If you just skimmed the headlines this week, you’d think everything was running smoothly in global markets. The S&P 500 stretched its winning streak, major indexes in the U.S. and Asia rose, and GDP figures in the Eurozone looked healthy. But peel back the layers, and it’s clear that this was anything but a simple week.

This update dives into the mixed economic signals across the U.S., Europe, and Asia, exploring what’s driving the data, what risks lie ahead, and what investors should be watching most closely.

United States: Strong Jobs, Great Earnings—But a Shrinking Economy?

The April jobs report came in hotter than expected:

• 177,000 jobs added

• Unemployment steady at 4.2%

• Wage growth up 0.2% month-on-month

Add to that nearly 13% earnings growth for S&P 500 Q1 earnings—almost double earlier expectations—and the picture seems bright.

But then came a surprise: Q1 GDP contracted by 0.3%, the first decline since 2022. Why? A dip in consumer and government spending and a surge in imports, possibly driven by pre-tariff stockpiling.

So how do we reconcile strong jobs and earnings with a shrinking economy? The market may be prioritizing the near-term strength in employment and profits, betting the GDP drop is temporary.

Eurozone: Growth with a Side of Doubt

The Eurozone surprised with a 0.4% GDP growth rate in Q1, double the previous quarter. Spain and Italy led the way, with France and Germany also inching into positive territory.

However, inflation remains sticky:

• Headline CPI: 2.2%

• Core CPI: 2.7%

This complicates things for the European Central Bank, especially as economic confidence slipped to a four-month low. So while growth looks solid, consumers are growing more pessimistic—raising doubts about how sustainable the recovery really is.

United Kingdom: Stock Gains Amid Domestic Weakness

The FTSE 100 had a good week, but under the hood, things look more fragile:

• Nationwide Price Index dipped in April

• Mortgage approvals fell for the third month in a row

• Lloyds Business Confidence Barometer dropped to 39%, its lowest since January

Concerns about tariffs and rising labor costs are beginning to weigh heavily on sentiment. With housing and business confidence both slipping, the UK recovery may be hitting turbulence.

Japan: Markets Up, But Outlook Dim

Japanese markets rose on expectations that the Bank of Japan would maintain easy monetary policy—and they were right. The BOJ held rates at 0.5% and lowered growth and inflation forecasts through 2026.

Still, the economic data paints a worrying picture:

• April manufacturing PMI contracted

• Retail sales and industrial production missed forecasts

• Yen weakened to JPY 144.07 against the dollar

The Bank of Japan may be cautious, but with domestic momentum fading, the pressure is mounting.

China: Waiting for Stimulus

It was a holiday-shortened week in China. The Hang Seng Index rose, but mainland indexes dipped. While there are signs of a possible thaw in U.S.-China trade relations, domestic data continues to disappoint:

• Manufacturing PMI fell to 49, the lowest since December 2023

• Services PMI also softened

Speculation is growing that Beijing will step in with stimulus to support its 5% growth target, but so far, concrete actions remain limited.

Key Events to Watch: May 5–9

United States

• Monday: ISM Non-Manufacturing

• Tuesday: Trade Balance

• Wednesday: Fed Rate Decision and Jerome Powell’s Press Conference

• Thursday: Q1 Productivity, Labor Costs, Jobless Claims

• Friday: Wholesale Inventories

Europe

• Thursday: ECB Economic Bulletin

• Friday: German Factory Orders

Japan

• Thursday: Final Services PMI

• Friday: Household Spending, Labor Cash Earnings

China

• Wednesday: Markets reopen post-holiday

Top 5 Market Risks to Watch

1. Fed Hawkish Tilt: Powell could signal resistance to rate cuts in Wednesday’s press conference.

2. U.S. Cost Pressures: Productivity and labor cost data may show persistent inflation risk.

3. Eurozone Stagflation: Core inflation remains high while confidence falters.

4. China Growth Fragility: Weak trade and credit data could increase pressure for stimulus.

5. Japan Demand Weakness: Household spending and labor data could undercut hopes for recovery.

Final Thought

Markets seem buoyed by selective optimism—tech earnings, strong employment—but deeper signals reveal significant fragility. Central bank decisions and upcoming data will play a decisive role in shaping market sentiment in the coming weeks.

FAQs

1. Why did U.S. GDP contract despite strong jobs and earnings? The contraction was driven by weak consumer/government spending and a surge in imports, possibly due to pre-tariff stockpiling.

2. What is the outlook for the Eurozone? GDP growth is improving, but high core inflation and falling confidence suggest it may not be sustainable.

3. What’s holding back the UK economy? Slowing housing activity and falling business confidence point to a fragile domestic recovery.

4. Is Japan’s economic recovery stalling? Data suggests weakening demand, even as the Bank of Japan holds back on tightening.

5. Will China introduce more stimulus soon? Likely, but so far no major steps have been announced despite disappointing PMI data.

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