Looming US-China trade talks lift Asian stock markets; China cuts interest rates – business live | Business
Key events
Global debt surges to new record high of $324tn
Phillip Inman
Global debt has hit a new record high of more than $324tn, fuelled by extra borrowing by Beijing as the Chinese authorities sought to offset the impact of Donald Trump’s tariffs with extra public spending.
Debt rose by $7.5tn in the first three months of the year, according to figures from the Institute of International Finance (IIF).
A modest increase in economic growth across much of Europe, the US and Asia meant that as a share of economic output, or gross domestic product (GDP), global debt edged down to almost 325%, maintaining a modest annual drop since a borrowing peak in 2021.
The IIF, which represents 400 of the largest financial companies from more than 60 countries, said that while major industrialised countries either mainted or reduced debt-to-GDP ratios, emerging markets reached an all-time high of 245% in the first quarter of 2025.
China’s government debt-to-GDP ratio has surged past 90%, up from 60% in 2019.
The IIF said one of the greatest sources of rising debt could be found in Washington, where plans by the White House to reduce taxes without cutting spending could send the US debt-to-GDP ratio above 200%.
Bank Of England Governor Andrew Bailey (R) speaks with Institute of International Finance President and CEO Timothy Adams (L) during the Institute of International Finance Global Outlook Forum at the Willard InterContinental Washington on April 23, 2025 in Washington, DC. Photograph: Andrew Harnik/Getty Images
In a hard-hitting judgement on the US president’s first 100 days, the usually restrained IIF said:
US government debt levels are projected to soar over the next several years and could trigger increased market volatility unless new revenues can be sourced to offset planned tax cuts and extensions.”
Tax breaks that are still in place from Trump’s first period in office could take the debt to GDP ratio to 180%. Further tax cuts could increase that to beyond 200%.
The institute said Trump’s pledge to lift overtime income and income from tips out of the income tax regime would cost about $1.4tn over the 10-year budget projection to 2034 – “implying that the U.S. government would need to borrow an additional $7.2tn over 10 years”.
The department of government efficiency (Doge) is currently on track to achieve annual government savings of about $160bn, well below the original $2tn annual target.
Eurozone construction remains in decline as sentiment worsens
The eurozone construction sector remained in decline in April, while the pace of contraction slowed.
New orders fell at a slightly slower rate and many firms cut both jobs and purchasing. Price pressures picked up to a 15-month high, although they remained well below the long-run average. Suppliers’ delivery times shortened for the second consecutive month. Companies were also pessimistic about the year ahead, with sentiment worsening.
The eurozone construction PMI from Hamburg Commercial Bank showed a rise in the headline index to 46 in April from 44.8 in March. Any reading below 50 indicates contraction.
Activity has now fallen for three years, though the latest decline was the least pronounced since February 2023. The slower decline largely reflected a softer reduction in Germany, while the contraction in France worsened slightly. Meanwhile, activity in Italy broadly stalled over the month.
Norman Liebke, economist at Hamburg Commercial Bank, said:
HCOB Economics expects further interest rate cuts by the ECB in the coming months of this year, which would benefit the construction industry.
Residential construction may catch up. Although all three sectors contracted in April, residential construction was able to close the gap with the other two sectors – civil engineering and commercial construction. Since the beginning of 2023, residential construction has performed significantly worse.
The outlook remains bleak. Orders are falling rapidly and are well below the historical average. Business expectations have declined further, with no signs of improvement in the near future, particularly given the increased geopolitical uncertainties. In view of this difficult situation, construction companies continued to cut jobs in April.
Cranes at a building and construction site near the TV tower in Berlin, Germany, 30 April 2025. Photograph: Hannibal Hanschke/EPA
European stocks dip ahead of Federal Reserve meeting
European stock markets dipped at the open, ahead of the Federal Reserve’s meeting later today.
The FTSE 100 index in London has lost 18 points, or 0.2%, to 8,578, after its recent record run. The Footsie rose for 16 trading sessions in a row.
Germany’s Dax and Italy’s FTSE MiB are flat to slightly lower while France’s CAC has dropped by 0.5%.
