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Investors await Fed policy decision - China unveils major policy easing measures

The Federal Open Market Committee (FOMC) will announce its interest rate decision tonight and Federal Reserve Chair Jerome Powell will deliver his arguments at the following press conference. It is the Fed’s first meeting since US President Donald Trump’s “reciprocal” tariffs went into effect in April. In other news, Germany got a new chancellor as Friedrich Merz was elected but unexpectedly needed two parliamentary votes. In Asia, stocks in Hong Kong surged after China’s central bank announced significant policy measures. 

  • Date
  • Author Alessandro Fezzi, LGT Research Content & Publications
  • Reading time 5 minutes

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US stock markets declined on Tuesday, with the Dow Jones Industrial Average dropping nearly 1% to 40,829.00 points, the S&P 500 falling 0.8% to 5606.91 points, and the Nasdaq 100 decreasing 0.9% to 19,791.35 points. Health sector stocks were hit hardest due to potential US tariffs on medications, following President Trump's announcement of new pharmaceutical tariffs and domestic production incentives. Additionally, EU Trade Commissioner Maros Sefocvic warned of possible new US tariffs on European exports.

US-China trade talks set to commence

US Treasury Secretary Scott Bessent and Trade Representative Jamieson Greer are scheduled to meet Chinese officials in Switzerland this week to discuss trade issues. The discussions, involving Chinese Vice Premier He Lifeng, come amid strained trade relations marked by high tariffs from both nations. However, it remains uncertain if these negotiations will lead to a de-escalation of the trade conflict.

China unveils major policy easing measures

China’s central bank announced significant policy measures on Wednesday, including a ten-basis point reduction in the seven-day reverse repurchase rate to 1.4% and a 50-basis point cut in the reserve requirement ratio. These steps aim to inject additional liquidity of nearly USD 139 billion into the economy to counteract trade-related pressures. The People’s Bank of China also introduced targeted support for key sectors and reduced mortgage rates under the housing provident fund.

Hong Kong stocks surge as China eases policy

The Hang Seng index in Hong Kong rose 2% on Wednesday after China's central bank and financial regulators announced plans to cut key interest rates to support economic growth amid trade concerns. Japan's Nikkei 225 and South Korea's Kospi saw modest gains, while the Australian S&P/ASX 200 climbed 0.2%.

Merz elected German chancellor following initial setback

Friedrich Merz, leader of Germany's Christian Democratic Union, was elected chancellor on Tuesday in a second parliamentary vote following an unexpected setback in the first vote. This election marks a significant political shift in Germany, with Merz expected to address key economic and social issues. 

Eurozone business sentiment dips slightly

Corporate business sentiment in the eurozone decelerated in April as demand weakened, with the services sector nearly stagnating, according to data released on Tuesday. The HCOB Eurozone Composite PMI Output Index dropped to 50.4 from 50.9 in March, just above the threshold separating growth from contraction. The services PMI fell to 50.1 from 51.0, its lowest in five months. Despite the slowdown, employment in the services sector saw marginal growth, while manufacturing continued to cut jobs. Inflation pressures eased, with input costs and output charges at their weakest in five months.

Euro producer prices dropped in March

Producer prices in the euro countries fell by 1.6% in March compared to the previous month, surpassing economists' expectations of a 1.4% decline, according to Eurostat data released on Tuesday. In February, prices had decreased by 0.2%. The drop was primarily driven by a significant reduction in energy prices. Annually, producer prices increased by 1.9%, below the forecasted 2.5%. These prices generally impact consumer prices, which the European Central Bank (ECB) considers for its monetary policy, with the ECB recently lowering interest rates.

Corporate and economic calendar

Corporate news in focus: Quarterly figures from Zurich Insurance, Novo Nordisk, BMW, Siemens Healthineers, Legrand, Scor, Emerson Electric, Ahold, Fresenius, Veolia, Walt Disney, Barrick Gold

Economic data in focus: German manufacturing orders (08:00), Retail Sales eurozone (11:00), US Federal Reserve monetary policy announcement (20:00) and press conference (20:30). 

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Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: Alessandro Fezzi
Source: LGT Bank (Switzerland) Ltd.