Market Update: May 2, 2025

This week in the financial world has been marked by the resilience of equity markets despite shaky fundamentals. Despite mixed earnings reports from major tech companies and ongoing trade policy uncertainty, U.S. equity markets showed positivity. Notable impacts were seen from General Motors’ revised guidance and Visa’s strong earnings. The U.S. and Canadian March GDP readings, indicating a contraction of 0.3% QoQ and 0.2% MoM, respectively, led to a slight contraction mid-week, shining a light on the negative effects of tariffs on both businesses and consumers. The Canadian federal election results brought about some volatility that was short-lived, while European equities benefited from stronger-than-expected GDP growth, albeit amidst some inflation concerns.

Asian markets were influenced by the Bank of Japan’s dovish stance and China’s factory activity contraction, with European markets buoyed by robust economic performance and corporate earnings. However, the fallout from U.S. tariffs continued to affect emerging markets, particularly China, whose Commerce Ministry established stringent preconditions for trade talks. Crude prices also dipped as future demand forecasts remained lackluster, and OPEC+ worked on increasing output.

In the Canadian financial landscape, markets showed a return of 1.35% for the week, with volatility related to the federal election results and weaker-than-expected GDP data. Economic challenges came to the forefront amid the ongoing tariff policies of the U.S. Similarly, European markets returned 2.94%, boosted by positive economic data and corporate earnings, despite lingering inflation concerns.

The fixed income markets in the U.S. and Canada were impacted by mixed economic data, including the Q1 GDP contraction report and strong nonfarm payrolls numbers. This led to stable sovereign bond yields for the week. European fixed income markets saw similar movements due to positive GDP growth and inflation concerns, while Asian markets felt the influence of the Bank of Japan’s stance and Chinese factory activity trends. Across the board, economic data releases, policy updates, and geopolitical issues drove fluctuations in the fixed income markets.

Canada’s economy contracted by 0.2% in February, primarily due to declines in the mining, oil, and gas sectors. The impact of U.S. tariffs and unfavorable weather conditions contributed to this slowdown. However, there is a slight prediction of growth by 0.1% in March, with an annualized GDP growth expected to reach 1.5% in the first quarter. Despite challenges, the Canadian economy is showing signs of resilience and potential growth moving forward.