Markets Rebound as Trump Signals Cutting China Tariffs 'Substantially'

(April 23): Private-sector activity in the euro area barely grew in April as tariff uncertainty sent confidence in the services industry to an almost five-year low.

The Composite Purchasing Managers’ Index by S&P Global fell to 50.1 from 50.9 in March, remaining narrowly above the 50 threshold separating expansion from contraction, data Wednesday showed. Analysts had predicted a drop to 50.2.

The deterioration was largely down to Germany, whose own main PMI gauge unexpectedly declined to less than 50 for the first time in four months. France also missed analyst estimates, remaining stuck beneath that level. Both of Europe’s two biggest economies saw surprise weakness in services.

“This has pushed the whole economy into stagnation territory,” Cyrus de la Rubia, an economist at Hamburg Commercial Bank, said in a statement. “A faster drop in new business suggests this weakness might stick around for a while. However, the higher fiscal spending on infrastructure in Germany and defence spending across Europe should eventually benefit not just manufacturing but also the service sector, though with a bit of a lag.”

Optimism over higher public spending, particularly in Germany, has given way to fears that President Donald Trump’s tariffs will erase the already meagre growth analysts had been predicting for the region’s economy this year.

Projections published Tuesday by the International Monetary Fund painted a gloomier picture for Europe, downgrading expansion in the euro zone’s 20-nation economy to just 0.8% this year from 1% before. For Germany, the revision was even steeper, with the Washington-based lender now foreseeing an unprecedented third straight year without growth.

Concerns about the economy’s prospects were clear when the European Central Bank met last week and cut interest rates for the seventh time since June 2024, having only weeks ago been considering a pause. Investors reckon it will have to take further action to protect growth and ensure inflation doesn’t drop below 2%, pricing two or three more moves.

Consumer-price growth currently appears to be heading back to 2%, with President Christine Lagarde saying Tuesday that the ECB’s task of returning inflation to that level is “nearing completion”.

Policymakers are getting “some mild support” for their rate-cutting stance from price indicators in the closely watched services sector, according to de la Rubia.

“Costs have risen at a similar rate to March, but the increase in selling prices has slowed significantly,” he said. “Goods prices are showing mixed behaviour: input prices have reversed their inflationary trend of the past four months and have fallen, while output prices have increased a bit more than in March but still modestly.”

PMIs are closely watched by markets as they arrive early in the month and are good at revealing trends and turning points in an economy. A measure of breadth of changes in output rather than depth, business surveys can sometimes be difficult to map directly to quarterly GDP.

Elsewhere, the UK and US composite PMIs are also expected to dip while remaining above the 50 mark.

Source: Theedgemarkets

British companies buckled in April under the strain of an escalating global trade war that threatens to tip the economy into a new downturn, a survey showed on Wednesday.

The S&P Global Composite Purchasing Managers' Index (PMI), a gauge of the private sector economy, slid to 48.2 in April from 51.5 in March.

This marked the lowest reading since November 2022 when businesses were wracked by surging energy costs and financial market turmoil after former Prime Minister Liz Truss' poorly received budget plans.

Readings below 50 denote a contraction in business activity.

Export orders fell at the fastest pace since the early months of the COVID-19 pandemic in 2020, while costs faced by businesses grew at the fastest rate in more than two years as higher employment taxes and an increased minimum wage kicked in.

Despite the inflationary warning signal, the sharp drop in business activity is likely to further cement expectations that the Bank of England will cut interest rates next month - something that had looked uncertain a few weeks ago.

Britain's economy defied expectations in February by growing 0.5%, according to official data published earlier this month.

Wednesday's PMI suggested the economy is now contracting at a quarterly pace of around 0.3%, S&P Global Chief Business Economist Chris Williamson said.

Although Britain hopes it will emerge with a relatively low tariff rate on goods sent to the United States compared with competing economies, Brexit has already weakened exporters and weaker global growth is likely to hurt their prospects further.

