Archive

Global Manufacturers Shrug Off Tariffs

• Volatile and destructive US trade policy has roiled markets and confidence, but April's flash PMI data suggests the sector isn’t suffering significantly more than before.
• The average held steady while the US balance increased. Weakness concentrated in the UK, where experience of the past decade suggests it is more distorted by bad vibes.
• Unemployment data are a more reliable signal, albeit lagging, and these also remain remarkably resilient. Rate cuts rely on Trump breaking the economy, but lack evidence.

By Philip Rush

Prisoner's Dilemma For Ukraine

• Ukraine cannot avoid painful settlements as the US and Russia pull its resources apart. Europe has no veto over US taxpayers and can’t block all attempts to loosen sanctions.
• Further progress to peace is likely over the next few months. If the US walks away from talks, it is most likely dropping support too, postponing peace while Russia gains more.
• Intensifying support would raise risks along a hard-fought market-negative path. Risks will also remain more elevated in Korea after Ukraine’s misguided incursion into Russia.

By Philip Rush

ECB: Cutting In Shadow of Shocks

• The ECB’s seventh 25bp deposit rate cut to 2.25% risks becoming stimulative, but the shock from US trade policy seen through market moves demanded a response.
• Central bankers are no more aware of the trade policy outlook than markets, but they are more aware of the potential inflationary effects and limits to effective easing.
• Time will reveal the tariffs and impact, allowing the agile ECB to tackle this rather than just the shadow it has cast on anticipatory market pricing. We still expect a June cut.

By Philip Rush

Korea: Policy Rate Held At 2.75% (Consensus 2.75%) in Apr-25

• The Bank of Korea maintained its base rate at 2.75%, aligning with the majority consensus, as heightened uncertainty over US tariff policy, domestic stimulus measures, and exchange rate volatility warranted a pause in easing, despite deteriorating growth prospects.
• Domestic GDP is now expected to undershoot the 1.5% forecast from February due to weak Q1 performance, persistent trade frictions, and subdued domestic demand, while inflation remains stable at around 2%.
• Further rate cuts remain likely, but the MPC will assess external volatility and policy clarity before resuming easing, with the May outlook expected to be a key inflexion point.