Articles

• Final Services PMI 49.0 vs 48.9 preliminary
• Prior 52.5
• Final Composite PMI 48.5 vs 48.2 preliminary
• Prior 51.5

Key findings:

• Renewed downturn in new work weighs on service
  sector output
• Fastest decline in export sales since February 2021
• Business activity expectations slump to a two-and-
  a-half year low

Comment:

Tim Moore, Economics Director at S&P Global Market
Intelligence, said:

“UK service sector output slipped into contraction for
the first time in one-and-a-half years as heightened
business uncertainty weighed on order books during
April. Export conditions were particularly weak, with new
business from abroad falling to the greatest extent since
February 2021.

“Survey respondents often commented on the impact
of global financial market turbulence in the wake of US
tariff announcements. Businesses in the technology and
financial service sectors noted rising risk aversion and
delayed spending decisions among clients, especially in
relation to major investment plans. Consumer service
providers meanwhile cited subdued domestic economic
conditions and challenges with passing on rising payroll
costs, especially those in the hospitality and leisure
sectors.

“Input prices increased at the steepest pace since the
summer of 2023 as higher National Living Wage rates and
National Insurance contributions added to payroll costs
in April. Prices charged inflation was also the strongest
for nearly two years as service providers sought to pass
on additional costs to clients despite fragile demand.

“Business expectations for the year ahead fell sharply
as service sector firms braced for an extended period of
global economic turbulence and heightened recession
risks. Some 22% of the survey panel predict an outright
decline in business activity during the next 12 months, up
from 14% in March and well above the post-election low
of 6% in July 2024.”

This article was written by Giuseppe Dellamotta at www.forexlive.com.

• China and EU should oppose unilateral bullying.
• Ready to work with EU leaders to expand mutual openness, properly handle frictions and differences.
• Calls for China, EU to safeguard fairness and justice.
• Stands ready to work with European Council, European commission to deepen strategic communication, enhance understanding and mutual trust.

These are not new comments. We’ve been getting such comments since April 2. Of course, the lack of real progress in trade talks could unnerve the market at some point.

This article was written by Giuseppe Dellamotta at www.forexlive.com.

It was supposed to be a straightforward appointment for Friedrich Merz to be German chancellor today. But when push comes to shove, it turned out to be anything but that. It’s a big and embarrassing setback for Merz and his coalition, who by the way commands 328 votes in the Bundestag, yet he only managed to secure 310 votes today. He needed 316 votes to secure a majority.

We’re now in a bit of an unprecedented situation in German politics. No candidate for chancellor has ever failed in the first round of voting. However, the constitution does allow up to 14 days for a new round of voting. But will we see another vote today? Or tomorrow? Nobody knows for sure. But the worry here is that the CDU/CSU/SPD coalition may already be damaged before it even begins governing.

This article was written by Justin Low at www.forexlive.com.

Well, that didn’t go according to plan. The expectation was that Merz would’ve been elected upon the first round of voting and then the Bundestag session will be adjourned as he travels to meet with the German president to formalise his appointment. Now, all of that is put on hold.

He needed 316 votes to win a majority but didn’t manage to reach that (only got 310 votes) even though the CDU/CSU/SPD coalition has 328 MPs. There can be a second or third round of voting but it’s still unclear if that will take place today.

This article was written by Justin Low at www.forexlive.com.

• Prior 51.0
• Composite PMI 50.4 vs 50.1 prelim
• Prior 50.9

The reading reaffirms stagnation in the euro area economy to start Q2, with the services sector experiencing a stall. Demand conditions continue to suffer and that’s not a good look amid a more challenging economic backdrop in the months ahead. The good news at least is that price pressures have eased a touch further on the month. HCOB notes that:

“Eurozone economic growth slowed at the start of the second quarter, following a pick-up in the first three months of the
year. The services sector, which is a major player, practically stagnated in April. Even though manufacturing output saw a
surprising uptick, it wasn’t enough to prevent the overall slowdown in growth.

