Tariff-Related Inflation Fears Kept Consumers Spending in April

Economic

China–U.S. Trade War

Summary:

Economists are watching retail sales as an important signal on whether consumer fears about President Donald Trump’s tariffs are making them hesitant to spend money.

A key indicator of the impact of tariffs on the economy isn’t flashing warning signs yet, as retail sales growth continued in April.

While slower than March’s surge, retail sales increased by 0.1% in April. The measure of sales at retail stores was in line with estimates of economists surveyed by The Wall Street Journal and Dow Jones Newswires. Last month’s sales growth figures were revised upward to reflect 1.7% growth, as shoppers rushed to purchase items ahead of potential U.S. tariffs.

“[April's 0.1% growth] is much more impressive than it sounds, as it means March's huge gains were maintained,” wrote Moody’s Economist Scott Hoyt.

Retail Sales in Focus Amid Tariff Tussle

Economists are watching retail sales as an important signal on whether consumer fears about President Donald Trump’s tariffs are making them hesitant to spend money.

So far, poor consumer sentiment surveys haven’t resulted in a meaningful decline in spending, mainly as people rush to buy items before tariffs raise prices. However, economists still expect a slowdown as tariffs work through the economy.

“Going forward, we anticipate further weakness in consumer spending as pay back from the front-loading of consumption ahead of the tariffs, higher tariff-induced prices, high borrowing rates, and a softening in employment gains that will weigh on aggregate income gains for households,” Nationwide Chief Economist Kathy Bostjancic said.

Consumer spending powers the economy, representing about two-thirds of the U.S. economy, with goods purchases making up about a third of spending levels. Retail sales, in particular, can illuminate tariffs’ impact on consumers because they reflect spending on goods like cars, building supplies, sporting goods, and toys. Many items tracked by the measure are manufactured in foreign countries and subjected to import taxes.

“The retail sales figures in the coming months take on additional importance as they serve as a harbinger of the impact of tariffs on the broader economy,” Wells Fargo economists wrote.

Source: Investopedia

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Adam

Economic

The average rate on a 30-year mortgage in the U.S. edged above 6.8% this week, returning to where it was just three weeks ago.

The rate increased to 6.81% from 6.76% last week, mortgage buyer Freddie Mac said Thursday. A year ago, the rate averaged 7.02%.

Borrowing costs on 15-year fixed-rate mortgages, popular with homeowners refinancing their home loans, also rose. The average rate ticked up to 5.92% from 5.89% last week. It’s down from 6.28% a year ago, Freddie Mac said.

Mortgage rates are influenced by several factors, including global demand for U.S. Treasurys, the Federal Reserve’s interest rate policy decisions and bond market investors’ expectations about the economy and inflation.

The average rate on a 30-year mortgage has remained relatively close to its high so far this year of just above 7%, which it set in mid-January. The average rate’s low point so far was five weeks ago, when it briefly dropped to 6.62%.

The elevated mortgage rates, which can add hundreds of dollars a month in costs for borrowers, have discouraged home shoppers, leading to a lackluster start to the spring homebuying season, even as the inventory of homes on the market is up sharply from last year. Sales of previously occupied U.S. homes fell in March, posting the largest monthly drop since November 2022.

The recent swings in mortgage rates reflect volatility in the 10-year Treasury yield, which lenders use as a guide to pricing home loans.

The yield, which had mostly fallen this after climbing to around 4.8% in mid-January, surged last month to 4.5% amid a sell-off of government bonds, triggered by investor anxiety over the Trump administration’s trade war.

The yield eased in the weeks since, but climbed above 4.5% earlier this week after the U.S. and China agreed to a 90-day truce in their trade dispute. That raised expectations that the Federal Reserve won’t have to cut interest rates as deeply as expected this year in order to shield the economy from the damage of tariffs.

The 10-year Treasury yield was at 4.45% in midday trading Thursday.

Economists expect mortgage rates to remain volatile in coming months, though they generally call for the average rate on a 30-year mortgage to remain above 6.5% this year.

Source: finance.yahoo

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Owen Li

Political

Much of the world was caught off guard when amid an avalanche of multiple US-Gulf deals worth hundreds of billions of dollars each being signed Wednesday, President Trump not only announced that he is lifting all sanctions on Syria, but even met in-person with US-designated terrorist and Syrian President Ahmed al-Sharaa (Jolani) in the Saudi capital.

