The Davy Digest - 22nd April 2025

During a quieter week for tariff news, markets remained calmer than previous weeks, with the VIX measure of market volatility dropping to 30 for the first time since ‘Liberation Day’ on April 2^nd. Retail sales were up by 1.4% in March which was greater than anticipated, largely due to consumers making pre-emptive purchases before tariffs were implemented. Eurozone inflation fell to 2.2% while industrial production rose 1.1%, higher than expected.

On Thursday, the European Central Bank cut rates by 0.25% as expected, to lower its benchmark deposit rate down from 2.5% to 2.25%. The ECB outlined that increased uncertainty is likely to reduce confidence among households and firms, and the adverse and volatile market response to the trade tensions is likely to have a tightening impact on financing conditions. Meanwhile, in the UK, unemployment remained stable in February at 4.4% while the Consumer Price Index came in below forecasts at 2.6%. In China, policymakers are expected to ramp up stimulus measures as tariffs stall Chinese exports. GDP in China rose 5.4% in Q1, a bigger increase than expected and retail sales rose 5.9%, as stimulus measures started to come through.

Last week's highlights

	Retail Sales (16/04) - Up to 1.4% in March, greater than expected, due to pre-emptive buying ahead of tariffs.  Industrial Production (16/04) - Fell slightly more than expected.
	Eurozone industrial Production (15/04) - Rose 1.1% MoM in February vs. 0.2% expected. Eurozone Inflation (16/04) - Fell to 2.2% from 2.3% in February. ECB Meeting (17/04) - Cut rates by 0.25% to 2.25%, as expected.
	Unemployment Rate (15/04) - Stable at 4.4% in February. Consumer Price Index (16/04) - Dipped to 2.6% in March vs. 2.7% forecast.
	China Q1 GDP (16/04) - 5.4% vs 5.1% forecast, policymakers expected to ramp up stimulus as tariffs take hold. China Industrial Production (16/04) - Jumped 7.7% year-on-year in March, the strongest growth since June 2021. China Retail Sales (16/04) - Rose 5.9% as stimulus measures start to come through.

This week, investors will receive figures for US, European, and UK manufacturing and services PMIs. The Federal Reserve’s Beige Book report will be released on Wednesday, which will provide insights into current economic conditions in the US. The UK will see retail sales come out on Friday. The People’s Bank of China met yesterday and decided to keep key lending rates unchanged as strong macro data allows its central bank to focus on stabilising the yuan. Tokyo inflation will also be released on Thursday.

What's on the radar

	S&P Global Manufacturing & Services PMI (23/04). Fed's Beige Book Update (23/04)
	Manufacturing & Services PMIs (23/04)
	S&P Global Manufacturing & Services PMIs (23/04) BOE Governor Bailey Speech (23/04) UK Retail Sales (25/04)
	People's Bank of China Meeting (21/04) Tokyo CPI (24/04)

Chart of the moment

Crude tariffs impacting oil prices

Source: Bloomberg as of 16^th April 2025

• Oil prices have dropped this year as economic policy uncertainty has caused growth concerns for the world's largest economies, leading to expectations of lower oil demand globally.
• Trump's 'Liberation Day' announcement of tariffs was followed by an unexpected move by the OPEC+ coalition* to boost oil output, adding to the downward pressure on oil prices.
• The Trump administration has welcomed the slide in oil prices, having promised to bring costs down for US consumers. 
• At some point, oil prices could become too low for some of the higher cost procedures in the US, getting in the way of Trump's pledge to boost domestic production. 

* Note: OPEC+ is a group of oil-producing countries that work together to control the supply and price of oil globally.