As the unseasonably warm weather continued, there was a thawing in relations between the UK and its European neighbours after their acrimonious divorce five years ago. News of a wide-ranging post-Brexit deal that cemented ties in defence and trade got the week off to a bright start.
This should have lifted the markets, but some gloomy news from the other side of the Atlantic eclipsed any sunshine in the hearts of investors. The US lost its last, highly-prized triple-A credit rating thanks to a Moody’s downgrade, snuffing out any hopes of a stock market rally in London and Europe.
It wasn't all sun and light for the UK either. On Wednesday, inflation came in well above forecasts because of a surge in household bills and employers’ expenses in what was dubbed ‘Awful April’. The 3.5% reading, well above target, gives the Bank of England something to think about, and traders scaled back their bets on further rate cuts in 2025.
April was equally awful for fiscal data. Government borrowing came in much higher than expected and £1bn higher than the previous month, despite increased receipts from national insurance contributions by employers.
Now, you may have noticed, we almost got through a week with no mention of tariffs.
Almost.
Perhaps inevitably, the week ended with a market shock courtesy of Donald Trump, who threatened the EU with an eye-watering 50% tariff and declared negotiations between his team and the bloc were "going nowhere". At the same time, he said tech behemoth Apple would face a 25% levy on its iPhones unless they are manufactured in the US.
Let's take a look at some of the highlights from an eventful few days, before turning our attention to the week ahead.
Key moments from the last week
Household bills such as water soared in 'Awful April', delivering a blow to the inflation rate. ·SARINYAPINNGAM via Getty Images
The stronger-than-forecast inflation reading for April, based largely on a surge in utilities bills and travel costs for households, makes it harder for the Bank of England to ease interest rates. This change in dynamic was reflected in a withdrawal by market traders of bets on rate cuts for the year.
Markets are now pricing in just one additional quarter-point cut in 2025, reflecting growing concern that the pace of price rises may prove more persistent than previously thought.
According to money markets, the probability of a rate reduction in August has slipped to 50%, down from 60% prior to the latest inflation figures.
Inflation wasn't the only thing exceeding expectations, unfortunately for the government. Chancellor Rachel Reeves' problems worsened when April's data for UK borrowing came in £1bn higher than the previous month and more than £2bn above forecasts.
It all adds up to an increased likelihood of tax rises, according to Ruth Gregory of Capital Economics.
"April’s public finances figures showed that despite the boost from the rise in employers’ national insurance contributions, the fiscal year got off to a poor start," she said.
"This raises the chances that if the chancellor wishes to stick to her fiscal rules, more tax hikes in the autumn budget will be required."
There was at least some good news for holders of the world's leading cryptocurrency. Bitcoin (BTC-USD) broke its price record as institutional appetite and regulatory support for the digital asset continue to grow.
Supply dynamics are also playing a part in the price surge. The amount of bitcoin held on centralised cryptocurrency exchanges has dropped to historic lows, indicating a shift towards self-custody and reducing readily available supply. According to CryptoQuant, exchange reserves are at an all-time low.
Some things seem too good to be true, and we're taught not to trust those things. But a number of FTSE 350 (^FTLC) stocks trading at steep discounts and easily outperforming the market are certainly a tempting prospect for would-be investors.
These "hidden gems" range from household names to industrial firms, and are trading at a significantly lower price-to-earnings ratio, compared to their five-year average.
“With such a heavy focus on US tech and the hugely volatile global macro environment, UK investors may have missed some of the quiet compounders closer to home, something recently noted by BlackRock’s Larry Fink," said Chris Beauchamp, chief market analyst at IG.
On money and personal finance
Are you richer than you feel? ·Klaus Vedfelt via Getty Images
You may not be an Elon Musk or a Bill Gates, but have you ever wondered if you actually qualify as being "rich"? Of course it depends on how you look at it, and most would agree there is more to life than money, but columnist and personal finance analyst Sarah Coles gives us some guidance: How to tell if you're rich
London, New York, Paris. Perhaps the top three are unsurprising, but there are plenty of intriguing entries in Oxford Economics' global ranking of cities this year, which evaluates the attractiveness of their economies based on a number of factors. Our very own Vicky McKeever brings us more:The world's 10 best cities to live in revealed
The Week Ahead
After a quiet start to the week with markets closed for holidays in the UK and US, developments around US trade relations and economic concerns will continue to occupy investors' attention, and earnings from chipmaking giant Nvidia (NVDA), among others, will also be in the spotlight.
Nvidia (NVDA), due to release first quarter earnings on Wednesday, is the last of the Magnificent 7 tech behemoths to report this earnings season. Salesforce (CRM), which provides customer relationship management (CRM) software, is another key tech name reporting on Wednesday.
Computer maker Dell (DELL) is then set to report on Thursday, after it unveiled new AI servers powered by Nvidia (NVDA) chips this week.
In the retail sector, investors will be looking at wholesale retailer Costco's (COST) latest results, to help gauge US consumer sentiment amid economic uncertainty.
In economic data, the closely-watched US consumer confidence gauge will be in the spotlight on Tuesday as investors look to get an important clue about the state of the world's largest economy.
On Wednesday, as well as a slew of key data from France and Germany, the Federal Reserve's rate-setting committee will release the minutes of its last meeting. Thursday is all about the US again, with GDP, corporate profits and jobless claims in the spotlight.
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