This market report highlights the key macroeconomic developments in April and May 2025, focusing on the US and Europe. In the US, nonfarm payrolls exceeded estimates, suggesting underlying resilience in the economy despite trade tensions. However, average hourly earnings increased less than estimated, and headline inflation fell to 2.3% in April, its lowest rate since February 2021, primarily driven by shelter prices. Core CPI also rose less than estimated on a monthly basis. The Federal Reserve kept its benchmark interest rate unchanged at 4.25%-4.5% in May, with Chair Jerome Powell noting rising risks of higher unemployment and inflation. He stated the Fed policy is appropriate despite tariff threats and is not looking to cut rates preemptively as inflation remains above the 2% target. Tariffs, particularly President Donald Trump's, were identified as a big, uncertain factor in the inflation outlook. President Trump criticized Powell's decision, calling for lower rates and claiming "virtually NO INFLATION".

Major trade developments included a 90-day suspension of most US-China tariffs, reducing rates from 125% to 10% on agreed goods, leading to a rally in global stocks, particularly in the US, and higher US Dollar and oil prices. A trade deal framework was also announced between the US and the UK. Stock markets reacted little to the April inflation numbers, with markets now expecting the first Fed interest rate cut later in the year, potentially September, with fewer cuts anticipated overall due to reduced pressure from tariffs and inflation staying above target. US Treasury yields moved substantially higher as the Fed remains hawkish. European inflation figures showed the euro area annual rate remained stable at 2.2% in April, with services showing the highest increase, while rates varied across individual countries. Economists expect the ECB to lower its deposit rate more than previously anticipated this year, potentially reaching 1.75% after cuts in June and September. Oil prices were relatively unchanged overall, although they rallied after the US-China trade deal news. Gold prices were down, while Bitcoin saw a significant increase.

The report also covers Q1 2025 earnings from key companies and banks. Bank of Cyprus reported a higher profit of €117mn compared to the previous quarter (€107mn), despite lower revenue, driven by significantly lower expenses and credit losses. The bank's cost/income ratio decreased to 37%, and its Gross NPE ratio improved to 1.8%. They announced a 50% payout ratio for 2024, including a cash dividend and share buyback, and are considering interim dividends. On the US equities front, Amazon and Apple saw initial hits to their share prices after Q1 earnings due to cautious outlooks tied to the trade war, but rebounded following the US-China tariff news. Microsoft's share price surged after strong Q1 earnings. European banks like BNP Paribas and ING Groep also reported Q1 results, with ING exceeding expectations and announcing a new share buyback.