Weekly Global Market Roundup: Trade Talks, Central Banks, and Regional Tensions Shape Markets (Week Ending May 9, 2025)

The week ending May 9, 2025, presented a complex tapestry for global financial markets. Investor sentiment oscillated in response to a confluence of factors, including ongoing international trade negotiations, pivotal central bank policy decisions, and escalating geopolitical tensions in certain regions. While some markets found support in stimulus measures or positive earnings, others grappled with uncertainty and risk aversion. This report will dissect the performance and key drivers across major economic zones.

Key themes dominated the week. International trade, particularly developments between the US and UK, and the anticipation of US-China talks, remained a focal point.¹ Central banks across the globe, including the Federal Reserve, the Bank of England, the People’s Bank of China, and the Bank of Japan, made significant pronouncements or took actions that influenced their respective markets.³ Furthermore, a significant geopolitical flare-up between India and Pakistan cast a long shadow over South Asian markets.⁷

The market’s reaction to events like the US-UK trade deal announcement indicated a growing discernment among investors. A mere headline of a “deal” was insufficient to spur sustained optimism; the substance, or lack thereof, was closely scrutinised. The US-UK agreement, described as a “modest start” with “big barriers” remaining, highlighted that unresolved core issues and persistent tariffs tempered any initial positive sentiment.¹ This suggests that future trade developments, especially the more complex US-China negotiations, will likely face intense scrutiny, with markets demanding tangible progress rather than just framework agreements for a lasting positive reaction.

Moreover, while global themes like trade and central bank policies were pervasive, their net impact varied considerably across different regions. This divergence underscores the importance of local factors. For instance, proactive stimulus measures by the People’s Bank of China provided a discernible lift to Chinese markets ⁹, a stark contrast to the caution observed in US markets or the geopolitically induced downturn in India.⁷ This desynchronisation highlights that local monetary policies, domestic economic conditions, and acute geopolitical events can significantly modify, or even override, the influence of broader global trends.

Table 1: Global Stock Index Performance (Week Ending May 9, 2025)

Sources:.⁷ Note: Shanghai Comp. weekly change based on May 5 close due to likely holiday on May 2. S&P 500, Dow, Nasdaq May 2 closing figures calculated based on reported weekly percentage change and May 9 closing levels.

United States: Navigating Trade Headlines and Fed’s Caution

A. Major Indices Performance

US stock markets experienced a modest pullback after a prior two-week winning streak, with the major indices finishing the week slightly in negative territory. Investor sentiment was shaped by mixed signals from ongoing trade developments and a notably cautious stance from the Federal Reserve. The Dow Jones Industrial Average recorded a weekly loss of 0.19%, while the S&P 500 concluded the week with a decrease of 0.57%.⁹ The tech-heavy Nasdaq Composite saw a weekly decline of 0.40%.9 In contrast to large caps, small-cap stocks, represented by the Russell 2000 index, remained nearly flat, down only 0.02% for the week, indicating a relative outperformance.9 Across investment styles, value stocks generally outperformed their growth counterparts during the week.⁹

B. The Impact of the US-UK Trade Framework and US-China Anticipation

A significant development during the week was the announcement of a new trade deal framework between the United States and the United Kingdom on Thursday, May 8. While presented as a positive step, the market’s reaction was tempered by the deal’s limited scope and the continuation of several major tariffs. This one-year “framework” agreement aims to reduce some tariffs—UK tariffs on US beef and ethanol, and US tariffs on British cars, steel, and aluminium. However, significant barriers, such as the UK’s digital services tax (a point of contention for US tech giants) and President Trump’s sweeping 10% blanket tariffs on most goods, remain intact.¹ This deal was seen as offering some relief to specific industries like UK auto manufacturing and American agriculture but addresses only a fraction of the trade between the two nations, leaving broader uncertainty.¹

Simultaneously, anticipation and uncertainty surrounding the upcoming US-China trade talks, scheduled for the weekend, kept investors on edge. President Trump expressed optimism about these forthcoming negotiations, suggesting that US tariffs on Beijing (reportedly at a prohibitive 145%) could be lowered if discussions progressed favourably.² Treasury Secretary Bessent was set to meet Chinese officials in Switzerland to advance these talks.³⁰

