KUWAIT: Global markets showed resilience in early May, supported by robust economic data despite lingering tariff uncertainties. In the US, stocks rallied with the S&P 500, Dow Jones, and Nasdaq all climbing over 1 percent, supported by stronger than expected job creation of 177,000 in April, and steady unemployment at 4.2 percent.

Meanwhile, China’s Commerce Ministry signals signs of openness to engage in trade negotiations with the US, marking a potential shift in ongoing tariffs disputes. The Bank of Japan maintained its interest rate at 0.5 percent, revising down its growth forecasts amid tariff-driven uncertainties, but continued signaling future rate hikes. In the Euro area, inflation remained stable at 2.2 percent with strength in services offsetting declines in energy prices. Australia’s trimmed mean inflation notably returned within the RBA’s target range, spurring expectations of an imminent interest rate cut.

US labor demand slips

US job openings dropped by 288,000 to 7.192 million, in March 2025, the lowest in six months and below expectations of 7.49 million. The decline was broad-based, led by transportation, food services, construction, and federal government. However, openings rose in sectors like finance, education, and manufacturing. Regionally, the Midwest saw gains, while the Northeast, South, and West declined. Hiring remained steady at 5.4 million, with total separations at 5.1 million. Quits held at 3.3 million, and layoffs slightly decreased to 1.6 million.

Core inflation edges up

US Inflation moderated in March, with the PCE index rising 2.3 percent year-over-year slightly above the 2.2 percent forecast. Core PCE, the Fed’s preferred gauge that excludes food and energy, came in at 2.6 percent, its lowest reading since March 2021 but still above the Fed’s 2 percent target. On a monthly basis, both headline and core PCE rose by less than 0.1 percent, aligning with expectations. However, President Trump’s tariffs are expected to push inflation higher in the coming months. Goldman Sachs predicts core PCE could reach 3.5 percent by August, which would be the highest level since September 2024.

Q1 GDP growth slows

US economic growth slowed significantly in Q1 2025, with GDP contracting at an annualized rate of 0.3 percent, down from 2.4 percent growth in Q4 2024, according to the Commerce Department’s initial estimate. This marks the weakest quarterly performance since early 2022. The decline was largely driven by businesses rushing to import goods ahead of President Trump’s sweeping tariffs, which were announced in April but prompted early stockpiling. Economists caution that the data may be distorted by this import surge, which can make growth appear weaker by skewing trade and consumption figures.

The US labor market showed resilience in April 2025, adding 177,000 nonfarm payrolls, surpassing economists forecasts of 138,000. The unemployment rate remained steady at 4.2 percent. While average hourly earnings increased modestly by 0.2 percent month-over-month, slightly below expectations. Significant job gains occurred in healthcare (51,000), transportation and warehousing (29,000), and leisure and hospitality sectors (24,000).

Federal government employment slightly declined at 9,000, whereas overall government jobs, including state and local hiring, rose by 10,000. Despite the ongoing uncertainty triggered by President Trump’s recent tariff announcements, the labor market has not shown substantial signs of distress. Analysts noted that the April data largely reflects conditions before tariff-related disruptions, emphasizing that immediate impacts on employment from the trade tensions might not yet be fully evident. Markets reacted positively, indicating confidence that severe economic downturn scenarios due to tariffs could potentially be avoided. The US Dollar Index closed the week at 100.03.

Tariff concerns in Canada

Investor uncertainty remains over Canada’s federal election results and ongoing concerns surrounding US tariffs. Early predictions indicated that Prime Minister Mark Carney’s Liberal Party could retain control but would likely fall short of a majority in the 343-seat House of Commons. The former Bank of Canada Governor’s attempt to strengthen Canada’s stance against US tariffs faced significant opposition from Conservatives, increasing the possibility of a minority government that could struggle to maintain policy stability. The USD/CAD currency pair closed the week at 1.3819.

Eurozone inflation holds at 2.2%

Annual inflation in the euro area remained stable at 2.2 percent in April 2025, unchanged from March. The main drivers of inflation were led by the services sector, which recorded the highest increase at 3.9 percent, slightly up from March’s 3.5 percent. Food, alcohol, and tobacco also saw an increase, reaching 3.0 percent, compared to 2.9 percent previously. Non-energy industrial goods inflation remained stable at 0.6 percent, while energy prices saw a significant decrease of -3.5 percent, down from -1.0 percent in March. The data indicates continued price pressures, particularly from services and food sectors, offset by declining energy costs. The EUR/USD currency pair closed the week at 1.1295.

BoJ holds rate steady at 0.5%

The Bank of Japan held its key interest rate steady at 0.5 percent following unanimous agreement, aligning with market expectations. In its latest quarterly outlook, the BOJ significantly lowered its economic growth forecast due to increased uncertainty stemming from ongoing US tariff disputes and their negative impact on exports. BoJ Governor Kazuo Ueda stated the expected timeframe for achieving the bank’s 2 percent inflation target has been postponed by approximately one year, now anticipated in the second half of fiscal 2026 or later.

Despite this setback, the BoJ remains committed to potential future rate hikes, supported by expected wage growth and higher inflation. Governor Ueda highlighted persistent global trade tensions as a major source of economic uncertainty, cautioning that this could continue suppressing corporate investment and household spending in the short term. The USD/JPY currency pair closed the week at 144.93.

Australia’s headline inflation rate remained steady at 2.4 percent in the March quarter, However, the Reserve Bank of Australia’s preferred measure (trimmed mean inflation) fell to 2.9 percent, returning within the RBA’s 2-3 percent target range for the first time in over three years. Economists had anticipated headline inflation slightly lower at 2.3 percent, with the trimmed mean expected at 2.8 percent. Quarterly data indicated headline inflation rose by 0.9 percent in March, following two consecutive quarters with more modest increases of 0.2 percent. Markets have reacted by pricing in a certain 25-bps interest rate cut at the upcoming RBA meeting on May 20. The AUD/USD currency pair closed the week at 0.6442.

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USD/KWD closed last week at 0.30665.