Financial Markets 07/10/2025
The stock markets continue to perform well despite the obstacles in their path. This week,
the US government shutdown has been the discordant factor in the financial world.
Although the two major parties were unable to reach an agreement to increase the
government’s borrowing capacity and thousands of civil servants were laid off early on October 1,
the uncertainty generated had little impact on the markets for more than a few hours.
Other variables have weighed more heavily than a government shutdown, and the stock markets have continued to perform well.
Furthermore, every time there has been a government shutdown in the past, it has been short-lived,
lasting no more than a few weeks in the worst cases, and has never had a significant economic impact.
The situation in Gaza, with an agreement in principle to end the war, and the significant number
of deals between companies in the technology sector have given the markets a boost once again.
Despite a slight correction on Friday, the week ended with
widespread gains on the US stock markets. The S&P 500 and Nasdaq 100 posted
gains of more than 1%, reaching two new all-time highs in the last five
sessions, closing at 6,715.79 and 24,785.52 points after reaching 6,750.87 and
24,958.02 points, respectively. In Europe, large companies performed
remarkably well, leading the Euro Stoxx 50 to a new all-time high of 5,674.40 points,
something that had not happened since last March. For its part, the Ibex 35 remained
halfway, gaining 1.63% and closing at 15,600 points, also reaching annual highs
and remaining less than 3% below its all-time highs.
Bond markets also saw money being positioned in public debt and witnessed
a widespread decline in yields. The US government shutdown has
had an initial direct effect on the markets, as much of the macroeconomic data
that was expected, such as that related to the labor market and produced by the administration, has not
been published. As a result, managers have had to settle for data from private sources,
which is generally more erratic but, on this occasion, generated the reading desired by investors.
This reading is that the labor market continues to show signs of weakness, which has once again
boosted expectations of rate cuts by the Fed, and once again the majority opinion
is that it will cut the cost of money by 25 basis points at the last two meetings of 2025. The
Treasury and 10-year bond yields fell 7 bps to end the week at 4.12% and 3.24%,
respectively. The Bund fell slightly less, 4 bps, to end the week with a
yield of 2.71%.
The precious metals market experienced significant increases for the fifth consecutive week,
notably reducing the upside potential if the markets cease to be affected by external circumstances
such as the armed conflicts in Ukraine and Gaza. In
any case, gold has maintained its upward trend and, after reaching new historic highs,
closed the week with a 3.11% increase at 3,912.07 ounces/USD. Silver and platinum
followed closely behind in their respective increases. The corrective side was seen in oil,
with a 7% drop for Brent, which closed at 64.36 USD/b. This drop has been supported, on the one hand,
the one hand, by the arrival of the truce in Gaza, and on the other hand because OPEC+ is expected to
increase its production again from November (137,000 b/d), which would affect the slight
balance between supply and demand. Any news that alters this balance is
causing movements of a certain magnitude that have increased the volatility of crude oil and had a significant
impact on the behavior of price trends.
In terms of macroeconomics, the most notable data was the PMI figures, which exceeded
forecasts in the three main markets. In Europe, as expected, the CPI rose
to 2.2%, while the core indicator remained stable at 2.3%. Therefore,
energy and food prices were responsible for the increase. In addition, the unemployment rate
rose by one-tenth of a percentage point to 6.3%.
In the US, consumer confidence fell slightly to 94.2 from 97.8 previously, which was not
significant. The private JOLTS surveys were also released, rising slightly to
7.23 million jobs, but we saw the ADP survey stand at -32,000 and
revising the previous figure to -3,000. In summary, job openings are increasing and hiring is decreasing
. These figures will be altered in future readings due to the administrative shutdown,
so it will take several weeks before we have normalized data again. For the current week,
there is nothing particularly relevant apart from the retail sales data in Europe and the minutes
of the latest Fed and ECB meetings, but above all, managers will be waiting for the
US administration to return to normal.
The quote:
And we leave you with the following quote from Adam Smith, economist and philosopher of the Scottish Enlightenment,
considered one of the greatest exponents of classical economics and the philosophy of
economics: «There can be no flourishing and happy society when the greater part of its members
are poor and miserable.»
Summary of the performance of the main financial assets (10/6/2025)
