India carried out missile strikes across three regions of Pakistan late Tuesday, targeting locations in Pakistan-administered Kashmir and Bahawalpur in Punjab province, according to Pakistan’s military.

The Pakistani Army, cited by state television, confirmed the strikes hit multiple sites, including Kotli, Muzaffarabad, and Bahawalpur, escalating tensions between the nuclear-armed neighbours.

Pakistani Army spokesperson Lt. Gen. Ahmed Sharif called the strikes “unprovoked aggression,” vowing a response, as reported by state media.

India’s Operation Sindoor targets nine sites

Concurrently, India’s Defense Ministry announced “Operation Sindoor,” a targeted operation striking nine sites in Pakistan and Pakistan-administered Jammu and Kashmir.

The ministry stated the sites were terrorist infrastructure used to plan attacks against India, though specific targets, such as a reported strike on Hafiz Saeed’s seminary in Bahawalpur, remain unconfirmed by Indian officials.

Posts on X indicate significant Indian jet activity near the border, with explosions reported in Rawalpindi and Azad Kashmir, though these claims are inconclusive.

Escalation risks and global implications

The strikes mark a sharp escalation in Indo-Pak relations, already strained by historical disputes over Kashmir.

Pakistan’s military reported at least three missiles fired from the air, impacting southern Punjab and Kashmir regions, causing widespread alarm in affected cities.

The establishment narrative of targeted counter-terrorism must be scrutinized—neither side has provided independently verified evidence of the targets or casualties, raising questions about the strikes’ scope and intent.

Global reactions are pending, but the risk of retaliation looms large, with both nations possessing nuclear capabilities.

Analysts warn of potential economic fallout, as markets may react to heightened geopolitical risks.

The international community is likely to call for de-escalation, though past mediation efforts have yielded limited success. As the situation develops, the region braces for further uncertainty.

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New Zealand’s labour market continued to show signs of softening in the first quarter, with employment growth remaining tepid, the unemployment rate holding near a multi-year high, and wage inflation moderating.

These latest figures reinforce market expectations that the Reserve Bank of New Zealand (RBNZ) will implement further interest rate cuts, potentially as early as this month, as it seeks to stimulate a sluggish economy.

The South Pacific nation narrowly avoided a prolonged recession at the end of last year, but continues to grapple with weak domestic demand and mounting external risks, notably from the ongoing global trade friction spurred by US President Donald Trump’s policies.

In response to these challenges, the RBNZ has already aggressively cut its official cash rate by 200 basis points since August 2024, bringing it down to 3.5%.

Today’s employment data further strengthens the case for continued monetary easing.

Statistics New Zealand reported Wednesday that the unemployment rate remained unchanged at 5.1% in the first quarter of the year. Employment saw a marginal increase of just 0.1% compared to the previous quarter.

While these figures were slightly better than some economist forecasts (Reuters poll: 5.3% unemployment, 0.1% employment rise) and the RBNZ’s own expectation of a 5.2% unemployment rate, they still point to considerable slack in the job market.

Wage growth slows, participation dips

Crucially, wage inflation showed signs of cooling.

The private sector labour cost index, excluding overtime, rose by 0.4% in the first quarter, a slowdown from the 0.6% increase recorded in the prior quarter and below the forecast 0.5% rise.

This easing in wage pressures suggests that inflationary impulses from the labour market are diminishing.
Further indicating a loosening, the labour force participation rate dipped to 70.8% in the first quarter, down from 71% previously.

Westpac senior economist Michael Gordon noted a significant trend in youth participation, observing a “marked drop… in recent quarters, with the tougher jobs market seeing young people returning to or spending longer in study rather than actively looking for work.”

Reinforcing expectations for RBNZ action

Analysts broadly interpreted the data as supportive of further RBNZ rate cuts.

“The broader suite of data continues to suggest there’s plenty of excess capacity in the labour market (and the economy more broadly) – a signal that domestic CPI inflation pressures will continue to wane for a while yet,” commented Miles Workman, senior economist at ANZ Bank, in a research note.

He added that ANZ remains comfortable with its expectation that the central bank will ultimately cut the cash rate to 2.5%.

