Weekly Market Pulse - Week ending May 16, 2025

Market developments

Equities: Global stock markets rallied this week, driven by easing U.S.-China trade tensions following a 90-day tariff truce, with the S&P 500 erasing its 2025 losses and rising for five straight sessions. U.S. equity funds saw their first inflows in five weeks, while European and Asian markets also gained, though sentiment remained cautious due to lingering tariff uncertainties. Strong economic data and upbeat earnings, particularly in tech, supported the rally, but analysts warn that valuations may be optimistic given unresolved trade risks.

Fixed Income: Bond markets experienced a rally in the middle of the week as expectations for U.S. monetary policy easing grew, spurred by softer-than-expected inflation data and cooling trade tensions. Treasury yields were relatively stable, with the Federal Reserve maintaining steady rates but signaling caution on inflation and labor market risks.

Commodities: Gold funds saw outflows for the third consecutive week as investors favored riskier assets amid the trade truce optimism. Commodities markets remained firm overall, with increasing interest in hard assets like gold and infrastructure as potential diversifiers against correlated equity-bond movements.

Performance (price return)

SECURITY	price	week	1 month	3 month	ytd
Equities ($Local)
S&P/TSX Composite	25,971.93	2.42%	7.74%	1.92%	5.03%
S&P 500	5,958.38	5.27%	12.94%	-2.56%	1.30%
NASDAQ	19,211.10	7.15%	17.81%	-4.07%	-0.52%
DAX	23,767.43	1.14%	11.53%	5.57%	19.38%
NIKKEI 225	37,753.72	0.67%	11.30%	-3.57%	-5.37%
Shanghai Composite	3,367.46	0.76%	2.79%	0.62%	0.47%
Fixed Income (Performance in %)
Canada Aggregate Bond	238.03	0.12%	0.17%	0.14%	1.13%
US Aggregate Bond	2232.09	-0.23%	-0.23%	0.84%	1.97%
Europe Aggregate Bond	244.69	0.00%	0.17%	0.03%	0.38%
US High Yield Bond	27.45	0.75%	2.81%	0.66%	2.30%
Commodities ($USD)
Oil	62.34	2.16%	-0.21%	-11.87%	-13.08%
Gold	3199.54	-3.77%	-4.29%	11.00%	21.91%
Copper	455.35	-1.25%	-2.82%	-2.38%	13.09%
Currencies ($USD)
US Dollar Index	101.09	0.74%	1.72%	-5.27%	-6.82%
Loonie	1.3976	-0.29%	-0.84%	1.47%	2.92%
Euro	0.8968	-0.88%	-2.17%	6.28%	7.71%
Yen	145.91	-0.37%	-2.76%	4.39%	7.74%

Source: Bloomberg, as of May 16, 2025

Central Bank Interest Rates

Central Bank	Current Rate	June 2025 Expected Rate*	December 2025 Expected Rate*
Bank of Canada	2.75%	2.58%	2.29%
U.S. Federal Reserve	4.50%	4.31%	3.83%
European Central Bank	2.25%	1.94%	1.65%
Bank of England	4.25%	4.19%	3.76%
Bank of Japan	0.50%	0.48%	0.65%

Source: Bloomberg, as of May 16, 2025

*Expected rates are based on bond futures pricing

Macro developments

Canada – No Notable Releases

No notable releases this week.

U.S. – Cooling U.S. Inflation, Cautious Consumer Spending

Inflation dropped to 2.3% in April, the lowest since February 2021, driven by sharper declines in energy costs like gasoline and fuel oil, despite a surge in natural gas prices. Food and transportation inflation slowed, while core inflation held steady at 2.8%. Monthly CPI rose 0.2%, with shelter and energy costs leading the increase.

Retail sales grew 0.1% in April 2025, down from March’s 1.7% surge, as tariff announcements curbed spending. Gains were seen in food services, building materials, furniture and electronics, but declines hit sporting goods, gasoline and clothing. Core retail sales, relevant for GDP, fell 0.2%.

International – Rising Unemployment in the U.K., Robust U.K. Economic Growth, Steady Eurozone Expansion, Japan’s Economic Contraction

The U.K. unemployment rate increased to 4.5% from January to March 2025, the highest since August 2021, with rises in short, medium and long-term unemployment. Employment grew by 112,000, the smallest increase since December 2024, driven by a drop in full-time jobs, while second jobs rose to 3.9% of workers. Economic inactivity fell slightly to 21.4%.

The U.K. economy grew 0.7% in Q1 2025, exceeding forecasts and marking the strongest growth in three quarters, led by services (0.7%) and production (1.1%). Construction was flat, but gross fixed capital formation surged 2.9% and net trade boosted growth with exports up 3.5%. Annual GDP growth reached 1.3%.

The Eurozone economy grew 0.3% in Q1 2025, slightly below estimates, driven by domestic demand, lower inflation and optimism from Germany’s fiscal relaxation. Growth faces risks from US tariffs and uncertainty, with Germany at 0.2%, Spain and Italy stronger at 0.6% and 0.3% and France and the Netherlands at 0.1%.

Japan’s GDP shrank 0.2% in Q1 2025, worse than expected, due to US trade policy concerns and weak demand from China. Net trade dragged growth as exports fell 0.6% and imports rose 2.9%. Private consumption and government spending were flat, but business investment grew strongly at 1.4%.

Quick look ahead

DATE	COUNTRY / REGION	EVENT		SURVEY	PRIOR
18-May-25	China	Retail Sales YoY	Apr	5.9	5.9
18-May-25	China	Retail Sales YTD YoY	Apr	5.0	4.6
19-May-25	China	1-Year Loan Prime Rate		3.0	3.1
19-May-25	China	5-Year Loan Prime Rate		3.5	3.6
20-May-25	Canada	CPI YoY	Apr	2.3	2.3
21-May-25	United Kingdom	CPI MoM	Apr	1.1	0.3
21-May-25	United Kingdom	CPI YoY	Apr	3.3	2.6
22-May-25	Eurozone Aggregate	HCOB Eurozone Manufacturing PMI	May P	49.3	49.0
22-May-25	Eurozone Aggregate	HCOB Eurozone Services PMI	May P	50.5	50.1
22-May-25	Eurozone Aggregate	HCOB Eurozone Composite PMI	May P	50.7	50.4
22-May-25	United Kingdom	S&P Global UK Composite PMI	May P	49.2	48.5
22-May-25	United Kingdom	S&P Global UK Manufacturing PMI	May P	46.0	45.4
22-May-25	United Kingdom	S&P Global UK Services PMI	May P	50.0	49.0
22-May-25	United States	S&P Global US Manufacturing PMI	May P	49.8	50.2
22-May-25	United States	S&P Global US Services PMI	May P	50.6	50.8
22-May-25	United States	S&P Global US Composite PMI	May P		50.6
22-May-25	Japan	Natl CPI YoY	Apr	3.6	3.6
22-May-25	Japan	Natl CPI Ex Fresh Food YoY	Apr	3.5	3.2
23-May-25	United Kingdom	Retail Sales Ex Auto Fuel MoM	Apr	0.2	0.5
23-May-25	United Kingdom	Retail Sales Inc Auto Fuel MoM	Apr	0.4	0.4
23-May-25	Canada	Retail Sales MoM	Mar	(0.3)	(0.4)
23-May-25	Canada	Retail Sales Ex Auto MoM	Mar		0.5

P = Preliminary

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