Apparently even the State Department and US Treasury departments were caught off guard. Trump's move to lift sanctions on Syria "took many by surprise," including his own officials at State and Treasury, according to Reuters.

"In Washington, senior officials at the State Department and Treasury Department scrambled to understand how to cancel the sanctions, many of which have been in place for decades … The White House had issued no memorandum or directive to State or Treasury sanctions officials to prepare for the unwinding and didn’t alert them that the president’s announcement was imminent," several senior US officials anonymously told publication.

Via Office of the Syrian Presidency

"Officials were confused about exactly how the administration would unwind the layers of sanctions, which ones were being eased and when the White House wanted to begin the process," they added while emphasizing that top officials were "caught off guard."

"Everyone is trying to figure out how to implement it," Reuters cited the officials as saying. Legally and procedurally, the removal of the sanctions will be a process which could take weeks or even months.

Meanwhile there are reports saying the Syrian Pound (SYP) jumped 30% quickly upon Trump's announcement. The local currency has experienced runaway inflation, and people have to lug huge bricks of cash around to purchase simple items like eggs or medicines.

Syrians have further endured rolling blackouts and lack of resources, or even fuel, for years amid the US-sanctions regimen which was geared toward regime change. But now...

The streets of Syria were a carnival of car horns, fireworks and flags after President Donald Trump made the surprise announcement that the United States would lift sanctions that have throttled the country’s economy for more than 45 years.

Trump stunned even close observers on Tuesday by saying he wants to normalize relations after Syria’s longtime president, Bashar al Assad, was toppled in December. Trump met Wednesday with Assad’s successor, interim President Ahmad al-Sharaa, a former leader of an al-Qaeda offshoot group, in Saudi Arabia after urging him late Tuesday to “show us something special.”

Trump said he wanted to give Syrians a 'fresh start' - and indeed this could be the start of an economic turnaround after years of brutal proxy war.

With Assad having been overthrown, the Saudis and Qataris are also stepping in to cover national debt and prop up public sector salaries.

Ultimately, Washington and the Gulf monarchies got their desired regime change in Syria. It was never about "democracy" or the Syrian people at all. The brutality of the sanctions, which compounded the common mysery, proves that - as some US officials are now openly admitting.

But this sick policy of the Washington blob is nothing really new...

Source: Zero Hedge

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Adam

Economic

This morning was a deluge of macroeconomic statistics - jobless claims, factory output, retail sales, and producer prices - all arriving in one dense wave. The signals were, in classic fashion, mixed. But one figure stood out for all the wrong reasons: core retail sales, a key input for GDP, unexpectedly slipped 0.2% in April, disappointing investors who had been bracing for modest growth.

Headline retail sales rose just 0.1% - a whisper of an increase, and a far cry from March’s unexpectedly strong 1.7% surge. However, this was slightly better than expected by economists. Consumers were selective: spending picked up at restaurants and garden centers, as if spring had coaxed a few more dollars out of their wallets. But other corners of Main Street - bookstores, hobby shops, sporting goods - felt the chill of tighter budgets and perhaps tighter minds.

Elsewhere, jobless claims nudged up to 229,000, factory activity in New York contracted deeper into negative territory, and producer prices delivered a rare surprise: a 0.5% monthly decline, even as the annual pace remained a steady 2.4%. It was a reminder that while inflation may be cooling, it isn’t quite done.

Taken together, the numbers paint a picture of an economy that’s neither overheating nor collapsing, but treading water. Growth is there, but it’s fragile. Confidence is present, but it’s cautious.

America's equity rebound, now over a month long, is beginning to show signs of fatigue. Yet the Nasdaq 100 managed a sixth consecutive gain, fueled by a renewed flicker of FOMO (fear of missing out). Investors are returning to their favorite adrenaline-providing tech stocks - equities that reliably amplify gains during rallies, offer a whiff of invincibility, and seem insulated from the doubts hanging over more cyclical sectors. The S&P 500, for its part, has now advanced in 14 of its last 17 sessions, albeit with a mere 0.1% rise on Wednesday.

