17 Apr 2025
US Fed in wait and see mode
Markets
- Local and global stocks were flat to weaker this week with investors still focused on tariff outcomes.
- US government bond yields fell this week (prices higher) with concerns rising regarding the US economic outlook in addition to some comments from the Fed chair.
- In local stock news, Collins Foods shares fell after the company announced plans to sell its struggling Taco Bell business in favour of a German expansion of its KFC stores, whilst flagging a potential $32.7 million impairment from its Netherlands businesses.
- Star Entertainment suffered a $136 million loss, according to delayed first-half results that showed a 25% drop in revenue.
- Mineral Resources saw two resignations from their board with immediate effect. One joined in January last year whilst the other has been with the business since January 2021.
- Buy-now, pay-later Zip Co’s shares surged after the company more than tripled its third quarter earnings.
- The International Energy Agency projected the weakest global oil demand in half a decade.
Economics
- Australian employment increased by 32,200 in March, below expectations, following a drop of 52,800 in the previous month. The March increase saw unemployment hold at 4.1%.
- US central bank chair Jerome Powell said they’re prioritising keeping long term inflation expectations anchored over satisfying their employment mandate. He clarified price stability is a prerequisite to achieving the employment mandate. Wait and see approach likely for now.
- US retail sales surged 1.4% in March, coming in ahead of forecasts. The result was the largest increase since January 2023, marked by a 5.3% increase in auto and parts sales as consumers rushed to pre-order before tariffs kick in. Excluding autos, retail sales rose 0.5%.
- A key US manufacturing index rose in April from March, remaining in negative territory but coming in well ahead of expectations. However, general business conditions fell to its second lowest reading on record.
- US producer prices fell by 0.4% in March, coming in ahead of expectations, with the annual growth rate falling from 3.2% to 2.7%.
- A key US consumer sentiment survey slumped in April, coming in below already weak expectations. In the same survey, consumer inflation expectations rocketed higher.
- The New York Federal Reserve’s measure of US consumer inflation expected for the year ahead rose for the second straight month from 3.1% to 3.6% in March, the highest level since October 2023.
- UK consumer spending rose in March against rising household bills.
- British inflation slowed to its weakest in three months in March, but expectations are that higher bills and employer costs will pressure prices soon.
- China’s exports rebounded 12.4% in US dollar terms in March, ahead of massive tariff hikes imposed against it by the US. This was well above consensus.
- China’s economy expanded by a better than expected 5.4% pace in the March quarter, possibly suggesting stimulus measures are beginning to work. Production and consumption showed unexpected momentum last month, but this came before US tariffs kicked in.
Politics
- China raised tariffs on US imports from 84% to 125% effective April 12. US President Trump exempted many popular consumer electronics from his 125% tariff on goods made in China but then clarified this a temporary measure. Beijing reacted by halting the exports of its rare earths to the US.
- The European Union trade chief was in Washington to meet with the US Commerce Secretary and trade representatives. However subsequent reports indicated there had been little progress made on bridging trade differences.
- The Trump administration is reportedly preparing to pressure nations to curb trade with China as they negotiate with the US over tariffs. Trying to make sure China doesn’t find ways around US tariffs.
- The US and Iran are expected to hold their second round of nuclear talks on Saturday in Rome, according to reports.
- US Treasury Secretary Scott Bessent played down the recent selloff in the bond market, rejecting speculation that foreign nations were dumping their holdings of US treasuries. He also flagged his department has tools to address dislocation if needed.
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