Global Economic Commentaries, Week 20, 2025

Global Markets Weekly Review: May 5–10, 2025During the week of May 5–10, global f...

author: Ahura Chalaki

published:May 10, 2025 19:22

Reading Time:

17 minutes

category:weekly

Global Markets Weekly Review: May 5–10, 2025

During the week of May 5–10, global financial markets exhibited modest gains as easing trade tensions and mixed corporate earnings bolstered investor sentiment. All three major equity indices in the United States advanced on May 7 following the Federal Reserve’s decision to maintain its benchmark rate. The Dow Jones Industrial Average climbed 0.7 percent. In comparison, the S&P 500 rose approximately 0.4 percent, supported by a late-day rally among semiconductor stocks after reports indicated the U.S. would relax export controls on AI chips.

Across the Atlantic, Europe’s STOXX 600 index gained 0.4 percent on May 8 amid reports of a “breakthrough” trade agreement between the U.S. and the U.K., which raised hopes for broader tariff relief. In contrast, the U.K.’s FTSE 100 slipped around 0.3 percent after the Bank of England surprised markets with a 25 basis-point rate cut.

With trade concerns receding, the global risk appetite improved heading into the weekend, and the MSCI World Index closed the period modestly higher. In fixed income markets, yields generally drifted lower. Following a robust U.S. jobs report in early May that had pushed yields higher, the Fed’s statement on May 7 prompted a pullback: the yield on the 10-year U.S. Treasury fell to roughly 4.27 percent from 4.32 percent late on May 6. German Bund yields also eased after the European Central Bank reiterated its “meeting-by-meeting” policy framework, underscoring the ongoing balance between slowing growth due to tariffs and persistent inflationary pressures.

In foreign exchange, the U.S. dollar strengthened on safe-haven flows, with the Dollar Index finishing near 100.3 after reaching a four-week high on May 8. Both the euro and the pound weakened. EUR/USD hovered around 1.122, down about 0.7 percent from Monday’s level, while GBP/USD retreated toward 1.324 following the BoE’s rate decision. Meanwhile, the Japanese yen remained near multi-month lows of ¥143–146 per dollar as U.S. rate expectations diverged further from Japan’s ultra-accommodative stance.

Key economic releases painted a mixed picture. Eurozone consumer prices held steady at 2.2 percent year-on-year in April, with core inflation rising to approximately 2.7 percent as services costs accelerated. In the U.K., March retail sales surprised with a 0.4 percent month-on-month increase—the strongest quarterly performance in four years—even as consumer confidence dipped to late-2023 lows amid tariff concerns.

Central banks exercised caution. The Federal Reserve left its target range at 4.25–4.50 percent, noting that tariffs posed “risks of higher unemployment and higher inflation.” Fed Chair Jerome Powell emphasized that policy would remain on hold pending further developments in global trade. The Bank of England’s narrow 5–4 decision to cut rates to 4.25 percent reflected growing concerns over tariff-induced economic drag, while the ECB signaled that further easing may be warranted despite sticky core inflation. On April 30, the Bank of Japan maintained its ultra-easy policy, trimming growth forecasts in light of trade-related headwinds.

Geopolitical developments also influenced markets. On May 8, President Trump announced a U.S.–U.K. trade accord featuring a 10 percent baseline tariff for British goods, which buoyed equity markets and drove gold prices down by approximately 1.7 percent. Meanwhile, high-stakes U.S.–China trade negotiations scheduled for May 10–11 in Switzerland remained a focal point for investors. Overall, the week’s events underscored a market environment shaped by tentative progress on trade, resilient economic data, and the ongoing interplay between growth concerns and inflationary pressures.