Jobs Strong, Growth Weak: Markets Weigh Tariffs (05-09 May)

Gold hovered near $3,250 on Friday, heading for its steepest weekly loss in over two months as safe-haven demand faded with renewed U.S.-China trade talk hopes. Trump signaled potential deals with China, India, Japan, and South Korea. The U.S. economy unexpectedly contracted 0.3% in Q1.

Silver fell over 3% to $32, pressured by weak global data and a 16-month low in China’s factory activity.

Brent crude dropped 1.4% to $61.29, posting its biggest weekly loss since March on OPEC+ supply concerns.

U.S. 10-year yields rose to 4.30%, while 2-year yields ended at 3.82% after testing 3.55%.

German 10-year yields climbed to 2.53%, and Japanese yields eased to 1.24%. The euro held above $1.13 after April inflation beat forecasts: headline at 2.2%, core at 2.7%, increasing ECB rate cut bets.

China Manufacturing PMI (Apr)

China’s Manufacturing PMI fell to 49.0 in April from 50.5 in March, missing the 49.8 forecast and marking the first contraction since January. Output (49.8) and new orders (49.2) declined, while foreign orders dropped to an 11-month low (44.7). Employment weakened (47.9), and buying activity contracted (46.3). Input costs (47.0) and selling prices (44.8) fell sharply. Business confidence slipped to a 7-month low (52.1).

German GDP (QoQ) (Q1)

Germany’s GDP rose 0.2% in Q1 2025, recovering from a 0.2% decline in Q4 and meeting forecasts. Growth was supported by lower inflation, improved sentiment, and stable governance. However, the economy shrank 0.2% YoY, extending its recession to seven quarters.

German CPI (MoM) (Apr)

Germany’s CPI eased to 2.1% YoY in April from 2.2% in March, slightly above the 2.0% forecast. Goods inflation slowed (0.5%), driven by lower energy prices (-5.4%). Services inflation rose to 3.9%, while core inflation increased to 2.9%. Monthly CPI rose 0.4% (vs 0.3% in March).

ADP Nonfarm Employment Change (Apr)

US private payrolls rose by 62K in April, down from March’s revised 147K and below the 115K forecast. Services added 34K jobs, with gains in trade/transportation/utilities (+21K) and finance (+20K), but losses in health (-23K) and information (-8K). Goods-producing jobs rose by 26K, led by construction (+16K). ADP’s Nela Richardson cited employer uncertainty despite mostly solid economic data.

US GDP (QoQ) (Q1)

The US economy contracted 0.3% in Q1 2025, missing the forecast for 0.3% growth and reversing from 2.4% in Q4. Imports surged 41.3% as firms front-loaded goods ahead of tariffs. Consumer spending slowed to 1.8%, and federal spending fell 5.1%. Fixed investment rose 7.8%.

Core PCE Price Index (MoM) (Mar)

The US dollar held near 100 after strong job data offset trade concerns and rising Fed rate cut bets. The euro stayed above $1.13 as Eurozone inflation beat expectations. The yen weakened toward 145 as easing trade tensions reduced safe-haven demand. The BoJ held rates and cut its growth outlook.

BoJ Interest Rate Decision

The BoJ kept its key rate at 0.5% in May, matching expectations. The board signaled readiness to hike if forecasts hold but lowered GDP projections for FY 2025 (0.5% from 1.0%) and FY 2026 (0.7% from 1.0%), citing trade risks. Core inflation is now seen at 2.2% in FY 2025, easing to 1.7% in FY 2026.

Initial Jobless Claims

US jobless claims rose by 18K to 241K in the week ending April 26, above the 224K forecast and the highest since February. Continuing claims rose by 83K to 1.916M, also beating estimates. Federal claims fell by 187 to 470, though many DOGE layoffs remain uncounted due to severance delays.

US S&P Global Manufacturing PMI (Apr)

The Manufacturing PMI was revised to 50.2 for April, unchanged from March and below the 50.7 flash reading. Output fell again, while domestic new orders rose for a fourth month. Export orders saw the steepest drop since November. Input costs eased slightly, but output prices rose the most since early 2023. Business confidence hit its lowest since June 2024.

