospects. The UK and Eurozone grapple with stubborn inflation and weak retail sales, while fluctuating egg prices highlight the broader impact of cost pressures.

Looking ahead, key economic data releases from the UK, Canada, and Japan, along with major corporate earnings, will be pivotal in influencing market sentiment. This issue also explores developments in AI, cybersecurity, and intriguing global headlines, offering readers comprehensive insights into current financial landscapes.

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What is Moving the Markets This Week

Wall Street is settling into a slower pace as summer approaches, with investors so far ignoring the traditional "sell in May and go away" strategy, as evidenced by the S&P 500's 6% gain for the month.

U.S.-China Trade Truce

- Markets surged after the U.S. and China agreed to suspend most of their recent tariffs for 90 days, significantly lowering rates while further negotiations continue. This de-escalation drove a strong rally across major U.S. indexes, with the Nasdaq up over 7% and the S&P 500 up more than 5% for the week.

Cooling Inflation

- April’s U.S. Consumer Price Index (CPI) rose 2.3% year-over-year, slightly below expectations and marking the slowest pace since early 2021. Producer prices also unexpectedly declined, signaling moderating inflation pressures and supporting investor optimism.

Technical Momentum

- Major indexes like the S&P 500 and Nasdaq broke above key technical resistance (their 200-day moving averages), fueling further gains. However, some indicators suggest markets are now overbought and could see short-term consolidation.

Global Market Sentiment

- European stocks also ended the week higher, marking their fifth consecutive week of gains, with strength in sectors like luxury goods.

Upcoming Events

- Next week’s focus will shift to inflation data from the UK, Canada, and Japan, as well as flash PMI releases. There are fewer major U.S. earnings, but several large UK companies will report results.

> “The bulk of U.S. stocks’ weekly gains came on Monday following trade negotiations between the world’s two largest economies. U.S. and Chinese negotiators agreed to sharply reduce rates for many recently introduced tariffs for 90 days while pursuing further talks that could result in a longer-term agreement.

Markets are being driven by optimism over trade, easing inflation, and strong technical momentum, though short-term consolidation is possible after sharp gains.

Top Economic News

Global Growth Forecasts Cut Amid Trade Tensions

- The IMF has sharply downgraded 2025 growth forecasts for major economies due to ongoing trade turmoil. The US forecast was cut from 2.7% to 1.8%, China’s from 4.6% to 4%, and Mexico is now expected to contract by 0.3%. While a pause in new tariffs has eased immediate recession fears, economic sentiment and business expectations remain weak, with global public debt also rising rapidly.

US Recession Fears Ease, but Growth Slows

- The threat of a US recession has receded after a recent US-China trade truce, sparking a stock market rally. However, economists now expect US GDP to grow just 1.4% in 2025-down from earlier estimates and the slowest pace in over a decade (excluding the pandemic years). Sluggish growth and higher unemployment are likely, as the economy adjusts to lingering effects of trade disputes.

UK and Eurozone Face Stubborn Inflation and Weak Retail Sales

- The UK is expected to see interest rate cuts as business confidence dips and inflation remains above target at 2.8%. April data showed falling business activity and subdued retail sales. The eurozone is also struggling with weak growth and persistent inflation, with final April inflation figures and new PMI data closely watched by markets.

Inflation Pulse (UK & US)

The Axios Markets newsletter from May 13, 2025, highlights a mixed economic picture: small business optimism in the U.S. has declined for the fourth consecutive month, with fewer firms planning investments due to the lingering negative impact of high tariffs and economic uncertainty, despite recent tariff relief measures.

Meanwhile, the U.S. dollar has rebounded after an initial drop following tariff announcements, reflecting a somewhat improved but still cautious market outlook on the economy and recession risks.

Additionally, there is a notable decrease in international job seekers interested in working in the U.S., driven by a slowing labor market and tighter immigration policies, which raises concerns for industries reliant on immigrant labor amid ongoing workforce challenges. Overall, while tariff easing has provided some relief, economic and labor market headwinds persist.