Markets showed an initial positive reaction to the US-UK deal announcement on Thursday.² However, the broader weekly performance of US equities remained subdued, reflecting “lingering uncertainty and little overall trade clarity”.⁹ Earlier in the week, the S&P 500 had snapped a historic nine-day rally, partly on concerns that comprehensive trade deals would be difficult to achieve, especially after Washington rejected Japan’s full tariff exception request.⁹

C. Federal Reserve Holds Steady Amid Economic Uncertainties

The Federal Open Market Committee (FOMC) concluded its May meeting by maintaining the federal funds rate in the existing 4.25% to 4.5% range, a decision that was widely anticipated by market participants.3 In his subsequent press conference, Fed Chair Jerome Powell emphasised a “wait-and-see” approach, acknowledging an increase in economic uncertainty, particularly concerning the potential impacts of tariffs on inflation and growth.

The Fed characterised current economic growth as modest, with inflation running slightly above their 2% target.³ Chair Powell remarked that the existing monetary policy stance is “in a good place” to respond to evolving economic conditions. However, he issued a warning that sustained tariffs could pose a dual threat: weakening the economy while simultaneously triggering higher inflation.³ The FOMC statement acknowledged that uncertainty surrounding the U.S. economic outlook had grown since its previous meeting, with increased risks of both rising unemployment and more persistent inflation.³

The market reaction to the Fed’s decision was muted, with major indices posting modest gains post-announcement, indicating that the “wait-and-see” stance was largely priced in.³ However, Chair Powell’s cautious remarks regarding future rate cuts, coupled with strong jobless claims data released during the week, led traders to pare back their expectations for imminent Fed rate reductions. This adjustment in expectations contributed to a rise in Treasury yields on Thursday.⁹

The Federal Reserve’s cautious stance stems from the complex challenge posed by tariffs, which can simultaneously fuel inflation through increased costs and dampen economic growth by disrupting trade and investment.¹ This creates a difficult policy dilemma, as actions to curb inflation (raising rates) could worsen a slowdown, while measures to boost growth (cutting rates) could fuel price pressures. This inherent ambiguity explains the Fed’s current preference for observing more data before committing to a policy shift and contributes to the prevailing market uncertainty.

D. Key Economic Indicators and Corporate Highlights

Economic data released during the week painted a somewhat mixed picture of the US economy. The ISM Services Purchasing Managers’ Index (PMI) rose to 51.6 in April from 50.8 in March, signalling ongoing expansion in the services sector. New orders within this sector expanded for the tenth consecutive month.⁹ However, a point of concern was that employment activity within the services sector contracted for the second straight month in April.9 Furthermore, the prices paid component of the services PMI registered its highest increase since January 2023, indicating persistent inflationary pressures.⁹

Weekly jobless claims data showed initial claims for unemployment benefits increased by 13,000 to 228,000 for the week ended May 3, down from the previous week’s revised 241,000, suggesting a still solid labour market.² Wholesale Inventories for March increased by 0.4%.²

Corporate earnings reports continued to be a significant driver of individual stock performance. Significant gainers included insulin pump maker Insulet (PODD), which surged 21% on strong quarterly results and an upgraded outlook.¹¹ Microchip Technology (MCHP) jumped 12.6% due to a better-than-expected outlook.¹¹ Lyft (LYFT) shares soared nearly 30% after exceeding Q1 gross bookings estimates and boosting its stock buyback program.11 Tesla (TSLA) shares rose 4.7%, marking a third straight week of gains, fueled by optimism about new U.S. trade deals, particularly as the US-UK framework included provisions for reduced tariffs on automobiles and President Trump hinted at potential China tariff reductions.1 This selective optimism in stocks like Tesla, even as broader markets were cautious, suggests investors are trying to identify specific beneficiaries of potential trade resolutions.

