Key events to watch in the week ahead: 5 – 11 May 2025

This week’s overview

US stocks appear poised for another week of gains, with major indices on track to notch a second consecutive session of advances. Risk sentiment has returned to more neutral territory after languishing in “extreme fear” for the past two months. The rebound has been driven by strong corporate earnings and renewed optimism over trade, following President Trump’s remarks about potential agreements with India, Japan, and South Korea, as well as a possible deal with China. These developments have eased some concerns around US tariffs, though their economic impact may still unfold in the months ahead.

Heading into the new week, here are five key events to watch.

US Q1 earnings season: Palantir, Advanced Micro Devices, Disney, Coinbase

With most of the Magnificent Seven stocks having reported their earnings, the season may begin to wind down in the coming week. Still, focus will turn to Palantir, AMD, Disney, and Coinbase to help sustain sentiments and carry forward the earnings momentum.

5 May 2025 (Monday, 10pm SGT): US Institute for Supply Management (ISM) services Purchasing Managers' Index (PMI)

In March, the ISM Services PMI fell to 50.8 from 53.5, missing expectations and marking the lowest level since June 2024. New Orders dropped to 50.4, and Employment slumped sharply to 46.2, though Production rose to 55.9 and Price pressures eased to 60.9. ISM Chair Steve Miller noted a marked increase in cost concerns linked to tariff activities.

For April, the Services PMI is expected to slip into contraction at 49.5, reflecting growing caution amid trade policy uncertainty. While soft data like sentiment and surveys are weakening, hard data—such as Non-Farm Payrolls—may not reflect the impact of reciprocal tariffs until June or July. That said, as seen in late 2022, soft data deterioration did not translate into a downturn, and if tariffs are reduced, a similar outcome may play out in 2025.

8 May 2025 (Thursday, 2am SGT): US Federal Reserve (Fed) interest rate decision

At its mid-March meeting, the Fed held the Fed Funds rate at 4.25%–4.50%, citing solid growth, low unemployment, and slightly elevated inflation. The updated dot plot still projected two 25 basis point (bp) cuts in 2025. Forecast revisions reflected higher inflation and unemployment, and lower gross domestic product (GDP), largely due to increased tariffs.

The reciprocal tariffs announced on "Liberation Day" have heightened inflation fears and raised concerns over growth, challenging both sides of the Fed’s dual mandate. Fed Governor Waller noted in late April that while he wouldn’t overreact to tariff-driven inflation, a significant weakening in the labour market could justify rate cuts—contrasting with Fed Chair Jerome Powell’s more cautious stance.

At next week’s meeting, the Fed is expected to keep rates unchanged and stress lingering uncertainty from tariffs and labour market softness. No new economic projections or dot plot will be released. Markets are currently pricing in a 65% chance of a June rate cut and expect a total of 105 bps in cuts by year-end.

8 May 2025 (Thursday, 7pm SGT): Bank of England (BoE) interest rate decision

At its March meeting, the Bank of England (BoE) voted 8–1 to keep the Bank Rate steady at 4.5%, maintaining a wait-and-see stance amid US tariffs and global economic uncertainty. The sole dissent came from Swati Dhingra, who advocated for a 25 bp cut to 4.25%. All along, the BoE has taken a “gradual and careful” approach—cutting rates only three times since August 2024—but a quicker pace of easing may be on the horizon.

Looking ahead, markets are pricing in a 25 basis point cut at the upcoming May meeting, as President Trump’s tariff measures cast a shadow over the global growth outlook. BoE Governor Andrew Bailey has acknowledged taking the tariff risks “very seriously,” while the International Monetary Fund (IMF) has recently downgraded both UK and global growth forecasts.

Still, the BoE faces a delicate balancing act, with inflation remaining above target at 2.6% in March and wage growth staying strong at 5.9% in the three months to January. Market expectations are leaning towards a total of four 25 bp rate cuts by the end of this year.

10 May 2025 (Saturday, 9.30am SGT): China’s inflation rate

In March, China’s consumer prices improved from -0.7% to -0.1% year-on-year, but remained in deflationary territory, reflecting broad-based downward price pressures across the economy. Both food and non-food inflation weakened on a month-on-month basis, underscoring weak domestic demand amid ongoing income constraints, soft credit growth, and continued stress in the property sector. Meanwhile, the producer price index (PPI) stayed negative for the 30th consecutive month, falling by -2.5%—a deeper contraction than February’s -2.2%—driven by declining raw material costs and persistent excess capacity.

Looking ahead, rising US tariff threats could indirectly dampen domestic demand by weighing on exports, eroding business confidence, and accelerating supply chain realignments. Should inflation data weaken further, it may prompt the need for more accommodative policies from Chinese authorities to bolster demand, support price stability, and help China stay on track toward its “around 5%” growth target for the year. April consumer price index (CPI) is expected to remain flat at 0% year-on-year, while PPI is projected to contract by -2.3%.