UK markets advanced this week with the FTSE 100 Index rising 0.54% to trade at 8,820 points at the time of writing. UK inflation was overstated by 0.1% in April, owing to an error in tax figures provided by a government department, the Office for National Statistics said, in the latest blow to confidence in the quality of economic data.
Annual inflation would have been 3.4% in April, according to the corrected date, rather than the 3.5% initially reported. Economists polled by Reuters had expected a rate of 3.3%, up sharply from 2.6% in March. The correction affects one of the UK’s most market-sensitive economic data series, an indicator that has particular significance to government bond markets, currencies and Bank of England interest rate decisions.
The Bank of England has been vocal about the difficulties it is experiencing on deciding the path for monetary policy given uncertainty about the accuracy of official data, in particular labour market figures.
UK industry was exempted from a doubling of US steel and aluminium tariffs by Donald Trump this week as British bosses urged Prime Minister Sir Keir Starmer to work quickly to implement a trade pact that would cut the levies to zero from the current 25% level. Under the terms of the agreement, the UK will receive a zero-tariff quota for steel if it meets US security requirements to exclude China from its supply chains.
However, since the May 8th signing ceremony involving Starmer and Trump, negotiations over implementing the deal have dragged on. Trump’s executive order added a note of jeopardy to the UK exemption, saying the Pesident reserved the right to increase steel and aluminium tariffs on Britain to 50% if “he determines that the United Kingdom has not complied with relevant aspects” of the trade deal.
The S&P Global UK Composite PMI was revised up to 50.3 in May 2025 from a preliminary estimate of 49.4, exceeding April’s reading of 48.5. While the figure signalled a return to marginal growth in private sector activity, it was still the second lowest reading since October 2023. The modest expansion was driven by a rise in services output, which offset a marked contraction in manufacturing production.
Commodity markets
In the commodity markets, Brent crude futures traded around $65 per barrel on Friday and are set for a weekly rise as China and the US resume trade talks, raising hopes for growth and stronger demand in the world’s two largest economies. China’s official Xinhua news agency said trade talks between Xi and Trump took place at Washington’s request. Trump said the call had led to a “very positive conclusion”, adding the US was “in very good shape with China and the trade deal”.
The oil market has also been supported by output cuts in Canada due to ongoing wildfires. Top exporter, Saudi Arabia cut its July crude prices for Asia to near two-month lows. That was a smaller price reduction than expected after OPEC+ agreed to ramp up output by 411,000 barrels per day in July. The kingdom had been pushing for a bigger output hike, part of a broader strategy to win back market share and discipline over-producers in OPEC+ including Russia.
Gold prices traded around $3,360 an ounce on Friday and are set for a weekly rise, supported by weaker US economic data, whilst silver prices rose above $36 per ounce, hovering near a 13-year high.
Equity markets
US equity futures rose on Friday as investors await the release of the closely watched May jobs report, which is expected to provide fresh insights into the health of the economy amid persistent trade-related uncertainty. In Thursday’s regular trading session, the Dow Jones Industrial Average fell 0.25%, the S&P 500 lost 0.53%, whilst the Nasdaq Composite declined 0.83%.
Donald Trump urged Federal Reserve chair, Jerome Powell to cut US interest rates this week as new data showed weak private sector hiring and a contraction in the services sector, raising fears of an economic slowdown. The figures showed US private payrolls rose by only 37,000 jobs in May, far less than expected, after a downwardly revised 60,000 rise in April, the ADP National Employment Report showed on Wednesday. Economists polled by Reuters had forecast private employment increasing by 110,000, following a previously reported gain of 62,000 in April.
Separately, data showed the US services sector contracted for the first time in nearly a year in May, while businesses paid higher prices for inputs, a reminder that the economy remains in danger of a period of very slow growth and high inflation.
Trump met Powell at the White House last week and warned him that the Federal Reserve chair is making a mistake by not lowering the central bank’s main interest rate from its current range of 4.25% to 4.5%. According to the Federal Reserve, Powell told Trump that monetary policy would be dictated by economic data alone and its decisions would be based solely on careful objective and non-political analysis. Trump has frequently and publicly criticised the Federal Reserve in both his first and second presidential terms, raising concerns that the President is undermining the independence of the US central bank.
Trump’s landmark tax bill will add $2.4 trillion to the US debt pile by 2034, the congressional fiscal watchdog has warned in the latest blow to the President as he urges the Senate to back the legislation. The Congressional Budget Office said on Wednesday that what the US President has dubbed the “big beautiful bill” would drive up budget deficits over the coming decade, despite the administration’s insistence it would slash them. The US Treasury bond market has grown from roughly $5 trillion in 2008 to $29 trillion today, as the US has cut taxes while increasing spending.
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