The unexpectedly severe “Liberation Day” tariffs—especially those targeting China—have significantly worsened global growth prospects. The global GDP forecast has been revised down to 2.3% for 2025, with the risk of a technical global recession now elevated. Countries with strong trade linkages, including Canada and Mexico, are expected to fall into recession, while China’s growth outlook has been cut to just above 4%.

Central Banks and Global Economy!

The trade-driven slowdown is pushing major central banks toward more accommodative monetary policy:

• The Federal Reserve is expected to cut rates by 50 basis points in 2025, beginning in June, though tariff-related inflation may moderate the pace of easing.
• The European Central Bank could bring its policy rate down to 1.50%, following a recent 25 bps cut, as inflation cools and eurozone growth weakens.
• The Bank of Canada is forecast to reduce rates by 75 bps to 2.00% by year-end amid early signs of recession and trade exposure.
• The Bank of Japan, already cautious, is likely to deliver just one more 25 bps hike to 0.75% in July, constrained by yen strength and trade uncertainty.

Emerging market central banks are poised to ease policy cautiously, balancing FX volatility, inflation risks, and slowing external demand:

• Brazil is expected to hold rates steady through 2026 due to persistent inflation risks.
• Chile is likely to extend its rate pause.
• Mexico’s Banxico is projected to cut aggressively in 2025 as inflation slows and recession risk rises.
• In China, PBoC expected to hold the rates at 3.1% and 3.6% for one and Five-year loans by year-end to encourage domestic demand and small businesses.
• In Turkey, The Central Bank of Turkey (CBRT) unexpectedly raised rates by 350bps to 46% in April, ending a streak of three cuts. The move aims to curb strong domestic demand and FX pressure, amid rising global trade risks and political tensions. The CBRT signaled that tight policy will remain until price stability is restored.
• The Central Bank of Russia kept its benchmark interest rate unchanged at 21.00% in April, as RCB trying to combat persistent inflationary pressures while balancing financial stability. With inflation still elevated and geopolitical uncertainty ongoing, policymakers signaled a cautious stance on future monetary easing.

U.S. Economic Overview: Policy Shifts and Mixed Growth Signals

Policy Changes and Trade Measures

The new White House administration has enacted a sharp policy shift, imposing significant tariffs on imports—including rates as high as 145% on select Chinese goods and a 10% across-the-board levy on most foreign products. These measures aim to fund domestic tax cuts and bolster U.S. industrial competitiveness but are viewed as hawkish fiscal policies that could exacerbate inflationary pressures and recession risks.

Slowing GDP Growth Amid Sectoral Divergence

Recent data indicates a deceleration in U.S. economic expansion. Real GDP growth slowed to 2.4% (annualized) in Q4 2024, down from 3.1% in Q3, with full-year 2024 growth holding steady at 2.8%matching 2023’s pace. The Q4 slowdown was driven by weaker business investment and exports, though robust consumer spending and government outlays provided offsetting support.

Early 2025 saw further softening, with Q1 GDP growth projected at just 0.1%. A surge in imports ahead of anticipated tariffs is expected to weigh on net exports, while inventory adjustments may partially mitigate the drag. Consumer activity rebounded in March after a sluggish start to the year, and business investment showed signs of recovery—primarily in aircraft manufacturing. However, the housing sector remains subdued due to affordability constraints and elevated inventory levels.

Inflation Moderates but Remains Elevated

Inflation has eased but persists above the Federal Reserve’s target. The March CPI declined 0.1% month-over-month, lowering the annual headline rate to 2.4% (down from 2.8% in February). Core CPI (excluding food and energy) stands at 2.8% year-over-year, while the Fed’s preferred PCE deflator registered 2.5% in February 2025. The upcoming March PCE release (due April 30) will provide further clarity, though analysts caution that new tariffs could reignite price pressures, potentially reversing recent disinflationary progress unless demand weakens sufficiently.

Labor Market: Tight Conditions Show Early Cracks

The U.S. labor market remains tight but is exhibiting tentative signs of cooling. March payrolls expanded by 228,000, exceeding expectations, even as the unemployment rate edged up to 4.2%. Weekly jobless claims remain low (220,000–230,000), reflecting persistent labor demand, but hiring momentum has slowed (~150,000 monthly gains in Q1). Surveys indicate businesses are adopting a “wait-and-see” approach to recruitment, with Fed officials characterizing the labor market as “at or near full employment.” Concurrently, federal workforce downsizing has led to layoffs, adding to labor market uncertainty.

