Issue #9 - From Trade Triumphs to Tech Transformations

What’s in this issue;

Today’s newsletter is packed with market insights and pivotal global developments. This week, we delve into the Federal Reserve's steady interest rate policy amid stagflation concerns and assess the impact of a new U.S.-UK trade deal on market sentiments.

We explore sector rotations with a shift from big tech to healthcare, financials, and international markets, alongside notable volatility in oil prices.

Key economic indicators, including U.S. CPI data and UK unemployment rates, are spotlighted for their potential market influence.

Additionally, we cover major corporate earnings, U.S.-China trade talks, and emerging stories like Fiverr’s growth amidst AI challenges and Apple’s potential search engine shift.

Plus, get the latest on international affairs, U.S. politics, and unique global events.

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What is Moving the Markets This Week

Wall Street ended the week slightly lower as investors weighed a somewhat hawkish stance from the Federal Reserve against renewed optimism on trade.

The Fed kept its benchmark interest rate steady at 4.25% to 4.5%, citing increased risks of both higher unemployment and inflation-a combination known as stagflation-while signaling it would wait for more clarity on the economic impact of recent tariffs before making further moves.

Fed Chair Jerome Powell acknowledged heightened uncertainty and persistent inflation above the central bank’s 2% target, but noted that the labor market remains solid.

Markets are now anticipating that rates will likely remain unchanged until at least June, with a possible cut later in the year.

Meanwhile, positive sentiment emerged after President Trump announced a breakthrough trade agreement with the United Kingdom, which will provide billions of dollars in new market access for U.S. products and reduce or eliminate certain tariffs and non-tariff barriers.

The deal, described as a significant step toward boosting bilateral trade and economic security, includes provisions for expanded U.S. exports, particularly in agriculture and manufacturing, and sets the stage for further negotiations on a comprehensive post-Brexit free trade agreement.

Despite these developments, major U.S. stock indices posted modest declines for the week, with the S&P 500 down 0.5%, the Nasdaq Composite off 0.3%, and the Dow Jones Industrial Average falling 0.2%.

Trade Developments and Tariff Talks

Markets have been highly sensitive to trade headlines. This week, optimism grew as the U.S. and U.K. announced a new trade deal, and U.S. officials prepared for negotiations with China in Switzerland.

Hopes for tariff de-escalation lifted investor sentiment, though the economic impact of the U.K. deal is limited. Any progress with China is seen as a potential catalyst for further market gains.

Federal Reserve Policy and Economic Outlook

The Federal Reserve kept interest rates steady, citing increased uncertainty regarding the economic outlook. Policymakers flagged rising risks of both higher inflation and unemployment, and indicated a “wait and see” approach to future policy changes. This cautious stance has contributed to market volatility as investors assess the Fed’s next moves.

Sector Rotation and Market Leadership

There is an ongoing rotation away from big tech stocks, which have underperformed after leading the market in previous years. Investors are shifting toward sectors like healthcare, financials, and basic materials, as well as international markets. Defensive sectors such as consumer staples and utilities have also outperformed amid the recent volatility.

Oil Price Volatility

Oil prices experienced significant swings, dropping early in the week before rebounding. Despite the late-week rally, prices remain well below recent highs, reflecting ongoing uncertainty about global demand and the impact of shifting tariff policies.

Upcoming Economic Data

Looking ahead, markets are focused on key economic releases, including U.S. CPI inflation data and consumer sentiment readings, which could influence expectations for Fed policy and market direction in the coming weeks.

Top Economic News

UK Economy Shows Mixed Signals: Growth Beats Forecasts, But Headwinds Remain

UK GDP grew by 0.5% in February, outperforming expectations, and retail sales rose in March. However, business surveys point to a recent slowdown, with rising insolvencies and concerns over higher payroll taxes and global trade tensions clouding the outlook.

Inflation dipped to 2.6% in March but is expected to rise again due to energy and tax hikes.

Looking Forward: What We Anticipate Next Week

1. U.S.-China Trade Talks

High-level negotiations between U.S. and Chinese officials are underway in Switzerland, aiming to de-escalate the ongoing trade war that has seen tariffs as high as 145% on Chinese goods and 125% on American exports.

While a breakthrough is unlikely, there is cautious optimism that both sides could agree to reduce tariffs, which would ease pressure on global markets and businesses.

Reports indicate a deal has been reached to help resolve the trade war, though details are still emerging.

2. Economic Calendar Highlights

Tuesday:

UK Unemployment Rate (forecast: 4.4%): A higher rate could push the Bank of England to lower interest rates, weakening the pound.

U.S. Monthly Inflation Rate (forecast: +0.3%): Higher inflation would likely keep the Fed on hold, while lower inflation could revive rate cut hopes.