Conversely, Akamai Technologies (AKAM) stock declined nearly 11% after a price target cut.¹¹ Expedia Group (EXPE) shares tumbled more than 7% following disappointing Q1 results and a lowered full-year outlook, citing weak U.S. travel demand.¹¹ Affirm (AFRM) plunged more than 14% after issuing a disappointing current-quarter revenue outlook.¹¹

In regulatory news, the Commodity Futures Trading Commission (CFTC) placed certain staff on administrative leave pending investigations. The agency also sought public comment on perpetual contracts in derivatives markets and the risks of 24/7 trading, signalling an evolving regulatory focus on complex financial instruments and their potential impact on market integrity and customer protection.³³ This suggests a proactive examination of newer derivative products, which could lead to increased compliance burdens and changes in how these instruments are traded in the long term.

Europe: A Mixed Bag Amid Rate Cuts and Economic Data

A. Pan-European Market Snapshot

European equities generally ended the week slightly higher, navigating a holiday-thinned trading environment for some markets. Market sentiment was influenced by ongoing trade discussions, a key interest rate cut by the Bank of England, and mixed economic data releases from the Eurozone.9 The EURO STOXX 50 index, a benchmark for the Eurozone, gained 0.46% for the week, closing at 5309.74, marking its fourth consecutive week of gains.¹⁵ On Thursday, the STOXX 50 rose 1.1%.10 The broader MSCI EAFE index, which includes Europe, Australasia, and the Far East, saw a weekly loss of 0.30%.⁹

B. United Kingdom: FTSE 100 Reacts to Bank of England Rate Cut and Trade News

UK stocks experienced a volatile week, with the FTSE 100 ultimately edging lower. The index closed at 8,554.80 on May 9, down from 8,596.35 at the close of May 2, representing a weekly decline of approximately 0.48%.12 British stocks underperformed some European peers during the week.9

The Bank of England’s (BoE) monetary policy decision was a central focus. At its meeting concluding on May 7, the Monetary Policy Committee (MPC) voted by a narrow 5-4 majority to reduce the Bank Rate by 0.25 percentage points to 4.25%.⁴ Two members had preferred a larger 0.5 percentage point cut, while two favoured maintaining rates at 4.5%. The BoE cited progress in reducing inflationary pressures but noted that CPI inflation is likely to rise temporarily in 2025 (forecast to reach 3.5% in Q3) before falling back towards the 2% target.⁴ The accompanying commentary was perceived as somewhat hawkish, with the BoE flagging long-term risks from global trade tensions and indicating a careful, data-dependent approach to any further rate cuts.⁴ This split vote and cautious tone likely limited any overwhelmingly positive market reaction to the rate cut itself, signalling the central bank’s ongoing struggle with balancing slowing growth against persistent inflation elements.

The US-UK trade deal framework provided some relief for specific sectors, such as UK auto manufacturing, with shares of companies like Rolls-Royce and Melrose rising on news of steel tariff relief.¹ However, the deal’s limited scope and the retention of significant tariffs by both sides meant it did not provide a broad, sustained lift to the FTSE 100.¹

C. Germany: DAX Reaches New Highs

The German DAX had a strong week, outperforming other European indices and reaching a new record high. The index ended the week 1.79% higher at 23499.32, marking its fourth consecutive week of gains and a new record closing level.¹³ On Thursday alone, the DAX rose 1.02%.¹⁰ This resilience was notable as the DAX became the first major European index to surpass its March record high, even overcoming a brief dip early in the week related to domestic political developments concerning conservative party leader Friedrich Merz’s bid to become Chancellor (which was ultimately successful).⁹ The strength in the German market may reflect robust Q1 earnings from key European companies and positive sentiment towards its dominant export-oriented sectors.