Consumer Spending: Resilient Yet Fragile

Consumer spending strengthened in early 2025 but reveals underlying vulnerabilities. March retail sales surged 1.4%, the largest gain since January 2023—driven by a 5.3% jump in auto sales and a rebound in dining out (+1.8%). However, this uptick may partly reflect “tariff-front loading” behavior rather than sustainable demand. Broader consumer sentiment remains weak (near multi-year lows), with inflation expectations elevated. High-income households continue to drive spending, while lower-income cohorts face mounting financial strain.

U.S. Economic Outlook for May 2025: Navigating Policy Crosscurrents

The U.S. economy continues to demonstrate resilience, though growing headwinds from shifting trade policies and persistent inflation are clouding the outlook. As the Federal Reserve walks a tightrope between controlling price pressures and supporting growth, May’s economic data releases will prove critical in shaping policy expectations. The central bank’s upcoming meeting on May 6-7 is widely anticipated to maintain interest rates at their current 4.25-4.50% range, reflecting Chair Powell’s commitment to data-dependent decision-making.

Key indicators this month will provide crucial insights into the economy’s trajectory. The April employment report, due May 2, is expected to show continued labor market strength with around 150,000 jobs added and unemployment holding steady at 4.2%. Inflation readings will be particularly scrutinized, with the May 14 CPI release and May 31 PCE report likely to show whether recent moderation in price pressures can be sustained amid new tariff measures. Consumer spending data on May 15 will test household resilience, while industrial production figures the same day may reveal early impacts from trade policy changes.

The labor market remains a bright spot, though signs of gradual cooling are emerging. Wage growth continues to run above pre-pandemic trends, with average hourly earnings expected to show a 0.3% monthly increase and the Employment Cost Index having risen 1.0% in Q1. However, job openings have begun to decline from their peaks, suggesting employers are adopting a more cautious stance amid economic uncertainty.

Growth expectations for 2025 have been revised downward to 1.3-1.7%, reflecting softer business investment and trade headwinds. The Q1 GDP revision on May 29 will provide important confirmation of whether the economy maintained positive momentum. While most analysts do not foresee an imminent recession, the combination of restrictive monetary policy, trade tensions, and global economic weakness presents notable downside risks.

Market participants remain particularly sensitive to potential surprises in trade policy or Fed communications, with any deviations from expected tariff implementations or central bank guidance likely to trigger volatility. On the positive side, continued disinflation and steady consumer spending could help sustain economic expansion. Oil price stability in the $70-80 range would provide additional support by containing energy-related inflationary pressures. As policymakers and investors navigate these crosscurrents, May’s data releases will be crucial in determining whether the U.S. economy can maintain its gradual slowdown without tipping into contraction.

Key U.S. Economic Data Releases – May 2025

The following high-impact indicators will shape market sentiment and Fed policy expectations this month: ISM Manufacturing & Non-Manufacturing PMIs (May 1 & May 3), Nonfarm Payrolls (NFP) (May 2), JOLTS Job Openings (May 6), FOMC Meeting (May 6–7), CPI Inflation (May 14), Fed Chair Jerome Powell’s Remarks (May 14, post-CPI), Retail Sales (May 15), Industrial Production (May 15), Housing Starts & Permits (May 16), Q1 GDP Revision (May 29), PCE Inflation (May 31).

U.S. Dollar and Wall Street Outlook – May 2025

U.S. Dollar

Following a volatile April, the trade-weighted U.S. dollar is expected to remain relatively range-bound in early May. Currency strategists surveyed in a recent Reuters poll broadly anticipate the dollar “stabilizing” over the coming months.

On April 21, the U.S. Dollar Index (DXY) fell to approximately 97.9, its lowest level since early 2022, after President Trump’s public criticism of Federal Reserve Chair Jerome Powell rattled market confidence. This event briefly drove investors away from traditional safe-haven assets. Nevertheless, should U.S. interest rates remain elevated relative to other economies—and if domestic inflation continues to moderate—the greenback could find renewed support in the months ahead. Overall, most analysts foresee only modest currency movements in the near term, with the DXY expected to fluctuate within the 98–100 range unless a major policy shock occurs.

The Federal Reserve’s “higher-for-longer” policy stance, combined with safe-haven demand driven by escalating global trade tensions, could bolster the dollar throughout May. However, over the longer term, if newly imposed tariffs provoke retaliatory measures or contribute to a global economic slowdown, the U.S. dollar may face downward pressure from declining export competitiveness and weaker external demand.