The New Zealand dollar showed little reaction to the data release, trading around $0.6010, as the figures largely aligned with market expectations for a softening labour market.

Financial markets are now pricing in a high probability that the RBNZ will cut the cash rate by another 25 basis points at its meeting later this month, with further reductions anticipated throughout the year, potentially taking rates below 3.0% before year-end.

“With inflation within the 1-3% target range, further monetary easing looks appropriate to support the labour market and New Zealand economy,” stated ASB Bank Senior Economist Mark Smith in a note.

ASB Bank anticipates an additional 75 basis points of rate cuts throughout 2025, underscoring the prevailing view that more stimulus is needed to invigorate New Zealand’s economy.

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Facing mounting economic pressure from its protracted trade war with the United States, China has unveiled a significant package of stimulus measures aimed at shoring up its domestic economy.

This flurry of policy action comes just as Beijing and Washington confirmed plans for high-level trade talks later this week, offering a tentative sign of potential de-escalation.

Top Chinese financial officials, including the governor of the People’s Bank of China (PBOC), detailed a series of steps designed to inject liquidity and support growth.

Key among these are cuts to interest rates and a reduction in the reserve requirement ratio for banks, a move intended to free up substantial funds for lending.

Specifically, PBOC Governor Pan Gongsheng announced a reduction in the reverse repo rate (the rate on commercial banks’ central bank deposits) to 1.4% from 1.5%, and a 0.25 percentage point cut in the PBOC’s lending rate to commercial banks, bringing it to 1.5%.

Crucially, the required reserve ratio for banks was lowered by 0.5%.

Governor Pan estimated this measure alone would “free up 1 trillion yuan ($137.6 billion) in extra cash” for the banking system to deploy.

Additionally, the central bank reduced interest rates on five-year housing loans, aiming to support the beleaguered property sector.

Beyond these monetary policy adjustments, the government also pledged to increase funding available for factory upgrades, technological innovation, and service sector businesses like elder care.

Navigating trade war headwinds

These domestic support measures are a clear response to the significant economic toll exacted by the high tariffs imposed by US President Donald Trump.

China’s export-reliant economy, already grappling with a prolonged downturn in its crucial property market, has been further strained by these trade barriers.

The announcement of these economic boosters coincided with news that high-level trade talks are set to resume.

Treasury Secretary Scott Bessent and US Trade Representative Jamieson Greer are scheduled to meet with Chinese Vice Premier He Lifeng in Geneva, Switzerland, later this week.

This will be the first confirmed dialogue since the latest round of significant tariff escalations.

Cautious optimism greets dialogue

While the agreement to talk offers a glimmer of hope, both sides have maintained firm public stances on their respective tariff positions, leading to cautious market reactions.

“The talks ‘could be the pivot point that either locks in fragile confidence or re-ignites the ‘trade war’ inferno,’” warned Stephen Innes of SPI Asset Management in a report, highlighting the high stakes involved.

Recent economic data underscores the strain on both economies.

The US economy contracted by 0.3% in the first quarter of 2025.

While China reported 5.4% annual growth in Q1, driven by factories ramping up production to meet a pre-tariff spike in orders, economists have questioned the sustainability of this momentum, and more recent indicators show deteriorating new export orders and business sentiment.

Financial markets, which have been reeling from the standoff characterized by US tariffs as high as 145% on Chinese goods and Chinese retaliatory hikes up to 125%, reacted positively but with restraint to the dual news of stimulus and talks.

Share prices in Hong Kong rose over 2%, and Shanghai gained 0.5% in early Wednesday trading, with US futures also advancing.

However, market watchers anticipate a protracted resolution process. “We do not expect reaction to be euphoric,” commented Tan Jing Yi of Mizuho Bank, as quoted by Reuters.

Point being, any trade resolution would likely take a long time and in the near term, there may be some piecemeal exemptions or tariff reductions on certain goods.

The combination of domestic stimulus and renewed dialogue signals Beijing’s attempt to navigate the challenging economic landscape created by the ongoing trade conflict.

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Indians woke up to the news of the country launching a series of coordinated missile strikes early Wednesday on terror infrastructure located across Pakistan and Pakistan-administered Kashmir.

