Moody's Raises Default Rate Forecast to 3.1%; Citi Warns of US Stagflation Risk
Key Takeaways
- Moody’s forecasts speculative-grade default rate up to 3.1% by year-end due to trade wars.
- Citi warns that tariffs could cause stagflation and weaker growth in the US.
- Pimco warns US assets risk mirroring UK, emerging markets due to protectionism.
- Snap-on shares dropped 8% due to weak sales and the negative impact of tariffs.
- South Korea to double overseas bond issuance to $3.5B to fund currency activity.
Top Stories
Moody's: Speculative-grade default rate forecast up to 3.1%
On April 17, 2025, Moody’s Ratings increased its forecast for speculative-grade companies' default rate to 3.1% by year-end, citing escalating global trade wars. A major negative shock could elevate the rate to as high as 6%.
Citi warns tariffs could cause US stagflation
On 2025-04-17, Citi's global strategist Nathan Sheets discussed the potential impact of tariffs on the US economy, predicting a minimum 10% reciprocal tariff and 25% sectoral tariffs. These tariffs could potentially lead to stagflation and weaker growth.
Pimco warns US assets risk mirroring UK, emerging markets
On 2025-04-17, Pacific Investment Management Co. (Pimco) warned that US financial assets are at risk of “mirroring dynamics of the UK and emerging markets”. This warning comes as the Trump administration embraces protectionism.
Snap-on shares drop 8% on weak sales, tariffs
On April 17, 2025, Snap-on Inc. shares dropped 8% after reporting its weakest quarterly organic sales and profit since 2020. Tariffs negatively impacted big-ticket orders, leading to a 10.9% decrease in originations within its financial services unit.
South Korea to double overseas bond issuance to $3.5B
On April 18, 2025, South Korea announced plans to more than double the amount of overseas bonds it can issue to fund currency market activity. This raises the ceiling to $3.5 billion.
Central Bank Actions
ECB prepared to adjust rates based on data
Published on April 18, 2025, European Central Bank Governing Council member Francois Villeroy de Galhau stated that the ECB is prepared to swiftly adjust interest rates based on incoming data. They will wait until their next meeting in early June before making any further decisions on interest rate adjustments.
ECB cuts rates for seventh time since June
On April 17, 2025, the European Central Bank (ECB) cut interest rates for the seventh time since last June. This is due to trade tensions instigated by Trump threatening the region’s economic recovery.
US Fed proposes overhaul of bank stress tests
On 2025-04-17, it was reported that the US Federal Reserve proposed an overhaul of stress tests for major banks, involving averaging results over two years and extending the timeframe for adapting to new capital requirements.
Trump criticizes Fed Chair Powell, wants rate cuts
On April 17, 2025, President Donald Trump stated that Federal Reserve Chair Jerome Powell is playing politics. On the same day, President Donald Trump stated that Federal Reserve Chair Jerome Powell’s termination could not come soon enough, arguing that the US central bank should have already lowered interest rates this year, and should do so now; Trump is increasing pressure on Fed Chair Powell to cut rates in the US.
Turkey's central bank raises interest rate to 46%
Market Insights
Market panic subsides after Trump's trade war threat
On April 17, 2025, reports indicated that the panic caused by President Trump’s trade war, which had shaken financial markets, subsided almost as quickly as it began. The S&P 500 Index, after fluctuating more than 10% in a single day, settled into an uneasy calm.
Investors adopt 'wait-and-see' approach on tariffs
On 2025-04-17, investors are adopting a "watch-and-wait" approach due to uncertainty surrounding tariffs. On April 18, 2025, Asian stocks saw small gains as investors adopted a wait-and-watch approach on tariff negotiations; the Nikkei-225 in Japan advanced 1%, while shares in mainland China were little changed.
Ghana's stocks lead global equity gains (+23%)
Published on 2025-04-17, Ghana’s stocks benchmark is leading global equity gains as the government’s commitment to cut spending after a painful debt restructuring pushes inflation and borrowing costs lower. The Ghana Stock Exchange Composite Index has climbed more than 23% this year in local-currency terms.
Wall Street strategists cut S&P 500 outlook for 2025
On 2025-04-17, Wall Street strategists are cutting their 2025 outlooks for the S&P 500 Index, citing concerns over the impact of US tariff policy on economic growth and corporate profits. Bloomberg's survey shows the average year-end target declining by 7.5% to 6,047, though this remains nearly 14% higher than the index's current level. JPMorgan Chase & Co.’s Dubravko Lakos-Bujas lowered his outlook the most — by 20% — to 5,200, while Wells Fargo & Co.’s Chris Harvey sees the S&P 500 finishing the year at 7,007, as does Deutsche Bank’s Binky Chadha at 7,000.