“In the services sector, cost pressures are still relatively high, though they have eased a bit over the past couple of months.
Inflation is down for sales prices and continued to trend lower. Many members of the European Central Bank (ECB) have
been hinting at another interest rate cut in June, and these latest figures seem to support their stance.

“Euro area employment has seen a slight stabilization. The drop in headcounts among manufacturers has been more-thancounterbalanced by an increase in jobs within the service sector. Overall, there’s still a noticeable hesitation to hire new staff,
which isn’t too surprising given the current uncertainties.

“Spain is leading the pack in terms of growth, followed by Italy, then Germany with marginal growth, and France trailing
behind. This is reflected in the Composite PMI data for the first four months of 2025 and aligns with Eurostat’s GDP data for
the first quarter. We expect Germany to soon outpace Italy thanks to a generous fiscal package, while France is likely to
remain at the bottom for now due to its uncertain political climate.”

This article was written by Justin Low at www.forexlive.com.

• Final Services PMI 49.0 vs. 48.8 preliminary
• Prior 50.9
• Final Composite PMI 50.1 vs. 49.7 preliminary
• Prior 51.3

Key findings:

• Germany Services PMI Business Activity Index at 14-month low.
• Germany Composite PMI Output Index at 4-month low.
• Optimism towards year-ahead outlook wanes.

Comment:

Commenting on the PMI data, Dr. Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, said:

“The German service sector has hit the brakes. Business activity dipped a bit in April, ending a four-month streak of growth.
The composite PMI didn’t slip into recession territory, thanks to manufacturing companies ramping up production, just like
they did in March after a slump that lasted nearly two years.

“Service providers probably felt the squeeze on profit margins in April. Costs went up more than last month, but they had to
dial back on price hikes. With this in mind, confidence about future business took a hit, with the index dropping further below
its long-term average.

“At first glance, the future doesn’t look too bright. New business has shrunk for the eighth month in a row, order book
backlogs have been sliding downhill for most of the past two years, and there’s no sign of a solid recovery in exports. But,
companies are still hiring, and job growth has even picked up for the second month straight. Clearly, businesses aren’t ready
to throw in the towel just yet. And for good reason, as the new government, expected to start this week, could well give the
economy a boost with its fiscal stimulus program in infrastructure and defence, plus more social spending. All of this should
also spread to the services sector.”

This article was written by Giuseppe Dellamotta at www.forexlive.com.

• Services PMI 52.9 vs. 51.5 expected
• Prior 52.0
• Composite PMI 52.1 vs. 50.5 prior.

Key findings:

• Output and new orders up at sharper rates in April
• Cost pressures at their lowest in 2025 so far
• Business confidence drops to weakest level in four-and-a-half years

Comment:

Commenting on the PMI data, Dr. Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, said:

“The growth trend appears to be consolidating. The Italian private sector has grown for three months in a row, led by the
service sector, while manufacturing output has practically stopped shrinking after a year. According to the Bank of Italy,
tourism and hospitality have supported growth in the service sector during the first months of the year, which suggests a
certain degree of sustainability. In the manufacturing sector, the question remains as to whether this sector could soon be hit
harder by US tariffs and EU countermeasures. For the year as a whole, we expect economic growth of around half a
percent.

“The service sector is showing relatively robust growth, which has accelerated slightly compared with the previous month.
Accordingly, service providers have once again hired more people, especially as they were also able to expand new
business more strongly than in March. It’s encouraging that most people were hired on a permanent basis, as panellists
said.

“Tariff uncertainty could also indirectly weigh on the service sector, with the challenging economic and geopolitical
climate mentioned by panellists as having weighed on expectations regarding future activity, with the index already well
below its long-term average. However, especially in these times, the service sector is likely to maintain its role as a stabiliser
of the Italian economy, which it has held for around two years.

“There is some slight relief on the cost side for service companies. Operating costs have not risen quite as sharply as in
previous months. However, companies were also unable to increase sales prices at the same pace as before and had to
settle for significantly lower increases, meaning that profit margins were unlikely to benefit.”

This article was written by Giuseppe Dellamotta at www.forexlive.com.