"The collapse in confidence and drop in output during April raise red flags as to the near-term economic outlook and add pressure on the Bank of England to reduce interest rates again at its May meeting," Williamson said.

Financial markets on Tuesday fully priced in a BoE rate cut at its May 8 announcement.

Williamson said the global outlook was the biggest concern for British companies but they had also faced sharply higher staffing costs in April due to employment tax rises and a nearly 7% rise in the minimum wage.

"There will be some uncertainty as to whether the recent upturn in price pressures could become entrenched or whether it merely represents a short-term tax-related spike which should be 'looked through'," Williamson said.

The PMI for the services sector fell to 48.9 from 52.5, dropping from a seven-month high in March to a 27-month low this month.

The manufacturing sector, already struggling, fared even worse in April as its PMI fell to 44.0 from 44.9 in March, a 20-month low. New manufacturing export orders collapsed at a rate surpassed only three times in monthly PMI surveys dating back to 1996.

Source: Reuters

Russia’s oil exports rose for the first time in four weeks, with flows from key ports climbing to multi-week highs.

Crude flows from all Russian ports in the four weeks to April 20 rebounded to 3.21 million barrels a day, recovering about one-quarter of the losses seen over the previous three weeks. Flows remain about 240,000 barrels a day, or 7%, below the recent peak seen a month ago.

The increase was driven by higher shipments from key ports — Kozmino in the Pacific and Primorsk in the Baltic. The number of tankers hauling ESPO crude from Kozmino was the highest in five weeks, while departures from Primorsk were the most in three weeks.

The uptick comes as US officials signal they are losing patience with the pace of peacemaking in Ukraine, raising concerns that the administration will abandon sanctions, including those targeting Russia’s oil exports.

The White House has signaled that it’s comfortable with almost all Russia’s demands in Ukraine. These include recognition of the territories it has seized from Ukraine since 2014, the easing of sanctions, a suspension of arms deliveries to Kyiv and a block on the country’s path to NATO membership.

Both President Donald Trump and Secretary of State Marco Rubio suggested on Friday that the administration is prepared to move on from its peace-brokering efforts unless progress is made quickly. US officials are due to meet with Ukrainian and European representatives to discuss US proposals to end the war.

The US has already scaled back its sanctions enforcement. In February, Trump shut down the KleptoCapture task force, a team formed shortly after Moscow’s 2022 invasion of its neighbor to implement measures imposed on Russia.

A total of 31 tankers loaded 23.45 million barrels of Russian crude in the week to April 20, vessel-tracking data and port-agent reports show. The volume was up from 21.93 million barrels on 29 ships the previous week.

Crude flows in the seven days to April 20 stood at about 3.35 million barrels a day, a week-on-week increase of about 220,000 barrels a day.

The less volatile four-week average flows were also up, rising for the first time in four weeks to about 3.21 million barrels a day from 3.13 million a day in the period to April 13.

There were two shipments of Kazakhstan’s KEBCO crude during the week from Novorossiysk.

The gross value of Moscow’s exports recovered about two-thirds of the previous week’s drop, rising by about $130 million, or 12%, to $1.28 billion in the week to April 20, reflecting increases in both weekly average prices and shipments.

Export prices of Russian Urals crude from the Baltic rose by about $2.30 a barrel, while cargoes loading in the Black Sea were up by about $1.80 a barrel. The price of key Pacific grade ESPO increased by about $2.40. Delivered prices in India were about $2 higher, all according to numbers from Argus Media.

On a four-week average basis, income was little changed in the period to April 20, edging higher to about $1.3 billion a week from $1.29 billion in the period to April 13. Using this measure, higher flows were almost completely offset by lower prices.

Observed shipments to Russia’s Asian customers, including those showing no final destination, rose to 2.92 million barrels a day in the four weeks to April 20.

The figures include about 410,000 barrels a day on ships from Western ports showing their destination as Port Said or the Suez Canal, or those from Pacific ports with no clear delivery point. They’re also boosted by another 50,000 barrels a day on vessels yet to show any destination.

