Market overview
The monthly US jobs report was the standout data point last week, providing some positive news on the world’s largest economy. Employers added 177,000 jobs in April, down slightly from March but well ahead of estimates for 135,000. The unemployment rate remained stable, while average hourly earnings rose by a modest 0.2% from the prior month.
On Tuesday, the Bureau of Labor Statistics (BLS) reported that job openings fell to 7.2m in March, down from February’s 7.5m and the lowest reading since September. On Wednesday, payroll processing firm ADP reported that private payrolls increased by only 62,000 in April, a sharp decline from March’s downwardly revised 147,000. Although these two mixed figures should be considered they are seen by most investors as secondary in terms of importance compared to the monthly jobs data.
Elsewhere, the Bureau of Economic Analysis (BEA) released its advance estimate of first-quarter economic activity, indicating that the US economy contracted at an annual rate of 0.3% in the first quarter, the first negative reading since 2022. The BEA attributed the contraction to “an upturn in imports, a deceleration in consumer spending, and a downturn in government spending.” There are two key points to be made here, firstly that the drop is due to the huge surge in imports as businesses attempted to front run trade tariffs. Imports are taken away from the GDP figure due to them not being produced in the country and to avoid counting them twice in the consumption and investment categories.
The second important aspect is that this data is inherently backward looking, referring entirely to a period before the trade tariff announcements, which according to some reports will knock US confidence due to them being more stringent than expected. Therefore, it serves as more of a pre-tariff summary of the strength of the US economy. This reveals that the economy was largely in rude health before the tariff shock, which is pleasing although may be not that important given the scale of the surprise.
The BEA also reported that its Personal Consumption Expenditures (PCE) Price Index — the Federal Reserve’s preferred measure of inflation — was flat month over month in March, while consumer spending rose 0.7%. This suggests that the economy was in a relatively good place to close out the first quarter, with cooling inflation and resilient consumer spending.
Ongoing optimism around de-escalating trade tensions drove positive sentiment early on last week. President Donald Trump rolled back some of his initial tariffs on cars and auto parts, and US Commerce Secretary Howard Lutnick announced that a major trade deal was nearing completion.
As the week progressed, attention shifted to earnings reports. Companies representing nearly 40% of the US large-cap market reported first-quarter results, including four of the Magnificent Seven. Despite tariff-fuelled disruptions, sentiment remained generally positive as investors seemed confident that businesses would weather the challenge.
Weekly economic announcements:
Last week, the MSCI All Country World Index (MSCI ACWI) rose 3.0% (1.0% in April, 1.6% YTD), a decent return despite ongoing US tariff concerns.
United States
US large cap rose by 2.9%, marking a second consecutive week of gains and closing Friday with its ninth straight session in positive territory. US growth Index of stocks outperformed value on the week and for April as a whole.
Tech-heavy benchmarks jumped 3.4%, supported by better-than-expected earnings reports from several large-cap tech companies including Microsoft, Meta, and Amazon.
The United Kingdom
In the UK, the Nationwide Building Society’s house price index fell by 0.6% sequentially, as demand from first-time buyers dropped following the end of a tax discount on home purchases.
Business sentiment also deteriorated in April, according to Lloyds Bank. Concerns about the impact of US tariffs and higher employment costs led to a decline in its widely followed business barometer — a measure of confidence among companies — which fell by 10 points to 39%.
Despite the challenges, the UK stock market showed impressive resilience. UK large cap added 2.2% for the week, up 6.7% year-to-date. Midcaps rallied 3.3% for the week and a 2.7% gain in April, and the British pound remained stable against the US dollar, closing the week at US$1.33.
Europe (excluding the United Kingdom)
Economic growth in the eurozone picked up pace in the first quarter, accelerating to 0.4% from 0.2% in the previous three months. This exceeded the consensus estimate polled by FactSet, who had predicted a 0.2% expansion in GDP. Spain’s economy grew by 0.6% and Italy by 0.3%, both surpassing forecasts. Germany and France also returned to growth, registering small increases.
In the markets, the MSCI Europe ex UK Index ended the week 3.4% higher, bringing its year-to-date gain to 7.9%. Germany’s large caps surged 3.8% (1.5% in April, 16.0% YTD), France’s rallied 3.1% (-2.0% in April, 6.1% YTD), and Italy’s index climbed 2.6% (-0.3% in April, 13.6% YTD). The euro weakened against the US dollar, closing the week at US$1.13.
Approver: Quilter Cheviot, 9 May 2025
Author