Wall Street

Financial forecasts for 2025 remain cautiously optimistic regarding U.S. equities, albeit with lowered year-end targets compared to earlier projections. In the short term, however, investors should brace for continued volatility. Historically, May has often been a choppy month for equities, particularly surrounding major Federal Reserve meetings and key economic data releases.

Following record highs earlier in 2025, U.S. stock indices experienced significant turbulence in the second quarter. April saw major indices, including the S&P 500, fluctuate sharply—initially retreating on tariff concerns, rebounding amid hopes for easing trade tensions, and subsequently selling off again as uncertainty around Fed policy intensified. Heading into May, investor sentiment remains mixed.

Corporate earnings reports (late April through May) and Federal Reserve communications will be critical drivers of market direction. Should inflation data show further moderation and Fed officials signal eventual rate cuts, equities could grind modestly higher. Conversely, signs of a deteriorating economy—such as weakening consumer data or rising layoffs—could lead to renewed declines.

Moreover, ongoing trade policy uncertainty and the Fed’s cautious stance could amplify market volatility, potentially resembling the tariff-driven sell-offs witnessed in 2018. While solid earnings and the prospect of monetary easing offer some upside potential, risks remain elevated, warranting a measured approach from investors.

May 2025 Eurozone Economic Outlook

Economic growth in the Eurozone remains sluggish, with consumption expected to stay the main driver. Household spending is supported by wage gains and high employment levels, but overall sentiment remains fragile. Meanwhile, business investment continues to be weighed down by weak export demand and persistent trade uncertainty.

Key Market Drivers in May:

Preliminary Q1 2025 GDP:

• Eurostat will release its preliminary estimate for Q1 2025 GDP in mid-May. Markets currently forecast near 0.0% quarter-on-quarter growth.

PMI Surveys for April:

• April’s PMI surveys will provide insight into business sentiment and broader economic trends. We expect modest gains in the manufacturing sector and continued strength in services. However, any positive momentum could be tempered by risks such as tariffs and weak productivity growth.

Final HICP Inflation for April:

• The final April inflation (HICP) figure, due mid-May, is expected to come in between 2.2% and 2.3%.

Unemployment Rate:

• The unemployment rate is projected to remain at March 6.1%, a record low, reflecting ongoing improvement in the labor market compared to previous months.

Other Key Data:

• Additional releases will include March industrial production, April retail sales, consumer confidence, as well as investment and trade figures.

ECB Policy Outlook:

• Following the European Central Bank’s (ECB) rate cut to 2.25% in April, markets anticipate at least one more cut, likely in June. Analysts expect the terminal deposit rate to fall within the 1.50%–2.00% range by year-end, assuming disinflation persists. The ECB has reaffirmed a “meeting-by-meeting” approach, meaning future decisions will remain data-dependent. Slower inflation or weaker growth would support further easing, while any inflation rebound could prompt a more cautious stance. Markets are currently pricing in two to three additional 25-basis-point cuts by the end of 2025.

Beyond domestic economic factors, trade and geopolitical tensions will also play a crucial role. The threat of new U.S. tariffs on EU and Chinese imports poses the biggest near-term risk. In mid-April, even a temporary pause in tariff escalation lifted European markets sharply, highlighting the sensitivity of the region to trade developments. Renewed trade tensions could negatively impact exports, investment, and sentiment. Furthermore, geopolitical risks—such as conflict in the Middle East or new disruptions to Russian gas supplies—could reignite volatility. A spike in oil or gas prices would likely stall disinflation and dampen growth prospects.

The Eurozone economy is expected to post only modest growth in early 2025, with inflation continuing to slow toward the ECB’s target. Key data releases in May—including PMIs, inflation, and GDP—will be closely watched for signs of momentum. However, stronger data may not necessarily support the euro. Following a retreat driven by ECB dovishness and tariff concerns, the euro is likely to trade sideways unless a significant shift in fundamentals occurs.

In May, EUR/USD will be heavily influenced by central bank policies. If the Fed signals a similar or slower pace of ease compared to the ECB, the euro could stabilize or even see a modest rally. Conversely, if U.S. rate cuts are delayed or U.S. growth remains resilient, the dollar could strengthen further, putting pressure on the euro. Overall, we expect EUR/USD to trade within a narrow range, likely between 1.10 and 1.15—with near-term moves largely driven by tariff developments and central bank signals.