Europe was more subdued. Most indices posted mild declines, lacking the stimulus of the Gulf whirlwind tour that produced a series of headline-grabbing commercial announcements from Donald Trump. These included deals supposedly worth hundreds of billions of dollars. The figures are immense; the details, conveniently opaque. But as ever, the intoxicant matters more than the bottle.

Consider one such proclamation, which warrants dissection - not for its veracity, but for its audacity. Mr Trump took to social media - one might reasonably ask whether that phrase is tautological - to boast that Qatar Airways had placed an order for 160 Boeing aircraft, valued at $200bn. This implies a per-plane price tag of $1.25bn. For the uninitiated, Boeing's priciest model, the stretched B777, lists at around $450m. That figure, mind you, is theoretical: neither Boeing nor Airbus has published catalogue prices for years, and real-world buyers rarely pay them anyway. John Leahy, Airbus's outspoken former sales chief, once quipped that across his career, only one customer ever paid list price. Discounts - often deep ones - are the norm, especially for mega-orders.

So, to recap: either Mr Trump struck the most lopsided deal in aviation history, or Qatar somehow paid three times the sticker price, perhaps six times the negotiated one. And that's assuming the jets in question are B777s. Were they B737MAXs, which cost under $150m apiece (and come with their own aeronautical baggage), the discrepancy would be even more spectacular. There is, of course, a more prosaic explanation: the former president likes round numbers and grand declarations. The White House did issue a correction - awkwardly - claiming the actual order was for 210 planes at $96bn, including B777s and B787s. That averages out at $457m a unit. Still inflated, but at least within the realm of possibility. Apply standard volume discounts and the true cost probably lands closer to $50bn. A sizeable deal, to be sure - just not the $200bn whopper initially proclaimed.

In short, say what you like. It's unlikely to matter.

Meanwhile, the more serious developments of the day fall into three broad categories. First, peace talks between Russia and Ukraine are due to take place in Turkey. Neither Vladimir Putin nor Donald Trump will attend, though Volodymyr Zelensky had entertained hopes of higher-level participation. Second, yields on U.S. government debt continue to rise, reflecting a market increasingly skeptical about imminent rate cuts. While not disastrous, this trend suggests that uncertainty has not abated - merely shifted shape. And finally, a market-moving rumor: Iran is reportedly open to scrapping its nuclear ambitions if Western sanctions are lifted. Oil prices duly sagged.

Asia-Pacific markets mirrored this indecisive mood. Tokyo fell by 1%, while indices in mainland China, Hong Kong and South Korea were each down around 0.5%. Australia managed a 0.2% gain; India edged up 0.4%. Europe is mixed, with the Stoxx Europe 600 up 0.1%. Futures on Wall Street are in the red, ranging from -0.3% for the Dow to -0.5% for the Nasdaq 100.

Source : marketscreener

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Devin

Political

Israeli military strikes killed at least 85 people in the Gaza Strip on Thursday, Palestinian medics said, as the United States and Arab mediators pushed for a ceasefire deal and U.S. President Donald Trump visited the Middle East.

Most of the victims, including women and children, were killed in Khan Younis in southern Gaza in airstrikes that hit homes and tents, they said.

The dead included journalist Hassan Samour, who worked for the Hamas-run Aqsa radio station and was killed along with 11 family members when their home was hit, the medics said.

The Israeli military said its air force had struck 130 targets used by militant groups in Gaza over the past two days.

Israel has intensified its offensive in Gaza as it tries to eradicate Hamas in retaliation for the deadly attacks the Palestinian militant group carried out on Israel in 2023.

In Jabalia in the northern Gaza Strip, the health ministry said an Israeli strike on Al-Tawba medical clinic killed at least 15 people and wounded several others. It took Thursday's death toll to 85, medics said.

Hamas said in a statement that Israel was making a "desperate attempt to negotiate under cover of fire" as indirect ceasefire talks take place, also involving Trump envoys and Qatar and Egyptian mediators in Doha.

Palestinians on Thursday commemorated the "Nakba", or catastrophe, when hundreds of thousands fled or were forced to flee their towns and villages during the 1948 war that gave birth to Israel.

"What we are experiencing now is even worse than the Nakba of 1948," said Ahmed Hamad, a Palestinian in Gaza City who has been displaced several times.