The UK Consumer Prices Index including owner occupiers’ housing costs (CPIH) inflation rate slowed to 3.4% in the 12 months to March 2025, down from 3.7% in February, while the Consumer Prices Index (CPI) fell to 2.6% from 2.8%. Monthly inflation also eased, with CPIH rising 0.3% in March compared to 0.6% a year earlier.

Key contributors to the slowdown included lower price growth in recreation and culture, motor fuels, housing and household services, and restaurants and hotels.

Owner occupiers’ housing costs, which make up about 17% of CPIH, increased by 7.2% annually, a slight decline from 7.5% in February.

Core inflation measures excluding volatile items like energy and food also eased, with core CPIH at 4.2% and core CPI at 3.4%.

Sector-specific trends highlighted a broad-based easing in inflation. Recreation and culture inflation dropped to its lowest level since October 2021 at 2.4%, driven by falling prices in games, toys, and data processing equipment.

Transport inflation slowed to 1.2%, largely due to falling motor fuel prices, with petrol and diesel prices dropping compared to a year ago. Restaurants and hotels saw inflation ease to 3.0%, the lowest since July 2021.

Conversely, clothing and footwear inflation rose to 1.1% after a period of decline, influenced by seasonal price changes and shifts in discounting patterns.

Overall, housing and household services remained the largest contributor to inflation, though its rate moderated slightly, reflecting a continued but slowing rise in owner occupiers’ housing costs.

Full breakdown

Consumer price inflation, UK: March 2025 https://www.ons.gov.uk/economy/inflationandpriceindices/bulletins/consumerpriceinflation/march2025

I’ve been doing some further digging and have been looking mainly at egg prices and have seen.

Egg Price Increases in the UK (2020–2025)

Summary of Price Changes

- In February 2020, a box of six medium free-range eggs at Morrisons cost 75p.

- By March 2025, the same box cost £1.65-a 120% increase over five years.

- Average UK egg prices rose over 40% in the past three years alone.

- In just the first two months of 2025, some egg prices surged by nearly 20%.

If you wanted to look deeper

https://www.thegrocer.co.uk/news/egg-prices-up-by-almost-20-since-start-of-year-with-more-rises-to-come/701026.article

https://www.gov.uk/government/statistics/egg-statistics

https://caliber.az/en/post/eggs-and-staples-becoming-more-expensive?utm_source=perplexity

Looking Forward: What We Anticipate Next Week

This week still brings a busy earnings calendar, featuring reports from companies like Home Depot-which may shed light on the effects of tariffs-as well as Palo Alto Networks, Medtronic, Snowflake, Intuit, and Workday.

On the economic side, the most significant data is expected to come from April's new and existing home sales, which could have a notable impact on the markets

Economic Events

Tuesday

• RBA Interest Rate Decision (Australia)

• 📊 Forecast: 3.85% (down from 4.1%)

• ➡️ Lenders are already cutting rates in anticipation of a 0.25% cut; some economists expect a 0.5% cut.

• Canada Consumer Price Index (YoY)

• 📊 Forecast: 2.5% (Previous: 2.3%)

• ➡️ Inflationary pressure remains, despite Canada suspending most retaliatory tariffs on US imports.

Wednesday

• Japan Balance of Trade

• 📊 Forecast: ¥ -200.0 billion (up from ¥ 544.1 billion)

• ➡️ Trade balance likely swung to a deficit after unusually high surpluses.

• UK Consumer Price Index (YoY)

• 📊 Forecast: 3.3% (up from 2.6%)

• ➡️ Rising prices could dampen hopes for further rate cuts.

US Existing Home Sales

• 📊 Forecast: 3.9 million (down from 4.02 million)

• ➡️ Data may reveal how ‘Trumpanomics’ is impacting the housing market.