UK Economy: Current Conditions and May 2025 Outlook

Economic Growth and Activity

The UK economy is projected to post modest growth in early 2025. Forecasts suggest GDP expanded by 0.3%–0.4% in the first quarter, a slowdown compared to previous quarters, reflecting headwinds from global trade uncertainties and persistent domestic challenges. Recent official data showed that GDP rose just 0.1% in Q4 2024, bringing full-year 2024 growth to approximately 0.9%.

Business investment contracted sharply, declining by about 3.2% in Q4, while household consumption remained flat. Output per capita slipped by 0.1% in 2024, highlighting continued weakness in productivity.

Inflation and Labor Market

Inflation has eased toward the Bank of England’s (BoE) 2% target but remains sticky. The Consumer Price Index (CPI) slowed to 2.8% year-on-year in February 2025 and further to 2.6% in March, supported by falling fuel and commodity prices. However, core inflation — particularly in services, excluding energy and food — remains elevated at around 4%–5%, although it has moderated from its peak last year.

Looking ahead, inflationary pressures are expected to remerge. The BoE anticipates a temporary spike in headline CPI to around 3.6%–3.7% by mid-2025, driven by higher energy and regulated prices.

The labor market remains historically tight but is showing initial signs of loosening. The unemployment rate (ILO basis) holds near multi-decade lows at 4.4%, with over 800,000 job vacancies. Nonetheless, cracks are appearing vacancies have fallen below pre-pandemic levels, and payroll data revealed a loss of 78,000 jobs in March — the largest decline since 2020.

Despite this, wage growth remains robust. Private-sector regular pay rose by approximately 6.1% year-on-year in late 2024, while overall regular pay (excluding bonuses) increased by 5.9%. However, pay settlement rates are now easing towards 3%–3.5%, suggesting that wage pressures may gradually moderate.

Consumer Spending and Retail

UK retail sales provided a positive surprise in March, reflecting resilient consumer spending despite economic headwinds. Core retail sales (excluding auto fuel) rose by 0.5% month-on-month, and by 3.3% year-on-year. Headline retail sales increased by 0.4% month-on-month and 2.6% year-on-year. These figures point to some momentum in household demand, potentially easing recession risks but complicating the BoE’s path to rate cuts.

Bank of England Policy Outlook

The BoE has transitioned to a more dovish stance. Following a prolonged tightening cycle, the Bank Rate was cut to 4.50% in February 2025. Policymakers have signaled a gradual relaxation of policy as inflation moderates, while emphasizing a cautious approach given ongoing risk.

By late April, market-implied odds of a 25 basis point cut at the May 8 Monetary Policy Committee (MPC) meeting were priced between 90% and 96%. Officials maintain that inflation remains on track to return to 2%, allowing for some policy easing. However, uncertainties such as U.S. tariffs and a domestic payroll tax increase add complexity, although these are seen as more disinflationary in nature. Governor Andrew Bailey has also warned that escalating global trade tensions pose a “very serious risk” to the UK’s growth outlook.

Markets widely expect the BoE to begin a modest cutting cycle in May and to keep policy rates above neutral until inflation is securely back at target.

Key Data Releases in May

May will be critical for gauging the strength of the UK economy. Key upcoming releases include:

• Preliminary Q1 GDP (expected around May 15)
• April CPI inflation (mid-to-late May)
• Labor market statistics (mid-May)
• March/April retail sales
• Consumer confidence surveys
• Flash PMI surveys for April (early May)

Upside surprises in growth or inflation could delay further easing, while weaker data would reinforce expectations of additional rate cuts.

Sterling Outlook

Sterling has strengthened in recent weeks, reaching around $1.32 in early-to-mid April — its highest level in six months — before easing back towards $1.30 by late April. In May, the pound faces mixed pressures. The BoE’s expected rate cuts, combined with the Fed’s more cautious stance, could narrow the UK–US interest rate differential, typically weighing on GBP. Markets have already priced a May rate cut as highly likely.

Japan’s Economic Overview and May 2025 Outlook

Japan’s economy is showing tentative signs of recovery after years of stagnation. Real GDP expanded by approximately 1.1% year-on-year in Q4 2024, reversing earlier contractions during the year. Stronger wage gains helped lift household spending and business investment, while pre-emptive purchases ahead of U.S. tariffs boosted exports.

However, the outlook for Q1 2025 is more cautious. Japanese GDP is expected to contract by around 0.6% quarter-on-quarter (QoQ), translating to an annualized decline of approximately 2.4%. The downturn is attributed to sluggish business investment and weaker net exports, partly influenced by seasonal factors, including the timing of the Chinese New Year.

