The beacon of the markets 04/03/2025
The first weekly correction of any significance in the US stock markets was triggered by a series of macroeconomic data that have generated fear in some investors. Two consecutive years of strong share price rises are reason enough for reactions like the one experienced in the last few days. Nvidia’s expected results did not disappoint analysts, but its forecasts for the coming quarters, together with a slight downward adjustment of the company’s margins, did raise some doubts.
On the macroeconomic front, The Conference Board’s consumer confidence fell to 98.3, compared to an estimate of 102.7 and a previous figure of 105.3. This indicator predicts future spending by U.S. citizens, whose consumption is one of the main drivers of their economy. In addition, the first revision of fourth quarter GDP remained at 2.3% (3.1% had been expected) and home sales continue to show no signs of improvement. But not everything is negative, the PCE data reassured the market, especially as the core component was confirmed to have dropped to 2.6% from the previous 2.9%, which should favor more favorable CPI readings in the coming months. In addition, the Chicago manufacturing PMI data jumped to 45.5, which, while remaining in the contraction zone, experienced a very notable rise from the previous figure of 39.5.
In Europe, CPI data confirmed expectations, 2.5% and 2.7% for core CPI, which allows us to continue to believe that inflation will moderate throughout the year. The ECB minutes confirmed what the market is discounting, it will probably lower by another 25 bps this week and will do so twice more during the year. However, some of its members raised their tone to show their concern about the upward trend in CPI since the lows of September and therefore request more confidence to continue with the easing of monetary policy from April onwards. However, the weakness of economic growth and the decrease in wage pressure in the latest agreements reached between employers and unions, would facilitate the path of interest rate cuts.
Against this financial backdrop, the stock markets corrected in the United States, where the S&P 500 fell by 0.98% and the Nasdaq 100 by 3.38%, with the Magnificent 7 among the most heavily penalized. In Europe, the Euro Stoxx 50 barely gave up 0.15%, while the Ibex 35 surpassed its last relative highs to close at 13,323.20 points, a rise of 2.87%. This level for the Ibex has not been seen since June 2008.
In the fixed income markets, the potential slowdown in US consumption pushed the yield on the 10-year Treasury down to 4.21%, a fall of 22 bps. The market is now betting on 2 or 3 25 bps declines in 2025. The Bund and Bond yields gave up 7 bps to close at 2.39% and 3.08%.
Commodities also saw a sell-off in the market, gold corrected 3.08% to 2,862.20 USD/Onz while Brent was down 2.49% to 72.50 USD/b, a potential end to the war in Ukraine could affect energy prices downwards.
This week we will be watching the ECB meeting, retail sales growth, PMIs and GDP in the euro zone. In China, the national assembly meets and a package of fiscal spending measures to revive the economy is expected, as well as PMIs. And in the US, we will be closely watching the employment data due later in the week, where the unemployment rate is expected to remain at 4% and more than 150,000 non-farm jobs will be created.
Earnings season is almost over, with EPS growth of 14.1% (versus an initial forecast of 7.5%). As of last Friday, 485 companies had presented their results, 74% of which have surprised positively versus a worse performance of 19%.
The sentence:
And we bid farewell with the following quote from Enrique Jardiel Poncela, Spanish writer and playwright: “All men who have nothing important to say speak loudly.”
Summary of the performance of the main financial assets (3/3/2025)
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This document has been prepared by Portocolom Agencia de Valores S.A. for the purpose of providing general information at the date of issue of the report and is subject to change without notice. Portocolom Agencia de Valores S.A. assumes no obligation to communicate such changes or to update the contents of this document. Neither this document nor its contents constitute an offer, invitation or solicitation to purchase or subscribe for securities or other instruments or to make or cancel investments, nor may they form the basis of any contract, commitment or decision of any kind.
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