Flows to Turkey in the four weeks to April 20 averaged about 290,000 barrels a day, up by about 50,000 barrels a day from the revised figure for the previous week and the highest since the period ending Feb. 9.

This story forms part of a weekly series tracking shipments of crude from Russian export terminals and the gross value of those flows. The next update will be on Tuesday, April 29.

All figures exclude cargoes identified as Kazakhstan’s KEBCO grade. Those are shipments made by KazTransoil JSC that transit Russia for export through Novorossiysk and Ust-Luga and are not subject to European Union sanctions or a price cap. The Kazakh barrels are blended with crude of Russian origin to create a uniform export stream. Since Russia’s invasion of Ukraine, Kazakhstan has rebranded its cargoes to distinguish them from those shipped by Russian companies.

Bloomberg classifies ship-to-ship transfers as clandestine if automated position signals appear to be switched off or falsified — a tactic known as spoofing — to hide the two vessels involved coming together to make the cargo switch.

Vessel-tracking data are cross-checked against port-agent reports as well as flows and ship movements reported by other information providers including Kpler and Vortexa Ltd.

If you are reading this story on the Bloomberg terminal, click for a link to a PDF file of four-week average flows from Russia to key destinations.

Source: Bloomberg Europe

Euro zone business growth has stalled this month, a survey showed on Wednesday, with activity in the bloc's dominant services industry contracting and the prolonged downturn in manufacturing continuing.

HCOB's preliminary composite euro zone Purchasing Managers' Index, compiled by S&P Global, dropped to 50.1 this month from March's 50.9. It was barely above the 50 mark separating growth from contraction and short of the median estimate for 50.3 in a Reuters poll.

"The service sector has turned into a bit of a party pooper," said Cyrus de la Rubia, chief economist at Hamburg Commercial Bank.

"Activity has shrunk instead of growing, which it had been doing almost continuously since February 2024. This has pushed the whole economy into stagnation territory."

A PMI covering services sank to 49.7 from 51.0, missing the poll estimate for a more modest decline to 50.5.

Optimism among services firms plummeted with the business outlook index falling to 53.1 from 57.8, the lowest since mid-2020 when the COVID-19 pandemic was tightening its grip on the world.

Manufacturing activity, in decline for nearly three years, saw some improvement. The sector's PMI rose to a 27-month high of 48.7 from 48.6, confounding expectations in the Reuters poll for a decline to 47.5.

An index measuring output, which feeds into the composite PMI, jumped to 51.2 from 50.5, its highest in almost three years.

"Manufacturing seems to be holding up better than expected. Despite the U.S. introducing general tariffs of 10% and car tariffs of 25% at the start of April, most manufacturers in the euro zone are not too fazed," de la Rubia said.

"Instead of falling off a cliff, they've actually increased production for the second month in a row, and even more robustly than in March."

Firms have suffered from uncertainty as U.S. President Donald Trump flip-flops on his tariff policy.

But some of the activity was from factories completing past orders. The backlogs of work index dropped to a three-month low of 46.8 from 47.7.

As overall demand fell again, firms returned to reducing headcount. The composite employment index dipped to 49.9 after being just above breakeven at 50.4 in March.

Source: TradingView

Silver rose 1% toward $33 per ounce on Wednesday, recouping losses from the previous session and tracking a broader rally in commodities amid signs of easing US-China trade tensions.

The white metal also decoupled from gold, which pulled back from record highs amid waning demand for safe-haven assets.

Instead, silver benefited from its dual role as both a precious and industrial metal, making it more responsive to improving macroeconomic conditions.

Investor optimism was sparked after US President Donald Trump downplayed the scale of future tariffs on Chinese imports, saying they “won’t be anywhere near as high as 145%,” though he clarified they “won’t be 0%” either.

Further lifting market sentiment, Trump affirmed he has no plans to remove Federal Reserve Chair Jerome Powell, easing concerns about central bank independence and policy direction.

Source: TradingView