Global Markets Overview
Global equities retreated last week after a strong run, as investor impatience grew over delays in US trade negotiations.
US-UK Trade Deal
Markets opened nervously following reports that President Trump may personally dictate tariff levels, sidelining formal negotiations. Midweek, a limited US-UK trade deal was announced, hinting at a potential new template for future agreements:
Slight easing of beef export restrictions, though the UK retained its ban on hormone-treated meat.
UK car exports face a 10% tariff on the first 100,000 vehicles—aligned with current volumes—rather than the steeper 27.5%.
Steel and aluminium exports will avoid the 25% tariff, though coverage details remain unclear.
Rolls-Royce engines and aircraft parts are exempt from tariffs.
No progress was made on pharmaceuticals or digital services; the UK will continue applying its 2% digital services tax on US tech firms.
Most other UK exports will now face the minimum 10% tariff imposed by the US in April. The narrow scope of this deal suggests that future US trade policy may lean toward a default 10% tariff on imports, with selective sector or country exemptions—implying a more complex and protectionist trade environment.
Other Global Developments
Markets welcomed signs of progress in US-China trade talks.
As expected, the Federal Reserve held rates steady and tempered expectations for imminent cuts. The probability of a June cut has dropped from 30% to 12%, and July from 60% to under 50%.
In Europe, German Chancellor Friedrich Merz’s tougher-than-expected parliamentary approval signals possible hurdles for reform and stimulus efforts.
Week Ahead: Key Global Events
Markets await any US-China trade deal details, particularly the extent of tariff rollbacks. A limited reduction could disappoint.
US CPI data is due, with core inflation expected at 2.4%. However, markets may discount this, anticipating temporary inflation from tariffs.
Updates on US retail spending, industrial production, and consumer sentiment will also be released. Weak sentiment could drag markets despite steady spending and output.
Global Market Trends
Recent equity strength has revived outperformance by growth stocks, developed markets, and US equities. These trends may reverse if broader market declines continue, with growth and US stocks likely to be hardest hit.
Australian Markets
Australian equities mirrored global caution last week.
Locally, a sharp drop in dwelling approvals dominated headlines. Still, a slow housing recovery remains intact.
Key data this week includes:
NAB and Westpac sentiment surveys
Wage Price Index
April Employment Report
With trade concerns and no RBA rate cuts yet, business conditions may stay muted. Consumer sentiment may stabilize in May after an April drop. Q1 wage growth is expected to remain modest (just above 3%), and employment is projected to rise by about 20,000 jobs, holding the unemployment rate at 4.1%.
Overall, barring a strong jobs surprise, this week’s data is unlikely to alter expectations for an RBA rate cut next week.
Enjoy your week.
Rick Maggi, Financial Advisor Perth, Westmount Financial
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Disclaimer
This document has been carefully prepared by Westmount Securities Pty Ltd (ABN 42 090 595 289, AFSL 225715) for general information purposes only. However, neither Westmount Securities Pty Ltd nor any of its affiliates guarantee the accuracy or completeness of any statements contained herein, including any forecasts. It is important to note that past performance is not a reliable indicator of future outcomes. This material does not consider the specific objectives, financial circumstances, or needs of any particular investor. Therefore, before making any investment decisions, investors should assess the relevance of this information to their individual situation and consult professional advice, taking into account their unique objectives, financial position, and needs.