D. France: CAC 40 Performance

The French CAC 40 ended the week with a slight loss, snapping a multi-week winning streak. The index declined 0.34% for the week to close at 7743.75.14 This marked its largest one-week percentage decline since April 11, 2025, and brought an end to a three-week run of gains. Despite the weekly fall, the CAC 40 did see a rise of 0.89% on Thursday.¹⁰

E. Eurozone Economic Pulse: Inflation Data, Retail Sales, and ECB Commentary

Key economic data from the Eurozone painted a mixed picture. Eurozone retail sales for March 2025, released on May 7, showed a slight month-on-month decrease of 0.1%, matching expectations. Year-on-year growth in retail sales softened to 1.5%.³⁶ This data point contributed to cautious market sentiment mid-week.³⁷

Eurozone Industrial Producer Prices (IPP) for March 2025, released on May 6, decreased by 1.6% month-on-month, primarily driven by a significant 5.8% drop in energy prices. Year-on-year, IPP increased by 1.9%. Excluding the volatile energy component, industrial producer prices rose 0.1% month-on-month and 1.3% year-on-year, suggesting some underlying price pressures persist.³⁸

European Central Bank (ECB) officials continued to provide commentary on the inflation outlook and monetary policy. In an interview published on May 3, ECB Vice-President Luis de Guindos expressed optimism about inflation returning to the 2% target by year-end. He cited factors such as euro appreciation, declining energy and commodity prices, and potential wage moderation due to tariff uncertainty. De Guindos also indicated that the ECB has policy space to pursue its own monetary policy path, distinct from the US Federal Reserve.⁴⁰

Later in the week, in a speech on May 10 that reflected views pertinent to the period, ECB Executive Board Member Isabel Schnabel argued for the ECB to “keep a steady hand” and maintain current interest rates. She cited the re-flattening of the Phillips curve (implying a weaker relationship between economic slack and inflation) and ongoing risks to price stability from fiscal expansion and protectionism. Schnabel stated that an accommodative policy stance would be inappropriate under current conditions.⁴¹ These somewhat diverging tones from ECB officials suggest an ongoing internal debate about the appropriate policy path, with a complex inflation dynamic that may not respond predictably to traditional policy levers, justifying a cautious approach.

On the regulatory front, the European Securities and Markets Authority (ESMA) was active, delivering technical advice concerning the Market Abuse Regulation (MAR) and SME Growth Markets, and also launching a consultation on rules for ESG (Environmental, Social, and Governance) rating providers.³³

Asia (Excluding India): Stimulus and Central Bank Watch

A. Greater China: Markets Buoyed by PBOC Measures Amid Trade Data

1. Mainland China (Shanghai Composite) and Hong Kong (Hang Seng):

Chinese and Hong Kong stock markets posted solid weekly gains, supported by monetary easing measures from the People’s Bank of China (PBOC) and renewed optimism surrounding US-China trade talks, despite a mixed bag of domestic economic data. The Shanghai Composite closed at 3,342.00 on May 9.19 For the week, using the May 5 closing price of 3,316.11 as the starting point (as May 2 was likely a holiday or data commenced from the week’s beginning), the index rose approximately 0.78%.18 The Hang Seng Index (HSI) closed at 22,867.74 on May 9, up 0.4% for the day.17 For the week, the HSI gained approximately 1.61%, rising from a closing price of 22,504.68 on May 2.21 News of the PBOC’s RRR and rate cuts on Wednesday provided a notable boost to both markets that day.⁵

2. PBOC Monetary Easing:

The People’s Bank of China (PBOC) took significant steps to support the economy. It announced a 50 basis point cut in the reserve requirement ratio (RRR) for eligible financial institutions, effective May 15, a move expected to inject roughly 1 trillion yuan (about $138.9 billion USD) in long-term liquidity into the financial system.5 Notably, the RRR for auto financing and financial leasing companies was slashed from 5% to 0%.42 The PBOC also cut the rate for seven-day reverse repos by 0.1 percentage points to 1.4%, aiming to lower broader financing costs, including the Loan Prime Rate (LPR).5 Additionally, relending rates for sectors like tech innovation, service consumption, and elderly care were lowered by 0.25 percentage points.42 These comprehensive easing measures provided a much-needed sentiment boost to the markets.⁵

Adding to the policy narrative, the PBOC released its quarterly monetary policy report on Friday, May 9. The report called for coordinated government efforts to lift consumer prices and shift the policy mindset from controlling high prices to controlling low prices, signalling growing concerns about deflationary pressures and the need to support domestic demand.⁴³ This highlights a delicate balancing act for Chinese authorities: stimulating growth and countering deflationary risks while navigating significant external headwinds from US tariffs and some internal demand weaknesses.

