By Jamie McGeever

ORLANDO, Florida (Reuters) - TRADING DAY

Choppier waters ahead?

One of the biggest surprises in a week overflowing with them - from top-tier economic indicators, to company earnings and policy decisions from around the world - was how steadfast financial markets were.

Global and U.S. stocks closed the week with gains of up to 3%, the dollar advanced, Treasury yields rose, and the VIX index of U.S. equity market volatility eased. On the surface, a strong week for investor sentiment and risk sentiment.

But that would be only half the story.

Figures showed that the U.S. economy shrank in the first quarter - a statistical anomaly due to a record hit from trade, perhaps, but the first contraction in three years, nevertheless, and putting the economy halfway towards a technical recession.

Some of that gloom was countered by unequivocally positive GDP figures from the euro zone. And yields and stocks leaped higher on Friday after April's non-farm payrolls report showed the Trump administration's global trade war has yet to be materially felt in the U.S. labor market.

On the corporate front, dozens of leading global firms cut or declined to give forecasts in their first-quarter earnings, such is the uncertainty surrounding tariffs. Yet the overall tone from these calls this week was positive, and investors have consistently bought the post-Liberation Day dip.

One of the most significant developments this week for world markets came from Tokyo, where the Bank of Japan kept interest rates on hold as expected but slashed its growth outlook and lowered its inflation forecasts. The yen tumbled, but still ended the week essentially flat.

So, some huge price swings in individual shares and assets. In the U.S. and beyond, there's little evidence that trade uncertainty is prompting companies to lay off workers or jack up prices. Not yet anyway.

There's a growing belief that U.S. President Donald Trump is backing away from his more belligerent tariff threats, and that a more receptive Washington is closing in on several bilateral trade deals. Tensions with China may even be cooling too.

However, the risks to growth and markets lie ahead, and a "cliff-edge type of adjustment" in the coming months is possible, warns RBC BlueBay Asset Management's Mark Dowding.

"There appear to be similarities to the Roadrunner cartoon, in which Wile E. Coyote keeps on running, long after the ground has disappeared beneath his feet, ahead of the inevitable moment of realisation when gravity kicks in," he wrote on Friday.

With consumer sentiment sliding and inflation expectations rising, stagflation looms. For markets, that suggests choppy waters ahead rather than plain sailing.

I'd love to hear from you, so please reach out to me with comments at . You can also follow me at @ReutersJamie and @reutersjamie.bsky.social.

This Week's Key Market Moves

* Britain's FTSE 100 notches a record 15 consecutive dailygains, the longest winning streak since the index was launchedin 1984. * Wall Street rallies on Friday, ending the week up around3%. The Dow has its best run since December 2023, the S&P hasits longest winning streak since November 2024. * U.S. bond yields rise as much as 7 basis points, thanks toa sharp rise on Friday after the April employment report. * Oil falls 8%, with Brent crude futures at a four-yearclosing low on Friday of $61.17/bbl ahead of Saturday's OPEC+meeting. * Japan's Nikkei 225 rises 3% on U.S. trade deal optimismand weaker yen. Index rises seven days in a row, its best runsince August-September, 2023. * Gold slips 2.6% on the week, easing further back fromits recent $3,500/oz high.

Chart of the Week

In his first term in office, U.S. President Donald Trump regularly took credit on social media for the boom on Wall Street. He has been less vocal this time around, and with stocks down since his inauguration, this week he posted: "This is Biden's Stock Market, not Trump's," adding that the recent slide had "NOTHING TO DO WITH TARIFFS".

April 30 marked the first 100 days of Trump's second term, and the following chart shows where they rank in history. Stocks have clawed back some of these losses in the last two days, and if the rebound continues, maybe it will be Trump's stock market after all.

Here are some of the best things I read this week: 

1. America's Economic Tailwinds Will Override Trump and HisTariffs 2. Trump and the Triumph of the Technolords 3. The Smoot-Hawley Trade War 4. Trump tariffs expose US weak flank in services 5. Remarks by Kevin Warsh - Commanding Heights: CentralBanks at a Crossroads IMF Lecture Hosted by G30

What could move markets on Monday?

* Australia reaction to Saturday's general election * Indonesia GDP (Q1) * U.S. services ISM and PMI (April) * U.S. 3-year Treasury note auction

Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.

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(Writing by Jamie McGeever; Editing by Nia Williams)