ISM Manufacturing PMI (Apr)

The ISM Manufacturing PMI dipped to 48.7 in April from 49.0, beating expectations of 48. Output contracted more sharply (44.0), while new orders declined slower (47.2). Prices climbed to 69.8. Export orders fell, job losses moderated, and manufacturers flagged rising costs, trade delays, and pricing pressures.

Europe CPI (YoY) (Apr)

Eurozone inflation held at 2.2% in April, slightly above the 2.1% forecast. Energy prices dropped (-3.5%), but service inflation (3.9%) and food/tobacco inflation (3.0%) rose. Core inflation rose to 2.7% (from 2.4%), above the 2.5% estimate. Monthly CPI rose 0.6%, matching March.

Average Hourly Earnings (MoM) (Apr)

US average hourly earnings rose 0.2% MoM in April to $36.06, just below the 0.3% forecast. For production/nonsupervisory workers, wages rose 0.3% to $31.06. Annual wage growth held at 3.8%, slightly under the 3.9% projection.

Nonfarm Payrolls (Apr)

The US added 177K jobs in April, down from March’s revised 185K but above the 130K estimate. Healthcare (+51K), transport (+29K), finance (+14K), and social assistance (+8K) led gains. Federal jobs fell by 9K. The monthly average for the past year is 152K.

Unemployment Rate (Apr)

Unemployment stayed at 4.2% in April, matching expectations. The number of unemployed rose by 82K to 7.165M, while employment increased by 436K. Participation edged up to 62.6%, and the employment-population ratio to 60%. The U-6 rate fell to 7.8% from 7.9%.

Currencies

The US dollar index hovered near 100 on Friday, set for a second straight weekly gain. April’s stronger-than-expected jobs report (+177,000) highlighted ongoing labor market strength, even as Trump’s tariff policies added uncertainty. Despite solid data, bond markets continued to price in up to four Fed rate cuts this year. Sentiment improved further after reports that China may resume trade talks, though Beijing insists on the removal of unilateral US tariffs.

The euro stayed above $1.13 after Eurozone inflation data beat expectations. Headline inflation held at 2.2% in April, while core inflation rose to 2.7%, reinforcing expectations for 60 basis points of ECB rate cuts by year-end.

The Japanese yen weakened to near 145 per dollar, weighed by lower demand for safe-haven assets amid improved US-China trade sentiment. Japan’s unemployment edged up to 2.5%, and the BoJ held rates steady while cutting its economic outlook.

Commodities

Gold hovered near $3,250 per ounce on Friday, heading for its steepest weekly loss in over two months as safe-haven demand faded. Sentiment shifted after Trump expressed optimism on trade deals with China, India, Japan, and South Korea, and signed an order easing tariffs on auto parts.

Despite the trade thaw, economic data pointed to weakness. The US economy contracted 0.3% in Q1—its first decline in three years—while March’s PCE index showed no growth. Markets are now focused on the nonfarm payrolls report for further Fed policy clues.

Silver dropped over 1% to around $32, logging its fourth straight daily loss. Alongside easing safe-haven demand, silver was hit by a weaker industrial outlook, as China’s manufacturing PMI slid to a 16-month low, with exports seeing the sharpest drop since 2022.

Brent crude fell 1.4% to $61.29 per barrel, posting its worst week since March. Markets await the OPEC+ meeting, with members split on supply increases. While Saudi Arabia remains cautious, global demand concerns persist due to trade tensions. Payroll data helped stabilize sentiment, but Trump’s warning on secondary sanctions over Iranian oil kept geopolitical risks elevated.

Equities

US equities posted strong weekly gains despite soft economic data. The Nasdaq climbed 3.38%, the Dow gained 3%, and the S&P 500 rose 2.90%, supported by earnings season and easing trade tensions after comments from Trump.

Microsoft led with a 12% weekly surge, followed by Meta (+9%). Google and Apple ended the week flat.

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