US stocks rallied last week after the US and China agreed to suspend most tariffs for 90 days, easing trade tensions. The Nasdaq jumped 7.15%, while the S&P 500 rose 5.27% and the Dow gained 3.41%. Sentiment improved further with April inflation data showing signs of cooling—CPI rose 2.3% y/y, below expectations. However, retail sales slowed to just 0.1% in April, and consumer sentiment dropped for the 5th month in a row, with rising concerns over trade policy and inflation expectations increasing to 7.3%. In fixed income, Treasury yields rose, resulting in negative returns, with further gains early on Monday. Moody’s downgrade of the US credit rating over rising debt and deficits, could potentially lead to higher Treasury yields and borrowing costs. Markets have shown limited immediate reaction, but the shift may prompt increased investor scrutiny and focus on fiscal challenges.
European stocks rose as US-China trade tensions eased, with the STOXX Europe 600 up 2.1% and gains across major markets. The UK economy grew 0.7% in Q1, its fastest in a year, driven by services, investment, and exports, though the labor market softened slightly with higher unemployment and slower wage growth. Bank of England officials remained cautious on rate cuts, warning inflation may stay elevated. In the eurozone, March industrial production jumped 2.6%, led by Germany’s 3.1% surge. The region’s trade surplus hit a record EUR 36.8 billion, fueled by exports to the US.
