PMI Data
Financial markets faced challenges throughout the week as geopolitical developments and weaker-than-expected Purchasing Managers’ Index (PMI) data from the United States toward the end of the week led to a sell-off in equity markets. The unexpected decline in U.S. PMI data was surprising, marking the first contractionary reading in the Services sector since mid-2023.
The US Dollar
Additionally, consumer sentiment data was also weaker than forecast, reinforcing some analysts’ views that the peak of U.S. economic growth has already been reached. The U.S. dollar also continued to weaken over the week as investors assessed the potential implications of proposed tariffs under former President Donald Trump’s policy considerations.
The US
Despite these recent economic indicators coming in below market expectations, we remain optimistic about the outlook for U.S. economic growth over the medium term, as well as for financial markets more broadly. However, the rapid pace of policy announcements by the new U.S. administration, coupled with a lack of clarity on key areas such as trade policy, tariffs, dollar strength, and the domestic agenda, is contributing to increased market volatility.
Australia
Domestically, the Reserve Bank of Australia (RBA) cut the cash rate by 25 basis points, bringing it down to 4.10%. While this move does not indicate the beginning of an aggressive monetary easing cycle, we continue to anticipate at least one further rate cut—possibly two—throughout 2025. The strength of recent employment figures, with an increase of 54,000 jobs, may slow the pace of additional near-term rate cuts. However, labor market data has been mixed, with the unemployment rate remaining steady at 4.1%. This week, attention will be focused on PMI data as well as monthly inflation figures, with the headline Consumer Price Index (CPI) forecasted to increase by 2.6% year-over-year, reflecting a 0.1% increase compared to the previous period.
China
In China, the release of PMI data—expected to remain above 50 points—will offer further insights into the country’s economic trajectory. The Chinese government’s recent moves to re-engage with the private sector, particularly in the information technology sector, may be the first of several additional measures aimed at supporting domestic economic growth while countering trade restrictions imposed by the United States on high-end semiconductor chips.
Overall, a combination of positive domestic growth in China and a weaker U.S. dollar could serve as a catalyst for supporting emerging markets.
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