The Davy Digest - 14th April 2025

It was another week of turbulence in global markets as tariff uncertainty continued to dominate headlines. US equities finished the week higher, despite experiencing unprecedented intra-day swings early in the week. As trade tensions with China escalated, news about tariff pauses and exclusions on Wednesday finally offered investors some respite.

On Thursday, US inflation data came in softer than expected, which a month ago could have allowed the Federal Reserve to ease interest rates further. However, sentiment continued to deteriorate amongst Americans, with the University of Michigan Consumer Sentiment survey coming in below consensus on Friday. Elsewhere, European equities finished the week lower as the European Union considered retaliatory tariff measures on the US.

Last week's highlights

	US Inflation (CPI) (10/04) - Decreased to 2.4% YoY (vs 2.5% expected) University of Michigan Consumer Sentiment (11/04) - Decreased to 50.8 (vs 53.8 expected).
	Eurozone Retail Sales (07/04) - Increased to 2.3% YoY during February (vs. 1.8% expected).
	Bank of England's Lombardelli & Breeden speak.
	China Inflation (CPI) (10/04) - Decreased 0.1% YoY, below expectations.

This week, Retail Sales and Industrial Production will provide an update on the underlying health of the US economy. In Europe, the headline event is Thursday’s European Central Bank meeting, which should offer clarity around Europe’s tariff response. Inflation data for the Eurozone will also be released. In the UK, March inflation data will be issued during the week, as well as labour data covering the three months up to February. Finally, in China, Q1 Gross Domestic Product will be out on Wednesday and is expected to remain above their 5% growth target.

What's on the radar

	Retail Sales (16/04)  Industrial Production (16/04)
	Eurozone Industrial Production (15/04) Eurozone Inflation (16/04) ECB Meeting (17/04)
	Unemployment Rate (15/04) Consumer Price Index (16/04)
	China Q1 GDP (16/04) China Industrial Production (16/04) China Retail Sales (16/04)

Chart of the moment

When the bond market speaks, politicians listen

Source: Davy, as of 14/04/2025. US Bond yields denoted by the 10-year Treasury. The US Dollar Index measures the value of the US dollar relative to a trade-weighted basket of foreign currencies.

• US bonds are usually a safe haven during stress periods, as elevated demand drives down yields.
• Last week, the bond market questioned the full faith and credit of the American government. With the US required to raise $10 trillion of bonds in 2025, this is not welcome.
• The US Dollar had a significant sell-off also, as investors rotated away from US bonds and other assets, and confidence ebbed in the dollar’s standing as the world’s reserve currency.
• Ultimately, the move in bond yields pressured Trump to rethink his blanket tariffs!