Safe-haven assets such as gold attracted strong inflows, with bullion prices surging to an intra-week high above $3,500 per ounce, reflecting ongoing concerns around geopolitics and inflation. While there were glimmers of progress on Ukraine and renewed nuclear talks with Iran, trade tensions persisted, and political uncertainty within the U.S. continued to grow. Against this backdrop, market sentiment remains highly sensitive, with volatility likely to remain elevated.
Global markets regained their footing this week as investor sentiment improved, buoyed by signs of easing trade tensions and stronger-than-expected corporate earnings. Although risks remain, several positive developments helped lift equity markets from earlier losses, even as mixed economic data reminded investors that the road ahead may remain volatile.
Initial fears that the historically high U.S. tariffs announced on 2 April would persist have begun to ease. A 90-day pause on new tariffs marked a key turning point, and media reports suggest that further softening may follow, with potential cuts to tariffs on Chinese goods. China, for its part, is said to be considering easing some of its retaliatory measures, while trade negotiations with South Korea and India are progressing. These developments helped lift U.S. equities over the week, led by technology stocks and smaller companies. However, economic data was less reassuring. Business activity slowed to a 16-month low, inflationary pressures built up as supply chains absorbed tariff costs, and underlying demand remained weak once volatile transportation orders were excluded from durable goods data. in imports, likely tied to businesses front-loading ahead of new tariffs.
In Europe, the European Central Bank cut its key interest rate by 25 basis points to 2.25%, as expected. ECB officials noted that while growth risks have risen, particularly due to tariffs, the eurozone’s diversified trading relationships should help avoid recession. Germany revised its 2025 growth forecast down to flat, and eurozone business activity softened further in April, although manufacturing showed some resilience. In the UK, retail sales surprised positively in March, rising by 0.4%, but any optimism was dampened by a further dip in consumer confidence in April, as rising living costs continued to weigh on households.
Asia remained in focus, with Japan’s inflation continuing to surprise on the upside, reinforcing expectations of further policy tightening from the Bank of Japan. Japanese equities performed well, helped by tentative signs of easing trade tensions, although the yen weakened modestly and bond yields edged higher. Meanwhile, China’s Politburo pledged to strengthen support for the economy through new stimulus measures, signalling a cautious but proactive response to mounting external pressures. Although tensions with the U.S. remain high, China is also making moves to stabilise domestic industries and repair ties with Europe.
The International Monetary Fund downgraded its global growth forecast for 2025 to 2.8%, citing persistent inflation, tighter financial conditions, and escalating geopolitical tensions. While markets ended the week on a firmer footing, the global backdrop remains fragile, and policymakers face increasingly difficult trade-offs as they attempt to sustain growth without reigniting inflation.
Equity markets extended their recovery this week, buoyed by the improved sentiment. In the U.S., major indices performed strongly, with the Dow Jones gaining 2.48%, the S&P 500 rising 4.59%, and the Nasdaq surging 6.73%. European markets also advanced, with the Euro Stoxx 50 up 4.43% and the FTSE 100 climbing 1.69%. In Asia, Japan’s Nikkei 225 rose 3.86%, Hong Kong’s Hang Seng gained 2.82%, and Shanghai’s Composite Index edged up 0.80%.
Market Moves of the Week
South Africa’s inflation surprised to the downside in March, with headline CPI easing to 2.7% year-on-year and core inflation falling to 3.1%—the lowest levels seen since mid-2020. The softer readings were largely driven by declines in fuel, food, and core goods prices, alongside a notable drop in education costs. In response to the better-than-expected data, Goldman Sachs has lowered its inflation forecasts, now projecting headline CPI to average 3.3% in 2025 and 4.0% in 2026. With inflationary pressures easing, it also anticipates a 25-basis point interest rate cut by the South African Reserve Bank (SARB) at its May meeting.
In another positive development, markets welcomed the government's decision to scrap a proposed VAT increase, which had threatened to destabilise the recently formed Government of National Unity (GNU). While reversing the VAT hike leaves a R75 billion gap in the national budget, improved revenue collection is expected to offset at least part of the shortfall. The announcement provided a boost to the local bond market and saw rand hedging costs fall to their lowest levels in several weeks, reflecting improved investor sentiment.
The local equity market mirrored the broader global trend, with the JSE All Share Index gaining 1.38% over the week. Industrials led the advance, rising 4.12%, followed closely by financials, which added 3.86%. Resource shares, however, came under pressure, giving back some of their recent outperformance amid ongoing volatility in global commodity markets.
Chart of the Week:
Despite easing slightly from its recent all-time high of $3,500 per fine ounce this week, the surge in gold warrants close attention. In inflation-adjusted (real) terms, gold has decisively broken out over the past few months, now far exceeding the previous peak set during the stagflation era and the Iran hostage crisis of 1980. The chart above tracks the real gold price since President Richard Nixon ended the Bretton Woods gold peg to the dollar in August 1971. (Source: Bloomberg).
Credits: Strategic IQ
© 2025 CAPTA Wealth