Wednesday:

U.S. Retail Sales (forecast: -0.8%): Weak sales would signal consumer caution and growth concerns.

Thursday:

Australia Home Loans (forecast: -1.2%): Falling volumes suggest a cooling property market.

Friday:

Japan GDP Growth (forecast: 0.1%): A slowdown would add pressure on the Bank of Japan to maintain loose policy.

3. Federal Reserve and Jerome Powell

Fed Chair Jerome Powell will deliver a closely watched speech in Washington, D.C. The Fed recently kept rates unchanged, citing increased risks of both higher inflation and higher unemployment. Powell emphasised that policy will remain responsive to economic developments, with a particular focus on the impact of trade tensions.

4. Earnings Season

Hundreds of companies are reporting, including major names like Cisco, Walmart, Alibaba, JD.com, Sony, and Deere. 13F filings from major funds will also be in focus, revealing changes in big investors’ portfolios.

What to Watch

• Progress or setbacks in U.S.-China trade talks could drive global markets.

• Inflation and retail sales data in the U.S. will shape expectations for Fed policy.

• Powell’s remarks may clarify the Fed’s stance amid stagflation risks.

• Major earnings reports and fund disclosures will influence sector and stock moves.

Markets are poised for volatility as investors digest trade headlines, central bank signals, and a flood of corporate results.

Things I’m Paying Attention To

Fiverr Raises Forecast After Strong Q1, Despite AI-Driven Customer Decline

- Fiverr reported a strong start to 2025, posting a $25 million profit and 15% revenue growth in Q1, driven by new large-scale contracts in content writing, app development, video production, and digital marketing.

- Despite a continued decline in active buyers (down to 3.5 million from 4 million a year earlier), Fiverr raised its annual revenue forecast, attributing buyer churn to the rise of AI tools automating services traditionally offered on its platform.

- In response to AI competition, Fiverr launched its own AI-powered tools in February to help freelancers close contracts more efficiently, with over 6,000 sellers and 200,000 buyers already using these features.

Apple Eyes AI-Powered Search for Safari, Challenging Google’s Dominance

- Apple is exploring the integration of AI-driven search options, such as OpenAI and Perplexity, into its Safari browser, potentially ending Google’s lucrative default search status.

- The move comes as U.S. regulators scrutinise Google’s $20 billion annual payment to Apple for default search placement, and as Apple notes a decline in Safari search activity amid rising user interest in AI technologies.

- Google’s parent company, Alphabet, saw its shares drop by 7.3% (wiping out $150 billion in market value) following the news, highlighting the potential threat to Google’s dominant search ad business.

- Industry analysts warn that losing exclusivity on Apple devices could have serious consequences for Google, as advertisers may shift budgets to alternative AI-powered search platforms if they become viable competitors.

What Else is Happening (Headlines)

International Affairs

- India and Pakistan have agreed to a U.S.-brokered ceasefire in Kashmir, though both sides accuse each other of violations. For now, the truce appears to be holding.

- In Ukraine, the U.S. and European allies are demanding a 30-day ceasefire starting Monday, threatening increased sanctions and military support if Russia refuses. Putin has offered direct talks with Ukraine in Istanbul, but dismissed the proposed ceasefire window. Ukraine says it is ready to negotiate.

- Pope Leo XIV delivered his first Sunday blessing as pontiff, calling for world peace.

U.S. Politics and Policy

- Trump will reportedly accept a luxury jet from Qatar to be retrofitted as Air Force One for his second term.

- The Pentagon has ordered military academies to review and potentially remove books on race, gender, and “divisive concepts” from their libraries.

- Newark Mayor Ras Baraka was arrested during protests at a federal immigration detention centre.

Domestic and Social Issues

- Transportation Secretary Sean Duffy addressed flight safety concerns after a brief communication lapse in Newark.

- Junior Alvarado, the jockey who won the Kentucky Derby on Sovereignty, was suspended and fined for excessive use of the riding crop.

- New Orleans Saints quarterback Derek Carr announced his retirement after 11 NFL seasons.

Europe

- Estonia’s Narva Museum is displaying a controversial Putin-Hitler banner.

- Anti-immigration protests are taking place in Poland ahead of elections.

- Germany reports a woman is cancer-free after a pioneering double-lung transplant.

Weather and Other Stories

- Unseasonal hailstorms have hit the southern U.S., surprising residents with large hail in May.

- The Colorado Rockies baseball team is experiencing a historically bad start to their season, losing 21-0 in their latest game.

Interesting Stories

- Spain’s first transgender soccer team has debuted in a regional men’s league.

- Judo Grand Slam in Astana saw four nations win gold medals on day two.

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