Thursday

• Eurozone HCOB Manufacturing PMI (Flash)

• 📊 Forecast: 49.2 (up from 49)

• ➡️ A leading indicator for business sentiment amid economic uncertainty.

Notable Companies Reporting This Week

• Home Depot

• Intuit

• PDD Holdings

• TJX Companies

• Lowe’s Companies

• Palo Alto Networks

• Analog Devices

• Medtronic

• Workday

• Autodesk

• Snowflake

• Target Corporation

• Baidu

Things I’m Paying Attention To

Robotaxis are explained as interesting to me as I’m planning a fleet they are releasing in America in June (jealous). Sadly, they will be in the UK in 2027 - Link

Apple seem to be up to something with this Car Play, Play. Currently, they don’t charge for it, but this Car Play Ultra looks like they are looking to gear up for a new service. - Link

This is a game changer for AI Agents. Coinbase has made some significant strides, being included in the S&P 500, and now is releasing this new payment protocol. - Link

Portfolio Updates (Bought or Sold) – 90 Days

Been quiet on a portfolio front, but I have taken profit from all my crypto holdings, mainly because of the gains I’m experiencing there.

Any Target Updates

CrowdStrike cybersecurity is heating up. I’ve been working with big corporates, and I have been noticing the fact that Microsoft has included this platform in all their enterprise solutions.

CrowdStrike integrates with Microsoft primarily through deep kernel-level access on Windows, enabling advanced threat detection and response by monitoring core OS operations.

Additionally, CrowdStrike Falcon Platform can be integrated with Microsoft Entra ID for single sign-on (SSO), allowing centralised user access management and seamless authentication using Microsoft accounts.

This integration enhances security but also creates dependencies; for example, a faulty CrowdStrike update in July 2024 caused widespread Windows crashes due to its tight coupling with the Windows kernel, impacting millions of devices and Microsoft cloud services.

Both companies now emphasize rigorous testing, collaboration, and improved incident response to maintain stability and security in their integrated environments.

Sources in-case you wanted to look deeper

Microsoft Entra SSO integration with CrowdStrike Falcon Platform. Link

Understanding the CrowdStrike and Microsoft Incident - Res-Q-Rity Link

CrowdStrike—How Microsoft Will Protect 8.5 Million Windows Link

ICYMI

Major International Headlines

- Elections Across Europe: Voters in Poland, Romania, and Portugal are casting ballots in tightly contested elections, with the Polish and Romanian presidential races drawing particular attention due to their political stakes and tense atmospheres. Link

- Gaza Relocation Controversy: The Trump administration is facing fierce backlash from Arab nations over a reported plan to relocate up to one million Palestinians from Gaza to Libya. Both Palestinian leaders and regional governments strongly oppose the proposal, calling it a violation of international law. Link

- Escalation and Ceasefire in Kashmir: The Indian Army released new footage of Operation Sindoor, a cross-border operation targeting terror sites in Pakistan and Pakistan-Occupied Kashmir after a deadly attack in Pahalgam. The brief but intense escalation ended with a ceasefire after retaliatory strikes from both sides. Link

Other Noteworthy Stories

- Tech Sector Shifts: President Trump urged Apple CEO Tim Cook to halt iPhone manufacturing expansion in India and focus on US production. Meanwhile, Microsoft announced layoffs affecting 6,000 employees globally as part of a restructuring effort. Link

- Sports Milestone: Indian javelin star Neeraj Chopra broke the 90-meter mark at the Doha Diamond League, making history for India with a throw of 90.23 meters. Link

- Accident in New York: A Mexican Navy training ship crashed into New York City's Brooklyn Bridge, injuring at least 22 people, with three in serious condition. Link

Interesting Stories

- Ray-Ban Meta smart glasses with AI integration debut in India.

- UP launches Vistadome coach service to boost wildlife tourism.

- Brussels cracks down on illegal tourist rentals amid a housing crisis.

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