BoC, Retail Sales, and Powell in focus

European markets are following their Asian counterparts lower in early trade today with Donald Trump’s decision to ban the export of Nvidia H20 chips to China signalling a tech lead decline for US equities today. Aside from this development, China has found itself in the headlines overnight, reporting a raft of better-than-expected data points for the month of March. With GDP at a 1 ½ year high (5.4%), the best industrial production output figure since June 2021, and the highest retail sales figure in a year, we are seeing clear evidence of a coming together between Beijing stimulus efforts and front-loaded US imports ahead of Trump’s tariffs. Unfortunately, whilst the Chinese maintain the view that a 5% growth rate is attainable this year, downgrades from the likes of ANZ 4.3%, SocGen 4%, and Commerzbank 3.8% suggest a likely slowdown unless this trade war is swiftly resolved.

This morning saw a welcome decline in UK inflation, with both headline and core CPI falling back to bolster calls for a rate cut next month. Amid all the talk of resurgent inflation in a trade-war world, today’s decline in UK inflation comes amid similar moves lower for US, Japan, Canada, and eurozone CPI. In part this is a result of Trump’s efforts to drive down energy costs, with crude falling into a four-year low. Meanwhile, the growing recession risk appears to be putting downward pressure on prices as businesses and consumers react. For countries such as the UK, we are likely to see the US-China trade war create disinflation as China dumps their excess supply on alternate trading partners. The sharp 4.2% decline in the ‘games, toys and hobbies’ segment highlights the potential for China-led disinflation to come to pass.

Looking ahead, an appearance from Fed Chair Powell comes in a session that also provides a raft of major market moving events from the US and Canada. The Bank of Canada are expected to keep rates steady after last month’s 25bp cut, highlighting the more stable environment than had been in place prior to Trump’s reciprocal tariff delay. Also keep a close eye out for the latest US retail sales data for March, with optimism having turned to concerns over how tariffs could cause a US recession. With Nvidia expected to lead a tech decline at the open, Trump’s decision to halt the export of H20 chips to China highlights his willingness to hurt US businesses in the aim of winning this trade war.