Global Equity Weekly

May 16, 2025 | 16:30

Lowering the Trade War Temperature

Economist

Senior Economist and Vice President
Economics

Carl Campus joined BMO Economics in 2007 as a Research and Technical Assistant; he was later promoted to his cur... (Read more)

Carl Campus

Senior Economist and Vice President
Economics

Carl Campus joined BMO Economics in 2007 as a Research and Technical Assistant; he was later promoted to his cur... (Read more)

It doesn’t take a superhero-like spidey-sense to know that someone has tinkered with thermostat…

In fact, the temperature of global trade tensions was turned way down over the past week, contributing to broadly stronger sentiment in global equity markets.

Last weekend’s U.S.-China trade deal, which culminated in the walk back of triple-digit “embargo style” import tariffs, was widely welcomed by financial market bulls and was enough to give the bears a shake. It was also enough for BMO Economics to nudge up our economic growth forecasts for the U.S., China and Canada.

On the economic data front, softer U.S. inflation readings provided some comfort on Tuesday, particularly for the Fed which has the uneasy job of balancing potential tariff impacts to inflation (higher) and growth (lower). Other April data out later in the week provided little additional drama, but also little encouragement on the growth front, reflected in soft industrial production and retail sales reports. This week’s NAHB homebuilder survey also printed one of its worst results in the post-pandemic period, a further reflection of the current state of economic uncertainty. While these results, combined with a weak producer price survey in April, give the Fed a little more breathing room, we continue to expect the Fed to stress the need for caution in the near term given the sticky core rate and upside risks from tariffs.

The S&P 500 added 5.3% this week, with gains led by technology, consumer discretionary and banks, pulling the index back into positive territory for the year. Health care notably underperformed and is the worst performer over the past year. The S&P/TSX followed roughly the same pattern, led by technology, industrials and banks, closing at a record high on Thursday and finishing the week 2.4%.

Source: Bloomberg

Equity performance around the globe largely mirrored the moves in North America but with less conviction. The rise in Europe was led by France’s CAC 40, though Germany’s DAX wasn’t far behind, padding its near-20% year-to-date gains, while the U.K.’s FTSE 100 trailed the pack despite a raft of mixed economic data and in the wake of last week’s “deal” with the U.S. Meantime, the major Asian markets were also broadly higher, but in the case of China’s CSI 300 and Japan’s Nikkei 225, both remained in the red on a year-to-date basis, with plenty of uncertainty still on tap for the rest of the year.

Major Index Performance

North American Sector Performances

(% change over period)

Table 1 - S&P 500 Sector Performance

Source: BMO Economics, Bloomberg

Table 2 - TSX Sector Performance

Source: BMO Economics, Bloomberg

TSX Relative Sector Performance

(relative to the index, year-ago = 100; dashed line = 200-day m.a.)

S&P 500 Relative Sector Performance