At the same time, Japan is finally experiencing sustained inflation. Headline CPI rose to around 3.6% in March 2025, with core CPI at 3.2%. High energy and food prices have been the primary drivers, although inflationary pressures are gradually easing — for example, fresh food inflation slowed from 22% year-on-year in January to 13.8% in March. While these developments suggest the economy is slowly renormalizing after decades of deflation, external headwinds — including commodity costs and trade friction remain significant.

Japan’s labor market remains exceptionally tight. The unemployment rate hovers around 2.4–2.5% (seasonally adjusted), and there were approximately 1.28 job openings per applicant as of March 2025. Firms are actively competing for workers, with spring union settlements delivering wage increases of approximately 5–5.5% — the fastest wage growth since the early 1990s. Stronger pay and high household savings are supporting a modest recovery in consumption. However, real wage growth remains under pressure, as much of the price increases are concentrated in essential goods like food and energy. Contracted wages (excluding bonuses) are still about 1–2% lower than a year ago.

On the monetary policy front, after decades of zero or negative interest rates, the Bank of Japan (BoJ) raised its short-term policy rate to 0.50% in January 2025 (from 0.25%) and maintained that level at the March meeting. Governor Ueda has emphasized that rates will move “gradually” higher if underlying inflation remains near the 2% target but has warned about potential fallout from new U.S. trade tariffs. In recent speeches, Ueda highlighted that additional tariffs on automobiles or other goods could weigh on growth, and thus the BoJ will “scrutinize” incoming data before adjusting policy further.

The BoJ’s next two-day policy meeting is scheduled for April 30–May 1, 2025. Economists broadly expect no policy change at this meeting, with the policy rate likely to remain at 0.50%. The next rate hike is anticipated in Q3, most likely at the July meeting. Updated economic forecasts will also be published at the April meeting, with expectations that the BoJ will trim its growth outlook. Meanwhile, the BoJ has further relaxed its yield curve control measures, allowing long-term yields to rise toward multi-year highs as it gradually winds down its ultra-loose policy stance.

Market Expectations and Reactions

Japan’s stock market has been volatile amid these shifting dynamics. After reaching an all-time high in February 2024, the Nikkei 225 has experienced sharp swings. In mid-April 2025, the index fell by about 3% to approximately 33,600 amid escalating trade war concerns and a strengthening yen. Over recent weeks, the index has exhibited extreme volatility, swinging by as much as 5–6% in single sessions as investors balance optimistic corporate earnings forecasts against rising geopolitical risks.

Despite the turbulence, some strategists remain optimistic. A Reuters poll conducted in February 2025 forecasted that the Nikkei could rise to around 40,000 by the end of June — a roughly 4.6% gain from current levels — assuming trade tensions ease and earnings revisions remain positive.

On the currency front, the yen has rallied strongly in recent months. As of late April, $1 buys approximately ¥140–¥142, with the yen strengthening roughly 9% since January 2025. While expectations for only two rate cuts from the U.S. Federal Reserve by year-end maintain a wide rate differential favoring the dollar, safe-haven flows could continue to support the yen if global geopolitical risks escalate in May. Conversely, signs of global growth stabilization could trigger a partial reversal of the yen’s recent gains. A further surge in the yen would weigh on Japanese exporters, as a stronger yen reduces the value of overseas profits when converted back into domestic currency.

China Economy April Review, May Outlook!

China’s Q1 2025 GDP surprised markets slightly to the downside, rising by 4.5% year-on-year (vs. 4.8% expected). Although growth remained solid, it showed signs of losing momentum as external demand cooled and domestic consumption remained uneven.

Consumer inflation (CPI) in March stayed subdued, coming in at 0.1% year-on-year (vs. 0.3% expected), confirming persistent weak price pressures. Core CPI also remained soft, reflecting sluggish household spending. Meanwhile, Producer Price Index (PPI) inflation remained deep in negative territory at -2.5% year-on-year, continuing a long stretch of factory-gate deflation due to weak industrial demand and lower commodity prices.

Trade data for March showed exports falling by 6.2% year-on-year (worse than the -4.5% expected), while imports dropped by 2.8%. The decline in exports was partly linked to early-year disruptions and slowing global demand, particularly from Western economies grappling with tighter monetary policies.