"The truth is, we live in a constant state of violence and displacement. Wherever we go, we face attacks. Death surrounds us everywhere."

ESCALATING VIOLENCE

Palestinian health officials say the Israeli attacks have escalated since Trump started a visit on Tuesday to the Gulf states of Saudi Arabia, Qatar and the United Arab Emirates, which many Palestinians had hoped he would use to push for a truce.

Attacks on Gaza on Wednesday killed at least 80 people, local health officials said.

Little has come of the indirect ceasefire talks.

Hamas says it is ready to free all the remaining hostages it is holding in Gaza in return for an end to the war, while Israeli Prime Minister Benjamin Netanyahu prefers interim truces, saying the war can only end once Hamas is eradicated.

Israel invaded Gaza in retaliation for the Hamas-led attack on southern Israeli communities on October 7, 2023, in which about 1,200 people were killed and 251 were taken as hostages to Gaza, according to Israeli tallies.

Israel's campaign has killed more than 52,900 Palestinians, according to local health officials. It has left Gaza on the brink of famine, aid groups and international agencies say.

A U.S.-backed humanitarian organisation will start work in Gaza by the end of May under an aid distribution plan, but has asked Israel to let the United Nations and others resume deliveries to Palestinians now until it is set up.

No humanitarian assistance has been delivered to Gaza since March 2, and a global hunger monitor has warned that half a million people face starvation in Gaza.

Hamas said it had expected that aid would flow back into Gaza after it freed American-Israeli soldier Edan Alexander on Monday from captivity in Gaza, according to what it said was an understanding reached with U.S. officials.

"Failing to achieve these steps, and specially allowing humanitarian aid for our people, will cast negative shadows over efforts to conclude prisoner swap negotiation," said Hamas.

Source: Reuters

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James Whitman

Economic

During his first 15 years at Qatar Investment Authority, Mohammed Al Sowaidi helped establish its US presence and scout opportunities. Now, as head of the $524 billion state-backed entity, he’s pledging to invest an amount nearly equal to the fund’s current size, as part of a major commitment by the Gulf nation.

QIA plans to invest an additional $500 billion in the US over the next decade, Al Sowaidi said in an interview in Doha. The sweeping new outlays will target areas traditionally favored by the fund — such as artificial intelligence, data centers and health care — while also aligning with President Donald Trump’s agenda to reindustrialize the US, he said.

The $500 billion accounts for nearly half of the total $1.2 trillion economic pledge by Qatar during Trump’s visit this week.

“We’re not shifting away from other markets — we’re increasing our exposure to the US,” Al Sowaidi said. The current US policy environment offers a “more promising direction” for long-term capital, he said.

To be sure, the QIA is not alone in pursuing an aggressive, US-focused investment strategy among Middle East funds. Saudi Arabia’s Public Investment Fund, state-owned entities in the United Arab Emirates, and the Kuwait Investment Authority are also looking to deploy billions across similar sectors — raising the likelihood of competition for the same deals and the risk of overpaying for assets.

Al Sowaidi took over as the chief executive officer last year during a pivotal moment for the fund, with an expansion of the country’s gas projects expected to funnel billions of dollars into its coffers. At the same time, Doha is no longer hamstrung by outlays for large projects like the 2022 FIFA World Cup, which is estimated to have cost $300 billion.

With fresh inflows expected, Al Sowaidi plans to steer the fund toward providing capital to large companies, taking stakes in listed businesses and prioritizing bigger deals.

That marks a departure from the QIA’s recent focus on smaller venture capital deals. Still, Al Sowaidi said the move isn’t “an actual strategic shift or pivot,” but rather a “further evolution” of the fund’s approach to keep pace with rapid global change.

The QIA is already the world’s eighth-largest sovereign wealth fund and owns a string of high-profile assets including London’s Harrods department store and the Shard skyscraper. But after years of relatively quiet dealmaking, Al Sowaidi’s plans show the fund is ready to be back in the spotlight.

Al Sowaidi joined the QIA in 2010, when it was led by Sheikh Hamad bin Jassim bin Jaber Al Thani, a former prime minister who’s widely regarded as among the most high-profile investors in the Middle East. Sheikh Hamad was ultimately replaced at the QIA by Ahmed Al-Sayed, who helped orchestrate large deals including Glencore Plc’s $29 billion takeover of Xstrata Plc.

