Stock Markets Reacted to Tariff Deals and GDP Growth Rate

In the week gone by, global equity markets saw mixed performance amid key economic developments, most notably the U.S.-China agreement to reduce tariffs. In this blog, we’ll know in detail what happened last week (May 12, 2025 to May 16, 2025) all across the globe.

US-China Trade Deal Benefits

US-China deal boosted investor sentiment, with the S&P 500 rising for a fourth consecutive session, while bond yields cooled after five straight gains. Optimism stemmed from hopes that easing trade tensions would support U.S. economic resilience. However, challenges persist.

Fed Chair Jerome Powell cautioned that the global economy may face more volatile inflation due to frequent supply shocks, complicating central bank policy. In a surprise, U.S. producer prices fell by 0.5% in April, hinting at cooling input costs.

Yet, U.S. manufacturing output declined 0.4% in April-double the expected drop-driven largely by a slump in auto production. Annual growth in factory output stood at 1.2%, but uncertainty looms amid ongoing tariff policy shifts, which continue to weigh on a sector that contributes 10.2% to the U.S. economy.

Europe Laggard Economic Signs

European markets traded sideways, stabilizing after an initial rally on the U.S.-China news. Investors refocused on earnings and slowing regional economic indicators.

In the UK, employment weakened, wage growth softened, and the jobless rate edged up to 4.5% for the January-March period. The eurozone’s Q1 GDP growth was revised down to 0.3%, though labor market and industrial production data provided some reassurance.

Japan’s GDP Fell by 0.7%

In Asia, Japan’s economy shrank by an annualized 0.7% in Q1, its first contraction in a year and a sharper fall than expected. This reversal from Q4’s 2.4% growth reflects rising vulnerability in its export-driven sectors, particularly automobiles, amid rising U.S. protectionism.

Overall, while relief on the tariff front lifted sentiment, the broader economic landscape remains clouded by weak manufacturing data, shifting trade dynamics, and inflation uncertainty, highlighting the delicate balance policymakers must navigate.

India-US Zero Tariff Deal On the Way

Back at home, the Indian stock market experienced significant volatility, influenced by geopolitical developments and global trade optimism. However, investor sentiment improved following reports of a potential zero-tariff trade deal between India and the U.S. Despite lingering geopolitical uncertainties, foreign portfolio investors remained net buyers.

India’s merchandise trade deficit in April 2025 increased to $26.42 billion from $21.54 billion in the previous month. India’s exports rose by 9.03% to $38.49 billion, while imports increased by 19.12% year-on-year (YoY) to $64.91 billion in April 2025.

Future Outlook

India remains the fastest-growing large economy and is expected to record a 6.3% growth this fiscal year, while the global economy faces a “precarious moment,” according to the UN. Going forward, markets will continue to take direction from both domestic and global developments.

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Reference:
SMC Global Securities’ Research Team

Author: All Content is verified by SMC Global Securities.