China’s Retail Disappointment and Industrial Slowdown Highlight Fragile Recovery
Asian equity markets began the week on a downbeat note as a batch of mixed economic data from China underlined persistent fragility in the world’s second-largest economy. Chinese blue-chip stocks dipped 0.4% after April’s retail sales figures fell short of expectations, raising concerns over weakening domestic demand. Although industrial output slowed as well, the decline was less severe than anticipated, offering modest reassurance.
The mixed Chinese data came as President Trump’s tariff hikes began to weigh on export growth, adding to domestic headwinds. The MSCI Asia-Pacific Index excluding Japan slipped 0.2%, echoing broader concerns about the outlook for Asia amid faltering Chinese momentum and a tightening global trade environment. Meanwhile, Japan’s Nikkei 225 fell 0.6%, further dragged down by global credit worries and a volatile yen.
Highlights:
China’s April retail sales missed forecasts, signaling weaker domestic consumption.
Industrial output slowed but remained slightly better than expected.
MSCI Asia-Pacific ex-Japan index fell 0.2%, Japan’s Nikkei declined 0.6%.
Chinese blue chips dropped 0.4% amid growing doubts over recovery strength.
Wall Street Futures Slide as Moody’s Downgrade and Tariff Threats Rattle Sentiment
Wall Street futures retreated sharply on Monday, extending the prior session’s volatility driven by Moody’s shock downgrade of the U.S. sovereign credit rating to Aa1 from Aaa. S&P 500 futures dropped 0.8%, while Nasdaq futures declined 1.1%, wiping out part of last week’s rally that followed President Trump’s partial rollback of China tariffs.
The downgrade came amid rising unease over the U.S.’s ballooning $36 trillion debt burden, compounded by a Republican push for sweeping tax cuts that analysts warn could add between $3 trillion and $5 trillion to the deficit over the next decade. Treasury yields climbed, with the 10-year yield rising 5 basis points to 4.49%, reflecting concerns about long-term fiscal sustainability.
Highlights:
S&P 500 futures down 0.8%, Nasdaq futures down 1.1% amid post-downgrade selloff.
Moody’s downgrade highlights U.S. debt risks and erratic fiscal management.
10-year Treasury yield rose to 4.49% as investors reassess sovereign credit outlook.
Markets remain jittery about additional tariffs and policy volatility.
U.S. Trade Policy Uncertainty Dampens Dollar, Boosts Euro; Treasury Secretary Dismisses Downgrade
The dollar came under pressure as markets processed Treasury Secretary Scott Bessent’s televised remarks defending Trump’s trade stance and dismissing the Moody’s downgrade. Bessent reaffirmed that countries failing to engage in “good faith” trade talks would face maximum tariffs, reinforcing fears of an escalating protectionist agenda.
Currency traders reacted by selling the greenback, driving the dollar index lower by 0.3%. The euro edged higher to $1.1180 amid renewed investor appetite and confidence following strong centrist election wins in Romania, Portugal, and Poland. Meanwhile, the dollar fell to 145.19 yen, reflecting market discomfort with the U.S.’s policy direction.
Highlights:
Dollar index dropped 0.3% as Treasury Secretary downplayed Moody’s downgrade.
Euro gained 0.1% to $1.1180 on dollar weakness and centrist election results in EU.
Dollar slipped to 145.19 yen amid concerns over U.S. trade policy volatility.
ECB President Lagarde cited dollar decline as evidence of waning confidence in U.S. strategy.
Fed Rate Cut Bets Moderate; Market Eyes Policy Signals from Central Bankers
Markets are now pricing in just 53 basis points of rate cuts from the Federal Reserve in 2025, a steep drop from the over 100 basis points anticipated only a month earlier. The odds of a Fed rate move by July stand at 33%, rising to 72% by September, indicating that investor confidence in aggressive monetary easing is diminishing.
Attention this week will be squarely focused on speeches by key Fed officials, including New York Fed President John Williams, Vice Chair Philip Jefferson, and Chair Jerome Powell, who is scheduled to speak on Sunday. Investors hope to gain clarity on how the Fed interprets the latest inflation prints, credit downgrade, and trade tensions in formulating forward guidance.
Highlights:
Market pricing for 2025 Fed rate cuts trimmed to 53 bps from 100+ bps.
July rate cut odds at 33%, September at 72%, per futures data.
Fed speakers including Williams, Jefferson, and Powell scheduled to speak this week.
Traders seeking clarity on Fed’s outlook amid heightened economic uncertainty.
Commodities Mixed: Gold Rises on Safe-Haven Demand, Oil Eases on Output Concerns
Gold prices rebounded 0.6% to $3,222 per ounce as geopolitical and financial market uncertainty fueled demand for traditional safe-haven assets. The yellow metal had dropped nearly 4% last week but regained favor amid a weakening dollar and fresh tariff tensions.
In contrast, crude oil prices remained under pressure. Brent crude slipped 19 cents to $65.22 a barrel, while U.S. West Texas Intermediate (WTI) fell 15 cents to $62.34. The declines reflect persistent concerns about rising OPEC and Iranian output levels, which could weigh on global supply-demand balances.
Highlights:
Gold rose 0.6% to $3,222/oz on safe-haven buying following Moody’s downgrade.
Oil prices fell as markets anticipated higher output from OPEC and Iran.
Brent crude at $65.22/bbl, WTI at $62.34/bbl amid supply-side caution.
Commodities reacting sharply to heightened geopolitical and trade-related risks.
