Weekly Market Pulse - Week ending April 4, 2025

Market developments

Equities: This week, global equity markets experienced significant turmoil, primarily driven by U.S. President Donald Trump's announcement of sweeping tariffs ranging from 10% to 50% on all trading partners, leading to a sharp sell-off. The Dow Jones Industrial Average plunged nearly 3000 points, with the S&P 500 and Nasdaq suffering their worst week since 2020 and are down over 13% and 19% YTD respectively. Canada, Europe and Japan didn’t fair much better, as they all moved meaningfully lower this week. Investors, fearing a trade war and potential recession, shifted away from stocks, with companies like Nike and Apple among the hardest hit, though Trump claimed the U.S. economy would ultimately benefit.

Fixed Income: Fixed income markets saw a surge in demand for safe-haven assets as bonds rallied amid the equity rout. Yields on U.S. 10-year Treasuries dropped as prices rose. The markets now anticipate four Federal Reserve rate cuts in 2025, up from two or three expected previously, to counter economic slowdown risks from the tariffs. European bonds faced mixed pressures, with PIMCO suggesting a shift toward high-quality global fixed income could outperform equities in the coming years as fiscal expansion in Europe might reduce bond appeal.

Commodities: Commodities took a steep hit this week, reflecting concerns over weakening global demand due to the escalating trade war. Oil prices dropped 7%, hitting a four-year low, while metals, copper, and agricultural products also declined sharply as industrial activity fears mounted. Gold, however, bucked the trend and pulled back slightly from a record high of $3,167.57, outperforming other commodities as investors sought safety amid the uncertainty.  

Performance (price return)

Source: Bloomberg, as of April 4, 2025

Central Bank Interest Rates

Source: Bloomberg, as of April 4, 2025

*Expected rates are based on bond futures pricing

Macro developments

Canada – Canada’s Factory Woes Deepen, Canadian Jobless Rate Climbs

The S&P Global Canada Manufacturing PMI dropped to 46.3 in March from 47.8, marking the steepest decline in factory activity since late 2023. Output and new orders shrank sharply, driven by U.S. tariff uncertainties, with export orders hitting their lowest since May 2020. Employment fell as firms hesitated to replace staff, while input costs surged at the fastest rate since mid-2022, fueling widespread pessimism about future production.

Canada’s unemployment rate rose to 6.7% in March, up from a three-month low, with 36,100 more people jobless, totaling 1.509 million. A shrinking labour force drove the participation rate down to 65.2%, the lowest in five months, while net employment fell by 32,600, missing expectations of a 12,000 job gain. This reflects growing economic strain amid tariff-related pressures.

U.S. – U.S. Factories Slip Back, Jobs Surge Ahead, Unemployment Edges Up

The U.S. ISM Manufacturing PMI fell to 49 in March from 50.3, dipping below the 49.5 forecast and signaling a contraction after marginal growth. New orders, production and employment weakened, while price pressures hit a peak since June 2022 due to tariffs, though inventories rose. Timothy Fiore noted demand confusion and rising costs as key drags on the sector.

The U.S. added 228,000 jobs in March, far exceeding the revised 117,000 from February and forecasts of 135,000, the strongest gain in three months. Health care, social assistance and transportation led the growth, with retail boosted by returning strikers, though federal jobs dipped. Revisions cut January and February totals by 48,000, tempering earlier optimism.

The U.S. unemployment rate rose to 4.2% in March, marking a four-month high and slightly exceeding the expected 4.1%. This increase reflects an additional 31,000 unemployed, bringing the total to 7.08 million. Employment grew by 201,000 to 163.51 million, and participation ticked up to 62.5%, while the broader U-6 rate eased to 7.9%, showing mixed labor signals.

International – Eurozone Inflation Cools, Eurozone Jobs Hit Record Low, Japan’s Labour Tightens, China’s Factories Gain Steam

Eurozone inflation eased to 2.2% in March, a four-month low, undercutting forecasts of 2.3%. This decline was driven by softer services (3.4%) and falling energy costs (-0.7%). Core inflation dropped to 2.4%, below the expected 2.5%, while food prices rose with monthly prices up 0.6%. This slowdown may ease pressure on ECB rate hikes.

The Eurozone unemployment rate fell to 6.1% in February from 6.2%, beating expectations. This drop reflects 70,000 fewer unemployed, bringing the total to 10.58 million. Youth unemployment rose slightly to 14.2%, while Germany (3.5%) and Spain (10.4%) showed stark contrasts among major economies. This marks a tighter labour market than the 6.5% seen a year ago.

Japan’s unemployment rate dipped to 2.4% in February from 2.5%, against expectations of no change. This reflects 60,000 fewer unemployed, bringing the total to 1.68 million. Employment and the labour force shrank slightly, pushing participation to 63.2%. Jobs-to-applications ratio eased to 1.24, signaling a still-tight market.

The Caixin China Manufacturing PMI rose to 51.2 in March from 50.8, topping forecasts of 51.1, the highest since November 2024. Output and new orders grew, with exports surging most in 11 months, though input costs fell and employment barely rose. Business confidence waned amid trade barrier fears, despite six months of expansion.

Quick look ahead

The Asset Allocation Team at NEI Investments

Judith Chan, CFA – Vice President, Head of Multi-Asset Portfolios

Mateo Marks, CFA – Senior Multi Asset Portfolio Analyst

Adam Ludwick, CFA – Senior Multi Asset Portfolio Analyst

Anthony Rago, B.A.Sc. – Senior Multi Asset Portfolio Analyst