Markets Brace for Central Bank Clarity Amid Signs of Services Slowdown

Last week, global markets pivoted around central bank expectations and signs of economic deceleration. U.S. economic data painted a mixed picture, especially with ISM Services PMI slipping to contraction territory. Meanwhile, the Fed held rates steady but removed its tightening bias, pushing yields lower and sparking risk appetite. Eurozone data confirmed weakening momentum, and the ECB hinted at a June rate cut. In Asia, Japan’s MoF intervened in FX markets amid a collapsing yen, while Chinese PMIs beat expectations but failed to excite equities. In the U.K., the BoE remains in focus as inflation eases. This week, attention turns to Fed Chair Powell’s tone, U.S. labor market data, and the BoE rate decision.

🇺🇸 United States

Last Week (Apr 29 – May 3):

• FOMC held the Fed Funds rate at 5.25–5.50%, but softened its tone by removing tightening bias. Powell pushed back against rate cuts, emphasizing a need for more inflation progress.
• ISM Services PMI dropped to 49.4 (vs. 52 forecast), suggesting contraction in the service sector, shaking confidence in economic resilience.
• Job openings (JOLTS) fell below 8.5M, lowest since early 2021, signaling a cooling labor market.
• Equities rallied post-Fed: S&P 500 +0.6%, Nasdaq +1.4%, supported by falling Treasury yields.
• 10-year yield dropped sharply from 4.7% to 4.5%.
• Dollar Index (DXY) declined, driven by dovish Fed tone and weaker data.

This Week (May 6 – 10):

• Focus on labor market: Nonfarm payrolls (Friday) expected to show continued deceleration.
• Fed speakers including Powell and Williams may further shape market expectations for summer cuts.
• 10-year Treasury auction and CPI revisions may affect bond sentiment.
• Equities will also respond to key earnings releases (Disney, ARM).

🇪🇺 Euro Area

Last Week:

• GDP Q1 (flash): Eurozone grew just +0.3% YoY, confirming economic stagnation.
• Inflation cooled slightly: Core CPI at 2.7%, still above ECB’s comfort zone.
• ECB officials (Lagarde, Villeroy) signaled a June rate cut is highly likely.
• German Bund yields fell ~10 bps; Euro Stoxx 50 gained +1.1%.

This Week:

• Final HICP inflation print on Friday will confirm CPI trends.
• ECB minutes and commentary expected to reinforce June cut bets.
• Germany’s industrial production and factory orders could give insights into growth momentum.

🇬🇧 United Kingdom

Last Week:

• Market anticipating BoE’s May decision amid signs of moderating inflation and weak activity.
• Gilts rallied, with 10-year yields down ~12 bps, and GBPUSD dipped below 1.25.
• FTSE 100 underperformed global peers, limited by energy weakness and domestic demand concerns.

This Week:

• BoE policy meeting (Thursday): Expected to hold rates at 5.25%, but tone will be closely watched.
• Markets now pricing in August or September as potential cut timeline.
• GDP estimate (Friday) to show whether U.K. avoids technical recession.

🇨🇳 China

Last Week:

• NBS PMIs (Apr) beat expectations: Manufacturing PMI at 50.4, Services at 51.2, supporting growth recovery narrative.
• Caixin Services PMI at 52.5, indicating continued private sector expansion.
• Equities showed modest gains; CSI 300 +0.4%, as sentiment improves slightly post-stimulus.

This Week:

• Trade balance (Thursday) and FX reserves (Tuesday) in focus.
• Market awaits signs of further stimulus, especially property sector support.

🇯🇵 Japan

Last Week:

• MoF intervened in FX markets for the first time since Oct 2022, with JPY surging from 160 to 152, confirming stealth intervention.
• BoJ maintains ultra-dovish stance, but warned of upside risks to inflation.
• Nikkei 225 rose +1.8% as the weaker yen and global rally supported exporters.

This Week:

• Traders watching follow-up FX interventions and wage growth data for policy clues.
• Yen volatility to remain elevated amid U.S.-Japan yield spreads.

🌍 EMEA Region

Last Week:

• Türkiye CPI printed at 69.8% YoY, up from 68.5%, reinforcing the TCMB’s tight stance.
• ZAR and HUF gained against USD, aided by softer U.S. data.
• BIST 100 lost -2.4% as profit-taking and geopolitical risks weighed.

This Week:

• Türkiye industrial production (Friday) and potential macroprudential tightening.
• South Africa elections approaching, rand volatility may increase.

🛢️ Commodities & 🪙 Crypto

Commodities:

• Gold surged to $2,320, helped by falling yields and soft dollar.
• WTI crude dropped below $79 after weak U.S. inventory data and ceasefire talks in Gaza.
• Silver outperformed: +3.1% on safe-haven demand.

Crypto:

• BTC +5.4%, ETH +3.8% as rate cut expectations supported risk-on sentiment.
• Solana rebounded 8% after major DApp launches and ETF speculation.
• Notable events:
  • SEC closed PYUSD investigation without enforcement.
  • Mastercard launched global stablecoin payment rails.
  • Bitwise filed for NEAR-based trust.