The military action, named ‘Operation Sindoor’ comes just two weeks after a deadly militant attack on tourists in Indian-administered Kashmir’s Pahalgam that left 26 civilians dead.

The action received bipartisan support in India, while many global players, including China, and the United Nations urged “restraint”.

Meanwhile, kin of those slain in the unfortunate Pahalgam attack welcomed the action, calling it a “befitting reply”.

Operation important to deter further such attacks: Indian officials

Foreign Secretary Vikram Misri, addressing a press briefing in New Delhi on Wednesday said the goal of the terror attack in Pahalgam was to destabilise Jammu and Kashmir and damage its booming tourism.

Misri added that The Resistance Front (TRF), a group linked to Lashkar-e-Taiba (LeT), claimed responsibility for the killings and is acting as an arm of Lashkar-e-Taiba (LeT) to derail Kashmir’s growth.

“A group called the Resistance Front has claimed responsibility for Pahalgam attack. This group is connected with Lashkar-e Taiba. Pakistan links have been established in this attack. On April 25, Pakistan’s pressure to remove the reference to TRF from the media release shouldn’t be ignored. Pahalgam terrorist attack has exposed the links of Pakistan with terrorists,” he added.

“Our intelligence agencies monitoring terrorist activities have indicated that there could be more attacks on India, and it was felt essential to both stop and tackle them,” he added.

Colonel Sophia Qureshi confirmed that Operation Sindoor successfully destroyed nine identified camps, including sites in Muridke and Bahawalpur — known to be headquarters of LeT and stronghold of Jaish-e-Mohammed respectively.

Wing Commander Vyomika Singh said that the nine camps targeted had been part of a well-established infrastructure developed over three decades in Pakistan and Pakistan-occupied Jammu and Kashmir (PoJK).

“The targets were chosen carefully based on credible intelligence,” Singh said. “We ensured minimal risk to civilians and carried out the operation with precision.”

Pakistan terms action ‘unprovoked’, vows retaliation

The Pakistani government issued a strongly-worded statement calling the Indian operation “an unprovoked and blatant act of war” and vowed to retaliate at a time of its choosing.

Hours after the strikes, Pakistani troops escalated ceasefire violations across the Line of Control, using heavy artillery in Rajouri and Poonch districts of Jammu and Kashmir.

At least seven civilians were killed and 38 others injured in the shelling, officials confirmed.

One civilian died in Mendhar, while six others, including women and children, perished in Poonch. Two Central Reserve Police Force personnel were also injured when a shell hit a bus stand.

“During the night of 06-07 May 2025, Pakistan Army resorted to arbitrary firing, including artillery shelling from posts across the Line of Control,” said Lt Colonel Suneel Baratwal, spokesperson for the Indian Army’s Northern Command.

The Indian side responded in a “calibrated manner,” the Army posted on social media platform X.

South Asia expert Michael Kugelman said the strikes represented one of the highest-intensity actions by India in years and warned of potential escalation.

“These are two strong militaries with nuclear capabilities,” Kugelman noted in a report by Politico.

“Even with nuclear weapons acting as a deterrent, they are not afraid to deploy sizeable levels of conventional military force. The escalation risks are real and could increase quickly.”

World urges restraint amid fears of wider conflict

The sharp escalation has triggered concern around the globe, with several countries urging both India and Pakistan to step back and avoid a broader conflict.

China, which shares borders with both nations, found India’s move “regrettable”.

The country, which shares borders with both India and Pakistan, urged both sides to “act in the larger interest of peace and stability, remain calm, exercise restraint and refrain from taking actions that may further complicate the situation”, it said in a statement.

United Nations Secretary-General António Guterres said he was “very concerned” and called on both sides to show military restraint.

US President Donald Trump expressed dismay over the strikes, calling them “a shame,” and said he hoped tensions would de-escalate quickly.

“This is a long-standing conflict, and I just hope it ends soon,” Trump said when asked about the strikes.

Israel, in contrast, backed India’s position. Reuven Azar, Israel’s ambassador to India, said the country supports India’s right to self-defence.

“Terrorists should know there’s no place to hide from their heinous crimes,” he posted on X.

