In terms of economic activity last week, the US data tilted to the downside, although it has not yet shown a serious slowdown. But the US economy is expected to weaken in the coming months, due to a forward increase in consumption and the increasing pain from the de facto trade embargo between China and the US.

The US and China still show no signs of launching trade negotiations as each side waits for the other to make the first move. The US says it is close to reaching agreements with Asian countries such as South Korea, Japan and India. The first agreements will be key to watch as they will provide an idea of ​​whether tariff rates for most countries will remain at the current 10% or increase to 15-20%. Trump will need a certain level of tariffs so that he can fund tax cuts with tariff revenues.

Stocks rose further, driven by positive earnings reports from large US technology companies, and the trade war is in cooling mode, at least for now. The S&P 500 has almost erased all its losses since "Liberation Day" on April 2, and the US dollar has also recovered some of its losses. However, as the pain from the trade war shows up in the data, the road ahead is still expected to be bumpy.

Besides the FOMC meeting, the focus in the coming week will be on trade negotiations and negotiations on the US budget bill. It is a very light calendar week in terms of data, with the market focusing on the European Sentix Confidence Index, German IP and factory orders, and Japanese labor income.

Last week's market performance review:

Before the weekend, stocks continued to rise after the better-than-expected US monthly employment report, which showed that the labor force remained resilient despite the impact of tariff uncertainty on stocks in April. Earnings from large technology companies, coupled with a strong US monthly employment report and the prospect of tariff negotiations, pushed stocks higher last week. The Dow Jones rose 3% to close at 41,317.43; the S&P 500 rose nearly 3% for the week to close at 5,686.68; and the Nasdaq rose more than 3.4% to close at 17,977.73.

The gold market has experienced violent fluctuations in the past four weeks, with gold prices breaking through $3,000 per ounce and soaring to $3,500 to form a climax top. However, despite investors starting to take profits, spot gold fell back to around the 3,200 mark last Thursday (May 1). Although the correction in gold prices was sharp, it was not surprising given that speculators have been selling since late March. Net long positions in gold fell 34% to 120,902 lots in the past five weeks, according to data from the Commodity Futures Trading Commission. Gold is experiencing a strong reversal as global economic sentiment improves. A substantial trade deal could weaken the appeal of gold by boosting risk assets. But any deal that falls through would quickly boost gold prices as funds shift from safe-haven assets to industrial commodities. In addition to geopolitics, a slowing economy and the Fed's policy dilemma also support gold prices.

Silver prices fell more than 3% last week to nearly $32 an ounce, marking the fourth consecutive day of decline as easing global trade tensions weakened demand for safe-haven assets. Market sentiment changed after U.S. President Trump said a trade deal with India, Japan and South Korea was possible and expressed optimism about a deal with China. Meanwhile, the outlook for industrial demand for silver came under pressure due to weak economic data from major economies.

The U.S. dollar index pared losses on Friday, trading near 100 and rising for a second straight week after the latest jobs report showed a cooling but resilient labor market. The report came in above expectations and provided the first look at employment conditions since President Trump announced massive tariffs. The bond market has already reflected concerns that these trade policies could slow the economy, adding pressure on the Federal Reserve to cut interest rates. Sentiment was also boosted by news that China is considering restarting trade talks with the United States.

The U.S. dollar index, which measures the value of the greenback against a basket of currencies, retreated after briefly breaking above the 100.00 level before the end of last week. Despite stronger-than-expected U.S. nonfarm payrolls, the dollar was pressured by dovish interpretations and China-related trade headlines.

The euro held near $1.13 as investors digested stronger-than-expected eurozone inflation data and a solid U.S. nonfarm payrolls report. Short-term indicators are sending mixed signals. However, the broader technical structure remains positive, with solid positioning across the major moving averages continuing to trend upwards. From a technical perspective, the pair has an overall bullish bias. Safe-haven demand has weakened as progress in U.S.-China trade relations has led to a decline in safe-haven demand. China said it is considering the possibility of trade talks after repeated efforts by the United States to push for tariff talks. USD/JPY rose to a near three-week high of 145.92 last week, before pulling back to 145.00 before the weekend close.

GBP/USD fell slightly last week to 0.34% to 1.1273, but remained close to its highest level since February 2022, benefiting from a generally weaker US dollar. The pound rose 3.2% in April, its strongest monthly performance since November 2023.