3. Key Economic Data (China):

Economic data from China presented a mixed view. The Caixin Services PMI for April fell to 50.7 from 51.9 in March, marking the slowest pace of expansion since September 2024. The composite PMI also declined to 51.1 from 51.8. The report indicated that growth in business activity and new orders slowed, employment contracted for a second month, and business optimism dropped sharply, partly due to concerns over U.S. tariffs.44 This contrasted with the official Manufacturing PMI for April (released earlier), which had already shown a contraction at 49.0, a 16-month low.⁴⁴

China’s trade data for April, released on May 9, showed a trade surplus in US dollar terms of $96.18 billion, which was above the $89 billion forecast but down from March’s $102.64 billion.⁴⁷ Exports grew 8.1% year-on-year (USD terms), beating the 1.9% forecast but slowing from the 12.4% growth seen in March.⁴⁷ Imports unexpectedly declined by 0.2% year-on-year (USD terms), though this was better than the forecasted 5.9% drop and an improvement from the 4.3% decline in March.⁴⁷ The trade surplus with the US specifically shrank to $20.46 billion from $27.6 billion in March.⁴⁸ This data pointed to some resilience in exports but also a potential slowdown in external demand, which impacted currencies like the New Zealand Dollar.⁴⁹ Inflation data for April (CPI and PPI) was scheduled for release on Saturday, May 10, with economists anticipating a year-on-year CPI decline of around 0.1%.⁴³

B. Japan: Nikkei 225 Performance and Bank of Japan’s Dovish Stance

Japanese equities, particularly in the tech sector, saw gains during the week.9 The Nikkei 225 closed at 37,503.33 on May 9, rising approximately 1.83% from its May 2 close of 36,830.69.16

A key influence was the Bank of Japan (BoJ), which maintained its key short-term policy interest rate at 0.5% following its meeting on May 1.⁶ However, the central bank struck an unexpectedly dovish tone, slashing its GDP growth forecasts for FY2025 to 0.5% (from a previous, higher figure) and for FY2026 to 0.7%. Core inflation forecasts were also cut to 2.2% for FY2025 and 1.7% for FY2026.⁶ BoJ Governor Kazuo Ueda explicitly cited uncertainty regarding US tariffs and their potential impact on Japanese exports as a primary reason for these forecast revisions and for delaying further rate hikes.⁶ He also noted that a recent surge in food prices had dampened real wages, hindering the establishment of a ‘virtuous cycle’ of wage and price growth. Consequently, analysts pushed back their expectations for the next BoJ rate hike, possibly to early 2026.⁵⁰ This pronounced dovishness signals that Japan’s path to monetary policy normalisation will likely be much slower and more cautious than previously anticipated, constrained significantly by external trade factors.

C. South Korea: KOSPI Navigates Local Holidays and Profit-Taking

The South Korean market had a shortened trading week, with financial markets closed on Monday, May 5, and Tuesday, May 6, for national holidays.20 The KOSPI ended slightly lower on Friday, May 9, closing at 2,577.27, down 0.09% for the day.20 This snapped a three-session winning streak. Compared to its May 2 closing price of 2,559.79 22, the KOSPI registered a weekly gain of approximately 0.68%. The decline on Friday was attributed to profit-taking by investors, particularly in battery shares like LG Energy Solution (down 2.9%) and bank shares such as KB Financial Group (down 2.65%), despite generally positive sentiment from the US-UK trade deal.²⁰

The market reaction in countries like New Zealand, where the NZD weakened following China’s trade data release ⁴⁹, underscores the significant economic interdependencies within the Asia-Pacific region. Softer economic indicators from China, especially those related to external demand and manufacturing, can have noticeable ripple effects on its trading partners, influencing their currency and equity markets.