The United Arab Emirates also issued a statement calling on both countries to de-escalate and work toward stability in the region.

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Tariff announcements are causing ripples throughout global oil markets, leading to increased focus on potential reciprocal actions and their fundamental effects across the entire oil-to-olefins value chain.

Alkenes, or olefins, are hydrocarbons characterized by the presence of one or more carbon-carbon double bonds.

These compounds serve as essential precursors in the manufacturing of a wide range of products, such as plastics and detergents.

The narrowing trade dispute between the US and China has highlighted natural gas liquids (NGLs) as a significant point of contention, revealing the substantial interconnectedness of both countries in the NGL, naphtha, and olefins markets, according to Rystad Energy.

“A steep 125% tariff on US propane would severely impact China’s propane dehydrogenation (PDH) sector, which is highly dependent on this cost-effective feedstock,” Manish Sejwal, vice president, commodity markets analysis at Rystad Energy said in an emailed commentary. 

Rystad Energy analysis indicates a potential 10–20% decrease in utilization, leading to a tighter propylene market and a brief period of benefit for Korean PDH and naphtha crackers.

China’s propylene output and reliance on US propane 

China’s propylene production via propane dehydrogenation (PDH) has surged over 300% in the last five years, exceeding 21 million tonnes. 

This dramatic increase is attributed to the availability of inexpensive propane from the US, a consequence of the US shale gas revolution, particularly in the Permian Basin. 

Limited US domestic propane demand has positioned the nation as the leading global exporter.

Notably, in 2024, the US supplied almost 60% of China’s total propane imports.

US LPG exports maintained a robust level in April. Although shipments to Asia saw a minor decrease, specifically to China, this was offset by higher exports to other areas. 

Despite potential changes in trade patterns, the substantial volume of US LPG exports makes a complete diversion from China unlikely.

If China enforces a 125% tariff on US propane, it would have severe consequences for its PDH industry, which has already been struggling with poor margins due to high feedstock costs and limited alternative propane sources. 

“Such a move would lead to propane oversupply in the US, putting downward pressure on US LPG prices,” Sejwal said.

China’s PDH plant operations could be significantly impacted by the tariff, potentially leading to a 10-20% decrease in utilisation rates due to a shortage of alternative propane suppliers, as projected by Rystad Energy. 

This reduction could lower propane demand by approximately 120,000 bpd with a 10% drop, and around 210,000 bpd with a 20% drop. 

Improved margins for Asia

Consequently, tighter propylene fundamentals are anticipated, which may re-balance the oversupplied propylene market and temporarily improve margins for Asian steam crackers and PDH operators outside of China.

Sejwal noted;

This would provide a small window of opportunity for Korean PDH operators and naphtha crackers in Asia to increase the run-rates.

However, elevated ethylene supply and a subdued demand outlook for derivatives, influenced by tariffs, are expected to limit increases in cracker operating rates and consequently restrain the growth in naphtha demand from these units.

Naphtha market

Rystad Energy expects naphtha demand in China to increase by around 250,000 bpd largely driven by new non-integrated capacity addition in China.

Refineries are expected to maintain current production levels of petrochemical feedstock in the near term. 

This is because the ongoing shift towards electric and gas-powered vehicles in China is projected to increase the availability of naphtha. 

The resulting surplus naphtha is likely to be redirected to the petrochemical industry, specifically for steam cracking and aromatics production.

Sejwal added:

Furthermore, the weaker product cracks outlook would disincentivize the refiners to increase runs.

Recent strengthening of naphtha cracks in Asia is attributable to limited imports from the West of Suez and the commencement of operations of a new naphtha-dependent cracker in China during April, according to Rystad.

Western naphtha supply is decreasing due to European, UK, and Middle Eastern refinery shutdowns, compounded by maintenance at the key exporter Skikda.

Rystad Energy anticipates strong Asian naphtha cracks this year, exceeding last year’s levels. 

This strength in cracks is attributed to reduced Western naphtha supply, stemming from European refinery shutdowns, aligning with increased demand from new Chinese ethylene crackers that were not integrated. 

Consequently, the region’s reliance on imported naphtha is expected to grow, the energy intelligence company said.

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