AUD/USD rose 0.71% to above 0.6440 on Friday, the best non-US currency last week, as the outlook for US-China trade talks was optimistic, boosting global sentiment. The offshore RMB rose to around 7.20 against the US dollar last week, stimulating the Australian dollar.

WTI crude oil fell 7.65% last week to close at $58.15 a barrel, marking the biggest weekly drop since late March. The decline came as traders turned cautious ahead of the key OPEC+ meeting rescheduled on Saturday, where members will discuss production targets for June. The group, which includes OPEC and its allies, is weighing whether to accelerate production increases or stick with a more moderate approach as expectations for demand growth weaken. Concerns about a global economic slowdown related to the U.S.-China trade war have further pressured the oil market.

Bitcoin rebounded to around $96,500 before the weekend, with bulls challenging the $100,000 mark again. Bitcoin's "troika" has changed, with tensions in the U.S.-China trade war easing, concerns about a U.S. recession intensifying, and the resolution of the Federal Reserve's political uncertainty. Looking ahead, the market still needs to keep a close eye on Trump's tariff policy shift, and Bitcoin remains closely tied to macroeconomic news.

The U.S. 10-year Treasury yield rose to 4.27% on Friday, beating expectations for April nonfarm payrolls data. The economy added 177,000 jobs in April, in line with expectations, while wage growth slowed slightly. The data came after a report on Wednesday showed that the U.S. economy shrank in the first quarter due to a surge in imports. On the trade front, China announced that it was considering trade talks with the United States after being approached by Washington several times.

Market Outlook This Week:

The Fed and the Bank of England made a big debut. Will the conflict between Trump and Powell escalate?

Thanks to signs of easing trade wars and a strong non-farm payrolls report, global economic volatility eased slightly last week. Next, the market's attention will partly turn to the Federal Reserve, which is scheduled to announce its interest rate decision on Wednesday (early next Thursday Beijing time), and investors hope that the Fed will cut interest rates as soon as possible. The market generally expects the Fed to keep interest rates unchanged next week, but it is expected to cut interest rates in June. However, after the release of a strong non-farm payrolls report on Friday, the possibility of a rate cut has decreased.

In Europe, the Bank of England is expected to cut interest rates by 25 basis points this week, and Sweden and Norway will also make interest rate decisions.

Trump's tariff policy has caused headaches for Federal Reserve officials, who are weighing the impact of tariffs on economic slowdown and rising inflation. Data released last week showed that the US economy shrank for the first time since 2022 in the first quarter.

The White House has repeatedly put pressure on the Fed to cut interest rates. Trump has severely criticized Fed Chairman Powell and hinted that he has the ability to replace the Fed Chairman before the end of his term. The latter has said that the Fed must ensure that tariffs do not trigger a more sustained rise in inflation before considering cutting interest rates. Last month, Trump raised the possibility that he would seek to fire Powell, sparking market concerns about the Fed's independence being damaged. After causing sharp fluctuations in financial markets, Trump later seemed to back off, but still asked the Fed to cut interest rates quickly.

At this week's meeting, Powell may continue to refute the claim that the Fed will be influenced by the White House with a hawkish attitude, which may lead to another escalation of the conflict between Trump and Powell.

Beware of downside risks after the short-term rebound of the US dollar

In the short term, the market may continue the trend of warming risk appetite, and the US dollar index may stabilize near the 100 mark, but in the medium and long term, the potential risks in the labor market cannot be ignored. The continued shrinking of manufacturing employment and the sluggish corporate confidence may translate into more obvious layoff pressure in the coming months, especially in the context of increased economic uncertainty caused by Trump's tariff remarks. Well-known institutions warned that if policy uncertainty continues, the risk of a hard landing of the economy will increase significantly.

The Fed's policy path will also become a key variable. The current market expectations for a rate cut in June have cooled significantly. If subsequent data continue to show the resilience of the labor market, the Fed may further postpone the timing of the rate cut, and the number of rate cuts for the whole year may even be less than three. This will support U.S. Treasury yields and the dollar, but may put pressure on risky assets. Investors need to pay close attention to inflation data and Fed meeting minutes in late May to judge the further direction of monetary policy.

In general, the unexpected performance of non-agricultural data in April has injected short-term confidence into the market, but the downward revision of historical data and external uncertainties still keep investors vigilant. Risky assets may still have room for upside in the short term, but medium- and long-term downside risks are accumulating.