India: Geopolitical Tensions Dominate Market Sentiment

A. Domestic Indices (Nifty 50, BSE Sensex) Post Weekly Losses

Indian equity markets witnessed a sharp selloff, particularly towards the end of the week, snapping a three-week winning streak. The Nifty 50 closed at 24,008 on May 9, down 266 points (1.10%) for the day. For the week, the Nifty 50 fell 1.39% from its May 2 close of 24,346.70.7 The BSE Sensex closed at 79,454.47 on May 9, down 880 points (1.10%) for the day, and recorded a weekly loss of 1.30% from its May 2 close of 80,501.99.7 While midcap and smallcap indices also declined, they showed slightly better resilience than the frontline indices on Friday, though they had faced steeper cuts earlier in the day.⁷

B. The Overarching Impact of India-Pakistan Border Skirmishes

The primary catalyst for the decline in Indian markets from Thursday, May 8, onwards was the significant escalation of military tensions along the India-Pakistan border. Reports emerged that the Indian government stated its armed forces had neutralised Pakistan’s air defence systems in Lahore after Pakistan allegedly attempted to engage military targets in Northern and Western India.⁷ This news rattled investor confidence severely. The market had already slipped on Thursday, and Friday’s drop intensified the weekly losses.⁵³ The India VIX, a measure of market volatility, spiked significantly, indicating heightened investor anxiety.8 Market experts commented that while some level of conflict was anticipated, the rapid intensification was unexpected, raising concerns about the duration of the confrontation, although the prevailing view was that it would likely be short-lived given India’s strategic advantages and Pakistan’s economic situation.⁸ This episode clearly demonstrates that geopolitical risk remains a potent and primary driver for Indian equities, capable of overshadowing positive domestic economic data or even strong foreign investment flows.

C. Investor Activity: FII and DII Trends

Foreign Institutional Investors (FIIs) displayed mixed activity during the week. They were net buyers on several days early in the week, continuing a multi-session buying streak.²³ For instance, on May 8, FIIs were net buyers of Indian equities in the cash market to the tune of ₹2,007.96 crore (provisional) 55 or ₹2,914.42 crore (NSDL final for equity segment).⁵⁶ However, as tensions peaked on Friday, May 9, FIIs turned significant net sellers, offloading ₹3,798.71 crore in the cash segment.⁵⁷

Domestic Institutional Investors (DIIs), in contrast, largely acted as net buyers, providing some cushion to the market. On May 8, DIIs were net sellers of ₹596.25 crore.⁵⁵ However, on Friday, May 9, DIIs stepped in with substantial net purchases amounting to ₹7,277.74 crore.⁵⁷ This behaviour suggests that while generally bullish foreign investors might quickly turn cautious during acute geopolitical flare-ups, domestic institutions can play a stabilising role. FIIs did show particular interest in defence-related stocks like Bharat Electronics and Hindustan Aeronautics, anticipating increased defence spending amidst the heightened tensions.²³

D. Reserve Bank of India (RBI) Developments and Economic Data Points

The Reserve Bank of India (RBI) was active with several announcements during the week, though no major shifts in monetary policy occurred. A key development was the issuance of consolidated “Digital Lending Directions, 2025” on May 8.60 These directions aim to enhance transparency and borrower rights in the digital lending space, mandating measures like a Key Fact Statement, a cooling-off period for borrowers, clear disclosure of recovery agents, and the operationalization of a public directory of digital lending apps.60 This proactive regulatory stance is designed to foster trust and responsible practices in the rapidly growing fintech sector, which will likely favour players with robust compliance frameworks.

