Despite lingering concerns about tariffs, trade negotiations, and slowing economic growth, U.S. equity markets ground their way higher throughout the week, notching its best six-day performance since March 2022, to get back to Liberation Day levels.  However, companies reporting in the U.S. have struck a cautious tone.

On the trade front, mixed signals emerged. While U.S. Treasury Secretary Scott Bessent suggested China needs to take steps to de-escalate tensions, Commerce Secretary Howard Lutnick hinted at progress on a trade deal with an as yet unnamed country. Tariff exemptions on auto exports also appear likely to remain in place for now. Still, the lack of formal negotiations between the U.S. and China tempered optimism.

Several economic data points painted a picture of an economy grappling with the impact of trade disruptions and waning confidence. The Dallas Fed's manufacturing survey showed a sharp drop in new orders and business activity in April. The Conference Board's consumer confidence index fell to its lowest level since May 2020. Even as job openings remained elevated in the JOLTS report, the surge in imports in March raised the spectre of weaker Q1 GDP growth.

Earnings season marched on, with 36% of S&P 500 companies reporting as of April 25. While 73% of companies beat earnings estimates and 64% topped revenue projections, the proportion of beats remains below 5-year averages. High-profile reports illustrated the divergent fortunes of consumer-facing companies - Coca-Cola maintained its full-year outlook after solid organic growth, while Starbucks missed expectations amid flagging demand. Forward guidance remained guarded as management teams cited macro headwinds.

Looking abroad, Japan's Tokyo CPI accelerated to 3.4% in April, maintaining pressure on the Bank of Japan. However, the data had little immediate impact on global markets, with investor attention diverted by a major power outage in Portugal and Spain and a growing focus on China’s upcoming PMI figures.

The next week will see data releases focused on the first quarter of the year like GDP readings from the U.S. and Eurozone, inflation prints from Australia and Germany, and manufacturing PMIs across the globe. This will give an insight to the underlying health of the global economy but it is likely there will be just as much focus on higher frequency data from April which seem to be pointing towards a tariff induced stocking surge and a potential slow down in the last few weeks which may provide a clearer picture of the economic toll from recent turmoil.

As we get into May, the tug-of-war between sentiment and hard data will likely persist. Bond markets remain circumspect, with yields drifting lower even as equities climb. The U.S. dollar has firmed slightly, but remains below key levels. If economic data disappoints or trade rhetoric sours, the recent bounce in risk assets may prove fleeting. For now, markets appear content to hold out hope for a resolution, but are quick to seek safety at signs of trouble.