Gold stabilizes after "high diving"! Is $3,200 an "iron bottom" or a "trap"?

Last week, the gold market was volatile due to the combination of expectations of tariff easing, strong employment data and risk aversion caused by the situation in Russia and Ukraine. The weekly line fell by 2.28%, about 7% lower than the historical high of $3,500.05 per ounce on April 22. It highlights the intensification of the long-short game.

This week, the May FOMC meeting will be the core focus. The market generally expects the Fed to keep interest rates unchanged, but Powell's speech may provide clues to future policies, especially after the hawkish statement in April. At the Reykjavik Economic Conference, the discussion of AI, employment and monetary policy by Fed officials may cause fluctuations.

The progress of trade negotiations is still a key variable. If the negotiations are deadlocked, safe-haven demand may push up gold prices; if a breakthrough is achieved, gold prices will face further downward pressure.

Technically, the $3220-3260/ounce range is a battle zone for longs and shorts. If it breaks through $3260/ounce, it may test $3300-3350/ounce, and if it falls below $3220/ounce, it may drop to $3150/ounce. Traders need to pay attention to technical signal confirmation and headline-driven fluctuations and remain flexible.

After the second bottoming out, U.S. crude oil rebounded from oversold. Beware of another breakout under demand constraints

Crude oil prices fell more than 7.50% last week, reflecting growing concerns about weakening global demand. Traders remain cautious ahead of a key OPEC+ meeting scheduled for May 5, when some members are expected to push for faster production increases before June. Reports that Saudi Arabia hinted at no intention to support oil prices through a new round of production cuts further added to the downward pressure on oil prices. Although supply concerns caused by U.S. policy toward Iran occasionally trigger short-covering rallies, these factors have failed to provide sustained support for oil prices.

In the current environment of weak demand signals, strong resistance levels and lack of consistent supply control measures, oil prices are still at risk of further downside. Unless there is new news to inject reliable bullish momentum, the market will still be bearish heading into the next OPEC+ policy decision meeting.

The Trump administration's tough stance on Iran and chaotic trade policies may continue to exacerbate market volatility. Pay attention to the further guidance of the OPEC+ meeting on May 5 and global macro data on oil market sentiment.

Conclusion:

The trade war will continue to be the focus of investors. A major factor in the recent market rebound is that tensions are easing and the agreement between the United States and other countries is making progress.

The Trump administration's tariff tsunami is triggering a chain earthquake in the US economy! The latest data shows that the US net trade in the first quarter of 2025 recorded the worst drop since records began in the 1940s, with a 41.3% surge in imports in a single quarter, directly dragging down economic growth by 4.8 percentage points. This major import and export shock caused by tariffs is evolving into a "chronic poison" that continues to hit the US economy.

This is not a short-term crisis, but a structural crisis. At present, the US exports of $2.1 trillion are far from offsetting the imports of $3.3 trillion, and the trade deficit continues to expand, while the negative effects of tariffs have just begun to emerge. As retaliatory measures from various countries take effect one after another, the US economy may face a more severe second wave of impact. This trade war caused by tariffs may eventually make the United States reap what it has sown.

Overview of important overseas economic events and matters this week:

Monday (May 5): Eurozone May Sentix Investor Confidence Index, US April S&P Global Services PMI Final Value, US April ISM Non-Manufacturing PMI, Saudi Aramco announces official crude oil prices around the 5th of each month

Tuesday (May 6): China April Caixin Services PMI, Eurozone April Services PMI Final Value, Eurozone March PPI Monthly Rate, US March Trade Account, US April Global Supply Chain Stress Index, European Central Bank holds a Central Bank Forum

Wednesday (May 7): US 10-year Treasury auction to May 6, US API crude oil inventory to May 2, US to May 2 EIA crude oil inventory, EIA Cushing, Oklahoma crude oil inventory in the United States for the week ending May 2, EIA releases monthly short-term energy outlook report

Thursday (May 8): Federal Reserve FOMC announces interest rate decision, UK central bank interest rate decision for the week ending May 8, US initial jobless claims for the week ending May 3, Federal Reserve Chairman Powell holds a monetary policy press conference, Bank of Japan releases minutes of March monetary policy meeting, Swedish central bank announces interest rate decision

Friday (May 9): New York Fed President Williams delivers a keynote speech at the 2025 Reykjavik Economic Conference, Federal Reserve Board member Kugler delivers a speech, Federal Reserve Board member Barr delivers a speech

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