Several commercial banks continued to adjust their Fixed Deposit (FD) interest rates in April and May, following an earlier repo rate cut by the RBI to 6% (the cut itself occurred in April, not during the reporting week, but its effects were still filtering through).⁶² The RBI also conducted various liquidity management operations, including auctions for Treasury Bills, Government of India Dated Securities, State Government Securities, and Open Market Operations (OMOs).⁶³

On the data front, India’s foreign exchange reserves fell by $2.065 billion to $686.064 billion for the week ended May 2, with the data released on May 9.⁶⁴ The Conference Board Leading Economic Index (LEI) for India, released for March, showed a marginal increase of 0.1%, but the report noted that sluggish growth rates in the LEI might indicate near-term economic challenges, forecasting real GDP growth to slow to 5.9% in 2025 from 6.6% in 2024.⁶⁶ Earlier released PMI data for April had shown strength, with Manufacturing PMI at 58.8 and Services PMI at 58.7.⁶⁵ Key inflation (CPI) data for April 2025 was scheduled for release on May 13 ⁶⁷, and the Index of Industrial Production (IIP) for April was due on May 28 under a new, faster timeline.⁶⁹

E. Select Corporate Earnings

The corporate earnings season for Q4 FY25 continued in India, with several companies reporting results. While individual stock reactions were specific to their announcements, the broader market sentiment was overwhelmingly dictated by the geopolitical news.

Positive results and/or share price reactions were seen for Titan Company (net profit up 13%, shares surged over 4%), Larsen & Toubro (L&T) (Q4 profit up 25%, stock jumped 4%), Birla Corporation (consolidated PAT up 32%), Cholamandalam Financial Holdings (consolidated PAT up 19%, dividend declared), Intellect Design Arena (stock rose over 1% post results), and Kalyan Jewellers (net profit up 36%, shares jumped 3%).⁷¹

Conversely, MCX shares fell nearly 7% after its Q4 results, and Paisalo Digital stock was down 4%.71 Swiggy reported widening losses despite revenue growth, and its shares fell ahead of the announcement.⁷¹

Oceania: Regional Responses to Global Cues

A. Australia: ASX 200 Performance, RBA Outlook, and Commodity Influence

The Australian stock market, represented by the S&P/ASX 200 index, ended the week nearly flat. The index closed at 8,231.2 on May 9, posting a gain of 0.48% for the day. However, for the week, it registered a slight decline of 6.8 points or 0.08%, having closed at approximately 8,238.0 on May 2.27 Gains on Friday were notably driven by banking, insurance, and technology stocks, which helped offset earlier losses in the week.²⁷

Commodity price movements exerted a mixed influence. The Gold Sub-Index (XGD) experienced losses as gold prices pared back some of their recent strong gains.²⁷ However, the broader Westpac Export Price Index had gained 2.5% over the month to May, largely driven by a 14% rally in gold during that period.⁷² Conversely, iron ore prices were reported to be trading below $100 per tonne following US tariff announcements (referred to as “Liberation Day” tariffs in some reports), and metallurgical and thermal coal were expected to contribute to declines in NAB’s Non-rural Commodity Price Index, which was forecast to fall by 4.9% in Q2.⁷² Crude oil prices had also seen volatility, with reports of prices crashing through $60 per barrel on OPEC+ agreeing to lift output.⁷²

The Reserve Bank of Australia (RBA) kept its official cash rate unchanged at 4.10% at its April meeting, with the next policy decision scheduled for May 20, 2025.⁷⁴ Market expectations, as indicated by the ASX 30 Day Interbank Cash Rate Futures on May 8, suggested a 56% probability of an interest rate decrease to 3.60% at the upcoming meeting.⁷⁴ Major Australian commercial banks like ANZ, CBA, NAB, and Westpac were also predicting further rate cuts during 2025.⁷⁵ This anticipation of monetary easing is likely driven by moderating inflation, with Q1 CPI data showing annual inflation back within the RBA’s 2−3% target range, and concerns about domestic consumption, despite some positive trade data.⁷⁶

Key economic data released during the week included preliminary March Building Approvals, which fell 8.8% month-on-month, significantly weaker than the forecasted 2% decline, though year-on-year approvals were up 13.4%.⁷⁷ Australia’s official foreign reserves for April, released on May 7, stood at AUD 102.423 billion, a decrease from AUD 105.248 billion in March.⁷⁸ The goods trade surplus rebounded significantly to $6.9 billion in March.⁷⁶