Fukoku Mutual to invest in Japan's super-long bonds
Fukoku Mutual Life Insurance Co. plans to invest in Japan’s super-long government bonds this fiscal year after their yields skyrocketed, and is considering shifting from foreign debt, according to a report published on April 18, 2025.
RBC BlueBay shifts to long position on Japanese bonds
RBC BlueBay Asset Management shifted its position on Japanese bonds from short to long over the past week, as reported on April 17, 2025, believing they will gain value due to the central bank avoiding further interest rate increases. This overweight position in 30-year bonds is driven by concerns about the US trade war impacting the Japanese economy.
Few US CEOs bought the dip amid tariff concerns
Few US CEOs bought the dip as tariffs rattled markets, according to a report published on 2025-04-17.
Company News
Global Payments to acquire Worldpay for $24B
Global Payments is set to acquire Worldpay in a deal valued at $24bn, according to a report published on 2025-04-17.
US judge: Google 'wilfully' monopolized ad market
A US judge has ruled that Google "wilfully" monopolized the online advertising market, according to a report published on 2025-04-17.
Petrobras cuts diesel price by 0.12 reais/liter
Effective April 18, 2025, Brazil's Petrobras reduced diesel prices for distributors by 0.12 reais a liter, averaging 3.43 reais per liter. This marks the second price cut this month due to a global oil market downturn and government pressure; gasoline prices remained unchanged.
LVMH assures investors despite economic challenges
On 2025-04-17, Bernard Arnault reassured investors at the LVMH shareholders' meeting in Paris that the company's situation is not worrying, despite a difficult economic climate, a 2% drop in activity in 2024, a 17% decrease in net income compared to 2023, and a 2% sales decline in the first three months of 2025. Uncertainties weigh on LVMH's trajectory due to customs taxes decreed by Washington at the entrance of the United States (currently 10%), a market that represents a quarter of LVMH's sales.
Economic Trends
IMF: African governments face surge in borrowing costs
On 2025-04-17, the International Monetary Fund reported that African governments are facing a surge in borrowing costs. This hinders their recovery from the Covid-19 pandemic's "great funding squeeze".
Nigeria may devalue naira due to trade war, oil prices
Published on April 17, 2025, the report indicates Nigeria may devalue its naira again due to sliding oil prices triggered by US President Donald Trump’s trade war, which is pressuring the budget. Goldman Sachs Group Inc. economist Andrew Matheny stated on April 17, 2025, that a natural policy response to lower oil prices is a depreciation of the naira, as this boosts oil revenues in naira terms.
Carlyle CEO: Inflation sticky, no recession yet
Carlyle Group Inc. CEO Harvey Schwartz stated on April 17, 2025, that persistent inflation across the firm's portfolio companies reflects a robust economy, making it premature to predict a US recession. He noted the "stickiness of inflation" as an indicator of a strong economy with low unemployment.
French purchasing power diagnosis biased, index gap growing
On 2025-04-18, Le Monde published an article by economists Pierre Concialdi, François Geerolf, and Florence Jany-Catrice, discussing the biased diagnosis of purchasing power evolution in France. The article highlights a growing gap between the harmonized index of consumer prices (IPCH) and the Insee index (IPC) since 2000.
US vet visits decline: recession omen?
Published on 2025-04-17, the report questions whether the decrease in US vet visits is a recession omen or due to price gouging.
EU trader bonuses surge after cap lifted
Bonuses for top traders at EU investment firms have surged after a cap was lifted, as reported on 2025-04-17.
Trade War Fallout
US imposes new fees on Chinese-built ships
On 2025-04-17, the U.S. Trade Representative (USTR) announced that owners and operators of ships built in China will be required to pay new fees when docking at U.S. ports. The measure will take effect in 180 days, with amounts gradually increasing; Chinese owners and operators of non-Chinese built ships will also be affected, with fees capped at five times per ship per year.
Oil analysts lower forecasts amid trade war concerns
Published on April 17, 2025, oil analysts have lowered their forecasts for oil demand and prices due to concerns about the impact of President Donald Trump's trade war. This suggests a larger-than-expected second-half glut.
Blackstone cites trade tensions for muted exits
On April 17, 2025, Blackstone Inc. reported muted exits for key businesses due to trade tensions stoked by US President Donald Trump’s tariff threats. Also on April 17, 2025, Blackstone Inc. President Jon Gray stated that governments that act swiftly to resolve the uncertainty from new US tariffs will reduce the fallout and bolster investor confidence.
Private equity faces longer wait for fund returns
Ares Management Corp.'s head of buyout business reported on April 17, 2025, that private equity investors will have to wait longer to get their money back from older funds due to global trade turmoil.
Trump: No rush for EU trade deal
On April 17, 2025, Trump indicated that he is in no rush to reach a trade deal with the EU.