Al Sowaidi, for his part, spent most of his early years at the fund in the Americas, where he helped establish a US office and eventually worked his way up to become chief investment officer for the region.

He holds bachelor’s degrees in finance and statistics from the University of Missouri, and has held roles including as the head of private equity funds and president of the QIA Advisory office in New York. The QIA was then known for its work in snapping up high-profile stakes in the likes of Barclays Plc and Credit Suisse.

Qatar is already one of the world’s richest nations and among the top exporters of liquefied natural gas. But the government’s plans to significantly expand that output is set to add more than $30 billion a year to state revenues.

Some of this cash will be funneled into the QIA. The research consultancy Global SWF recently projected the QIA’s total assets will surge to $905 billion by 2030, meaning it would be vaulted into the ranks of other high-profile investors across the region like Saudi Arabia’s PIF and the Abu Dhabi Investment Authority.

The QIA is already positioning itself to prepare for significant outlays.

Al Sowaidi said the fund typically takes minority stakes in successful businesses, with deal size varying widely by asset class. “In public equity, we can go big,” he said.

“In private equity, we’re capable of multibillion-dollar transactions, but we can also stay nimble — especially in sectors like technology or health care.”

Such a move would be welcome news for the private equity industry. For years, high interest rates have put a damper on global dealmaking. When private equity firms aren’t able to sell their portfolio companies at a healthy pace, they can’t return capital to their investors. Then that money can’t be recycled into new funds.

The QIA’s efforts in that space would help get fundraising moving for the industry again — and make up for the pullback that’s expected from the $925 billion PIF, which has started to increasingly focus on domestic investments.

Already, financial firms are eager for the chance to work more closely with the QIA. Eduardo Saverin’s B Capital, for instance, unveiled plans to set up offices in Qatar earlier this year. Days later, BlackRock Inc.’s Global Infrastructure Partners, said it would set up in Doha too.

Those outside Doha will get more insight into Al Sowaidi’s thinking next week, when he speaks at the annual Qatar Economic Forum, where top finance executives from around the world and key names from Trump’s orbit — including his son Eric and Tesla Inc.’s Elon Musk — are scheduled to speak.

Doha had until recently largely stayed away from the race for regional financial dominance, even as a flurry of Wall Street firms announced plans to set up their regional headquarters in Riyadh and hedge funds flocked to Abu Dhabi.

But Al Sowaidi’s plans show the gas-rich nation is intensifying efforts to catch up.

Source: Bloomberg Europe

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Adam

Cryptocurrency

Top cryptocurrencies experienced a pullback on Thursday, amid signs investors are taking profits off the table after a recent rally.

Bitcoin touched lows of $101,500 at one point, indicating a return to all-time highs might not be as imminent as some bulls hoped.

Sell-offs were more pronounced among major altcoins. Ethereum has fallen by 3% over the past 24 hours—with XRP, Solana and Dogecoin all shedding about 5%.

Risk appetite also appears to be cooling in the stock market too, with the Federal Reserve set to cut interest rates less frequently in 2025 than first thought.

BRN's lead research analyst Valentin Fournier argues healthy inflows into BTC and ETH ETFs "provides a solid foundation for long-term support."

Describing Thursday's declines as a "modest pullback," he wrote: "While this appears to be a healthy correction, altcoins, after leading the rally, are showing more volatility.

"We believe Bitcoin's $100k level will serve as a critical support zone for an extended accumulation phase," Fournier wrote.

YouHodler's chief of markets Ruslan Lienkha told Decrypt that upward momentum is moderating now that tariff negotiations have concluded, with short-term traders deciding to lock in profits across the equity markets.

"This shift in sentiment has spilled over into riskier assets, including Bitcoin. As a result, the current pullback appears to be a correction within a broader medium-term uptrend," he added.

Going forward, Lienkha believes "ongoing global economic uncertainty and persistently high interest rates in the U.S. may act as headwinds" for crypto, and could limit upside potential.

Newhedge measures Bitcoin's correlation with the S&P 500 on a scale of -1 to 1. While -1 indicates there's no connection between these markets, a score closer to 1 suggests they rise and fall in tandem with one another.

With a current reading of 0.86, continued strength for BTC may hinge upon how things unfold on Wall Street.