B. New Zealand: NZX 50 Gains and RBNZ Financial Stability Insights

The New Zealand equity market registered gains for the week. The NZX 50 index rose 1.1% on Friday, May 9, contributing to a weekly gain of 2.2%.28 The index closed at 12,605.07 on May 9.29

The Reserve Bank of New Zealand (RBNZ) was a key focus with the release of its May 2025 Financial Stability Report. The report warned of increased risks to the country’s financial system stemming from geopolitical shocks, volatile financial markets, and a subdued local economic activity.⁸⁰ It highlighted that national house prices remained weak, sitting around 13% below their November 2021 peak, although sales volumes had picked up in recent months as mortgage rates fell.⁸⁰ Despite these challenges, the RBNZ stressed that New Zealand’s banking sector remains resilient, with strong capital and liquidity buffers. The report also pointed to the upcoming implementation of the Deposit Takers Act 2023 and the launch of the Depositor Compensation Scheme (DCS) effective July 1, 2025, which will insure deposits up to $100,000 per person per institution.⁸⁰

A notable point from the RBNZ was its growing concern about the expanding role of Artificial Intelligence (AI) in the financial and insurance sectors. While acknowledging potential benefits like enhanced efficiency and fraud detection, the central bank warned that technological complexity and dependency on external AI service providers could introduce or amplify systemic vulnerabilities, necessitating careful risk management by regulated entities.⁸¹ This highlights a dual concern for the RBNZ: navigating immediate global shocks and domestic economic sluggishness while also addressing emerging long-term technological risks.

On the economic data front, New Zealand’s employment change for Q1 2025, released on May 7, came in at −0.1% quarter-on-quarter. This was an improvement from the −0.6% in the previous quarter but fell short of the −0.2% forecast. Economists were expecting a modest increase in employment of 0.1% for the subsequent quarter.⁸²

Conclusion: Key Takeaways and a Look Ahead

The week ending May 9, 2025, was characterised by a complex interplay of international trade negotiations, varied central bank actions, and impactful regional geopolitical events. US markets adopted a cautious stance, awaiting greater clarity on trade deals, particularly with China. European markets presented a mixed performance; the UK saw a rate cut from the Bank of England accompanied by cautious commentary, while Germany’s DAX surged to new highs. Asian markets were largely influenced by China’s significant stimulus measures aimed at bolstering its economy and the Bank of Japan’s continued dovish monetary policy. However, Indian markets faced substantial headwinds, with escalating geopolitical tensions with Pakistan leading to a sharp sell-off. In Oceania, Australian and New Zealand markets navigated global cues with a keen eye on domestic economic conditions and their respective central bank outlooks.

The persistent focus on US trade policy, especially the limitations of the announced US-UK deal and the high anticipation for US-China talks, underscored the market’s sensitivity to protectionist risks. Central banks globally adopted varied stances: the Bank of England initiated an easing cycle, the US Federal Reserve maintained its holding pattern, the People’s Bank of China actively stimulated its economy, the Bank of Japan remained decidedly dovish, and European Central Bank officials signalled ongoing caution. The eruption of military tensions between India and Pakistan served as a stark reminder of how quickly geopolitical risks can dominate market sentiment in specific regions. Mixed economic data from various economies added another layer of complexity to policy decisions and investor outlooks.

Looking ahead, markets will be keenly focused on the outcome of the US-China trade talks scheduled over the weekend following May 9. The release of April inflation data from several key economies, including the US Consumer Price Index (CPI) on May 13 ³, China’s CPI on May 10 ⁴⁷, and India’s CPI on May 13 ⁶⁸, will be crucial for gauging global price pressures and informing expectations for future central bank actions. Additionally, the Reserve Bank of Australia’s interest rate decision on May 20 will be closely watched in the Oceania region.⁷⁴

Table 2: Key Central Bank Decisions/Stances (Week Ending May 9, 2025)

Disclaimer

This article is for informational purposes only and should not be considered financial advice. The stock market is inherently risky, and past performance is not indicative of future results. Readers should conduct their own research and consult with a qualified financial advisor before making any investment decisions. The information presented here is based on data available as of May 9, 2025, and may be subject to change.

References

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