Traders are waiting nervously for the Fed’s rate decision and Fed chair Jerome Powell’s press conference.
Naeem Aslam, chief investment officer at Zaye Capital Markets, said
The anticipation surrounding the Federal Reserve’s policy decision is causing investors to tread carefully. While no rate change is expected, market participants are keenly awaiting Chair Jerome Powell’s remarks for insights into future monetary policy directions, especially in light of recent strong labor data and persistent inflation concerns.
German factory orders jump 3.6%
In Germany, factory orders jumped more than expected in March, in the run-up to Donald Trump’s trade tariff announcements.
Orders rose by 3.6% between February and March, according to the federal statistics office, beating analysts’ expectations of a 1.3% increase. Stripping out major orders, demand was up by 3.2%.
Orders rose across electrical and transport equipment, machinery, automotives and pharmaceuticals.
Business surveys from S&P Global also suggest that Germany’s factories emerged from a downturn in April, helped by export orders.
However, Trump’s tariffs against the EU – announced on 2 April, but then paused – have clouded the outlook for Europe’s biggest economy. Economists are wondering whether the improvement in performance was due to companies trying to get ahead of the levies.
Goldman Sachs analysts said last week that such frontloading may have added 15% to eurozone exports to the US between January and April.
Michael Herzum, head of macro and strategy at Union Investment, said, according to Bloomberg News:
Don’t read too much into this month’s increase. Unfortunately the recovery so far is nothing more than a flash in the pan. Unpredictable US economic policy will continue to be a burden for the time being and stands in the way of dynamic growth in 2025.
Introduction: Looming US-China trade talks lift Asian stocks; China cuts interest rates – business live
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
China has cut interest rates, and news of trade talks between Beijing and Washington lifted Asian stocks.
The People’s Bank of China is making a half-point cut to the banks’ reserve requirement ratio, its benchmark interest rate, and trimming other interest rates, releasing 1tn yuan into the banking system.
Pan Gongsheng, governor of the People’s Bank of China, said the move was due to “uncertainties of global economy, economic fragmentation and trade tensions, which disrupted global industrial supply chains”.
Beijing announced the measures amid a damaging trade war with the US.
After weeks of rumours over de-escalation between the two countries, markets gave a lukewarm welcome to news that top trade officials are due to meet in Geneva this weekend – the first meeting since Donald Trump launched punitive tariffs against China.
China’s vice-premier He Lifeng will meet US treasury secretary Scott Bessent on the sidelines of meetings in Switzerland between 9 and 12 May. US trade representative Jamieson Greer will also attend.
Japan’s Nikkei edged 0.1% lower, while Hong Kong’s Hang Seng rose by almost 0.5% and markets in Taiwan, Australia and South Korea were up between 0.1% and 0.55%. In mainland China, the Shanghai Composite rose by nearly 0.5% while the Shenzhen Composite gained 0.16%.
Stephen Innes, managing partner at SPI Asset Management, said:
That tepid market response speaks volumes. Because let’s be honest—this isn’t a rates problem, it’s a demand problem. China’s real economy isn’t thirsty for credit, it’s paralyzed by weak confidence, property rot, and collapsing export flows. You can lead the horse to water, but you can’t make it drink—especially when the water’s tainted with deflationary fear and policy fatigue.
European stock markets are set for a mixed open, with the UK’s FTSE 100 index seen opening slightly lower after its recent strong run while the German and French indices are expected to rise.
Traders are cautious ahead of the US Federal Reserve’s meeting tonight, where interest rates are expected to be left unchanged.
Oil prices are rising again, after yesterday’s 4% jump amid signs of higher demand in Europe and China, lower production in the US, tensions in the Middle East, a day after prices fell to a four-year low.
Brent crude is 1.1% ahead at $62.86 a barrel while US crude has risen by 1.3% to $59.86 a barrel.
The Agenda
8.30am BST: Eurozone HCOB Construction PMI for April
9.30am BST: UK S&P Global Construction PMI for April
10am BST: Eurozone retail sales for March
7pm BST: US Federal Reserve interest rate decision