The official Manufacturing PMI for March dipped to 49.5 (below 50, contraction zone), showing factory activity under pressure. The Caixin Manufacturing PMI, focused on small and private firms, dropped to 50.2, still expansionary but barely above the threshold. On the services side, the Non-Manufacturing PMI stayed healthier at 53.2, indicating continued resilience in consumer-related sectors like travel and entertainment.

Job markets are under strain. The urban unemployment rate was 5.2% in March, slightly below February’s 5.4% peak. Youth (ages 16–24) joblessness remains very high (about 16–17% in early 2025), though it ticked down from 16.9% in February to 16.5% in March (recall it spiked above 21% in mid-2023). Authorities have pledged stronger fiscal and monetary support to help reach this year’s growth goal (around 5%) and boost employment.

Chinese Property Sector

The housing market remains a drag on growth. New home prices were roughly flat in March after small dips — about 4.5% lower than a year ago — even as Beijing rolled out support measures. Still, property sales and investment continue to shrink: in Q1, sales by floor area fell about 3.0% year-on-year and investment dropped almost 9.9% year-on-year (only slightly less than the declines seen in January–February).

Policymakers have urged local governments to ease purchase curbs, cut mortgage rates, and direct funding to developers. However, analysts warn the housing downturn is deep and structural (aging demographics, excess inventory), so any recovery is likely to be slow and uneven.

Monetary & Fiscal Policy

The People’s Bank of China (PBoC) has adopted a patient easing stance. At its April meeting, it kept the 1-year and 5-year loan prime rates at 3.10% and 3.60%, respectively. Officials describe policy as “appropriately loose” with ample liquidity, but recent strong data reduced the pressure to cut immediately. (The central bank has said rate cuts or reserve requirement cuts will come “at the appropriate time.”)

A key constraint is fragile yuan and banks’ shrinking lending margins; economists note that meaningful interest-rate cuts may await stabilization of the currency. Still, many forecasters expect modest easing by mid-year — for example, some analysts predict a 50-bps cut to the 5-year LPR by late Q2 — especially if U.S. tariffs further dampen growth.

Fiscal policy is explicitly supportive.

China’s 2025 budget targets a record ~4% of GDP deficit (up from 3% in 2024) to bolster growth. In Q1, total fiscal revenue fell about 1.1% year-on-year (with tax receipts down ~3.5%), while government spending rose ~4.2%. This reflects stepped-up infrastructure and social spending to lift demand.

As Reuters notes, Beijing is “shoring up its economy” with higher spending even as trade headwinds mount. (Fitch Ratings has flagged rising debt as a risk, but for now, authorities seem willing to tolerate higher leverage to protect growth.)

Risks to Watch

• Further rounds of reciprocal tariffs could sharply reduce exports and drag on GDP.
• Property-sector weakness is another concern — ongoing defaults or stalled projects could undermine confidence and bank lending.
• The global slowdown is a third risk: slowing demand in Europe, the U.S., or key emerging markets would hurt Chinese exports and capital spending.

In sum, any adverse shocks (from trade or abroad) could force Beijing to add even more stimulus.

Chinese Stock Markets and Currency – May 2025

Chinese equities have already priced in some optimism around stimulus measures and technology advancements. The Shanghai Composite stood near ~3,300 in late April, while the CSI 300 hovered around ~3,800. Overall, mainland indices have posted only modest gains year-to-date (the CSI 300 is up around 1–2% through early 2025), whereas Hong Kong’s tech-heavy Hang Seng Index has surged over 20% on AI-driven enthusiasm.

Analysts are mixed on the outlook for May. Some, such as Morgan Stanley, have raised their 2025 targets — projecting the CSI 300 could reach ~4,220 by year-end — citing stronger earnings and increased policy support. Others caution that the rally could stall if U.S.-China relations deteriorate again.

In currency markets, key upcoming data and potential policy moves in May are likely to drive short-term swings. The Chinese yuan (CNY) remained relatively stable in late April, trading around 7.10–7.15 per U.S. dollar, supported by central bank interventions aimed at preventing excessive weakening.

Looking ahead, most forecasters anticipate a gradual depreciation if U.S. tariffs persist. For instance, Goldman Sachs estimates that an additional 20% effective tariff could push USD/CNY toward the 7.4–7.5 range. Morgan Stanley now expects the yuan to reach about 7.35 by mid-2025 (from ~7.30 currently) and 7.50 by year-end. However, Chinese policymakers remain committed to preventing disorderly currency moves, so any weakening is expected to be controlled and gradual.