Weekly Macroeconomic Analysis: Market Trends & News

Macroeconomic analysis covering key developments in global markets, including trade tensions, policy changes, and sector-wise financial trends.

The week of 5th May 2025 was quite volatile. While some countries experienced positive momentum, others faced challenges. The major reason was the eased trade talks between the US and UK. Additionally, the US-China trade agreement, which progressed over the weekend, contributed to an overall positive outlook in the markets.

However, the India-Pakistan tensions are still serious, due to which there is pressure on the markets of both countries. In this blog, let us look at weekly macroeconomic analysis along with financial market insights.

Indian Market Update

During the week, India launched a retaliatory attack on Pakistan over the Pahalgam-Kashmir terror attack issue. Earlier, India had announced a mock drill on 7th May 2025, and on the same night, India attacked Pakistan. After that, in response, Pakistan attacked India, and the problems escalated.

This impacted both the markets, where Indian markets corrected by 1.7% during the week. Due to the expectations of a ceasefire, FIIs remained net buyers during the week, with total purchases amounting to Rs 5,086 crores. The only significant selling occurred on 9 May 2024, when they sold approximately Rs 3,798 crores.

On the other hand, Pakistan markets were severely impacted by 5.5%. The major correction came on Thursday, when their index fell more than 7%, and they also had to halt trading for one hour.

Source: Nifty-50 Tradingview

Source: Karachi 100 Tradingview

However, on Saturday, May 10, 2025, the US got involved and attempted to make a settlement between the two countries, which eventually led to a ceasefire between India and Pakistan. As a result, on Monday, 12 May 2025, the Indian markets surged, with both the Nifty and Sensex rising by 3.5% in a single day, which was the biggest single-day gain since February 2021.

Source: Nifty-50 Tradingview

India’s services Purchasing Managers’ Index (PMI) was reported at 58.7 in April 2025, compared to 58.5 in the previous month. This growth was seen because of an increase in new business. Among the various segments, the finance and insurance sector led the growth. Expenses also increased, with major contributions coming from Asia, Europe, the Middle East, and the US.

Source: Trading Economics

US Market Update

During the week, the US markets showed a strong recovery, with the Nasdaq Composite Index up 1.6%. This was mainly due to the trade settlements between the UK and the US.

Source: Nasdaq Composite Tradingview

In the Fed meeting, the interest rates remained unchanged in the range of 4.25% to 4.5%. This decision was made after conducting an economic policy analysis, reflecting ongoing concerns about several key factors: the unresolved global trade tensions, lingering recession risks in the US, and uncertainty surrounding inflation trends. Due to all these reasons, the US Fed kept the rate range unchanged for this time.

With the market getting stable, its impact was seen on the US Treasury bond yields, where the yield increased from 4.24 to 4.43 during the week. This was mainly due to the markets stabilising, and as a result, investments were moving out of bonds, which led to a rise in Treasury yields.

Source: Trading Economics

Europe Market Update

During the week, the Bank of England lowered its interest rate by 25 basis points, from 4.50% to 4.25%. The bank hopes the rate cut will help the UK deal with weaker demand from other countries. A new trade deal between the US and UK has been eased, and President Trump called it a “full and strong” agreement. Other central banks across the globe are also adjusting their policies because of ongoing trade issues.

Germany’s industrial production rose by 3% in March 2025, primarily due to a surge in export demand, particularly from the United States and China. U.S. buyers increased orders in anticipation of impending tariffs, leading to a 2.4% rise in exports to the U.S., while exports to China jumped by 10.2%. This heightened demand boosted manufacturing activity, contributing to a 3% increase in industrial output for the month. Additionally, industrial orders rose by 3.6% in March, showing a recovery in the sectors. 

China Market Update

The US and China were going to have a meeting in Switzerland over the weekend to work on a trade deal. Due to this, investor sentiment across countries shifted, and it is expected that something productive will happen in the upcoming meeting about trade easing. As a result, the Chinese stock market rallied, with the SSE Composite Index surging by 1.4% during the week.

Source: SSE Composite Tradingview

Further, China’s trade report showed a significant increase in exports, rising by 8.1% compared to April of the last year. This growth was mostly due to higher demand from Southeast Asia, Africa, and Latin America, despite a 21% drop in exports to the United States due to higher tariffs and ongoing trade issues.

China took significant monetary policy measures on 7 May 2025, to stimulate its economy due to increasing trade tensions with the United States. The seven-day reverse repurchase rate was lowered by the People’s Bank of China (PBoC) from 1.5% to 1.4%, and the reserve requirement ratio (RRR) for banks was cut by 0.5 percentage points, with the two changes to take place on May 15. Other important points which were discussed are as follows:

• A 0.25% point decrease in rates for housing fund loans.
• A 0.25% point reduction in rates for special lending tools and extra funding for policy banks.
• An increase of 300 billion yuan in the funding limit for technology loans, bringing the total to 800 billion yuan, to support equipment upgrades and trade-in programs for consumer goods. 

Commodity Market Update

During the week, the inventories of crude oil declined by 2 million barrels from last week to a total of 438.4 million barrels, which is roughly 7% below the five-year average at this time. Crude oil imports rose to 6 million barrels per day, a rise of 557,000 barrels per day from the previous week.

The natural gas storage stood at 2,145 billion cubic feet (Bcf), an addition of 104 Bcf over the prior week. The storage is 412 Bcf below the level last year but 30 Bcf above the five-year average of 2,115 Bcf.

Bottomline

Looking at the macroeconomic indicators, the outlook for the Indian markets remains unstable due to the ongoing tensions between India and Pakistan. Recent trade deals between various countries like the US-China are contributing to positive global sentiment. So, the upcoming week could be crucial, considering these major global economic trends and developments.Investors need to stay updated and do proper research before investing. They can use online platforms, which are readily available now, to conduct their research and then make informed investment decisions.