• Prior 47.9
• Composite PMI 47.8 vs 47.3 prelim
• Prior 48.0

The slight revision higher doesn’t take away from the fact that French business activity has now contracted for eight straight months. Demand conditions remain subdued and that’s troubling amid a more challenging outlook in the months ahead. HCOB notes that:

“April marked another month of declining activity in the French private sector. The HCOB Composite PMI signals a
continued downturn in economic activity in France, driven by weakness in the services sector. However, the manufacturing
sector has managed to increase production for the first time in nearly three years.

“The French services sector remains on a downward trajectory. Business activity declined again in April, attributed to lower
customer demand and generally poorer market conditions. The rapid decline in new orders is particularly concerning this
month. Surveyed companies report that weak market conditions make it very difficult to attract new business, and existing
customers are also hesitant to engage in new transactions. High trade policy uncertainty seems to be causing
postponements to investment and consumption decisions.

“Current developments – weak demand amid high uncertainty – do not bode well for the profit margins of French service
providers. Additionally, our survey results indicate that operating costs, appear to be rising faster than end prices, which
have virtually stagnated due to competitive pressures.

“Future business expectations remain in the growth zone, but significantly below the historical average. Employees find
themselves in a concerning situation, as they are increasingly at risk of job loss as workloads decrease due to the order
slump and simultaneous reduction of backlogs.”

This article was written by Justin Low at www.forexlive.com.

• Proposed 0 for 0 tariffs on industrial goods.
• Accelerating trade talks with India among others.
• Another €170B US-exports may be impacted by tariffs.
• Ready to use all available tools in trade defence.

There’s nothing new here as we’ve been aware of the 0 for 0 offer for weeks. The problem is that we still haven’t got any breakthrough. Last week, French Finance Minister Lombard said that he discussed the idea of reciprocal
zero tariffs with Scott Bessent, and Bessent told him that it was not
unrealistic. So, this will keep the hopes alive.

This article was written by Giuseppe Dellamotta at www.forexlive.com.

• Prior 54.7
• Composite PMI 52.5
• Prior 54.0

That’s a slightly softer reading than estimated, with softer gains in new work recorded on the month. Meanwhile, confidence in the outlook has also fallen to its lowest since November. HCOB notes that:

“In April, business activity growth in Spain’s private sector slightly slowed according to the HCOB Composite PMI. While
growth in the services sector weakened, production in the manufacturing sector declined. This trend is also reflected in the
order situation: service providers recorded slower order growth, while orders in the manufacturing sector decreased.

“Service providers report a more challenging work environment. This is not surprising, given the increasing tensions in
international markets – keywords: trade frictions – which led to postponed or cancelled consumption and investment
decisions. Despite the slight slowdown, business activity and order levels remain in the growth zone.

“Operating costs for Spanish service providers remain high, despite the current slight slowdown. Anecdotal evidence
suggests that trade tariffs have already had initial impacts on supply chains, leading to input price increases. Additionally,
wage increases continue to be a significant driver of prices. As a result of rising input costs, companies are passing these
costs on to their customers.

“Spanish service providers remain optimistic about the future, even though the corresponding index recorded a decline this
month, falling to the lowest level of the year. This is mainly due to the uncertainty arising from US tariffs and their effects on
the international trade network. However, this has no immediate impact on Spanish workers. Given the continued growth in
orders and increasing backlogs, service providers added to their workforces.”

This article was written by Justin Low at www.forexlive.com.

,

This article was written by Justin Low at www.forexlive.com.

• Eurostoxx +0.1%
• Germany DAX +0.1%
• France CAC 40 +0.1%
• UK FTSE +0.4%
• Spain IBEX +0.3%
• Italy FTSE MIB +0.2%

It’s a slower start to proceedings as broader markets are mainly waiting on further trade developments for the most part. S&P 500 futures are down 0.3% after the overnight drop but again as a reminder, it came after nine straight days of gains. We’re pretty much taking a breather until the next meaningful headline hits on tariffs/trade. But the longer that drags on, the more apprehension there will be filling up in the air.

This article was written by Justin Low at www.forexlive.com.