Financial Markets 11/03/2025
Financial markets maintain high levels of volatility caused by the geopolitical situation and by macroeconomic data that do not clear up doubts about the health of the world economy. In China, the PMI data exceeded forecasts, but very slightly and remains very close to the 50 level, although for now in the expansion zone. In addition, last month’s export and import data, well below forecasts, are an additional sign of concern about the state of health of the second largest economy. On March 11, the party-government meeting concludes, from which a series of forceful measures are expected to enable the recovery of its economy.
In Europe, we continue with the publication of mixed data that do not allow us to establish the concrete direction of the economy. On the positive side, i) annualized GDP for the fourth quarter surprised on the upside at +1.2% (+0.9% was expected), ii) the unemployment rate fell to an all-time low of 6.2%, iii) the underlying CPI fell by one tenth of a point to 2.6% (2.5% was expected) and iv) industrial activity continued its recovery at 47.6 when 47.3 was expected. But on the negative side, i) retail sales fell more than expected in February -0.3% (+0.1% estimated) and ii) services activity continues to weaken at 50.6 and is very close to entering contraction territory. Faced with this situation, the ECB had no doubts and lowered interest rates by 25 bps to leave the level of the deposit facility at 2.50%, although it did indicate that the next movements will be very much influenced by the evolution of the data that will become known.
In the United States, the situation is similar to that in Europe, but with the manufacturing sector gaining traction. Employment data continue to be erratic with respect to forecasts, and are undergoing relatively large adjustments weeks after their initial release. In any case, over 150,000 new jobs were created in February, but note that the public sector contributed to the unemployment rate rising to 4.1% and that the labor force participation rate was the lowest (62.4%) since February 2023. Early GDP forecasts for the first quarter of 2025 point to a significant correction, close to 3%. The Beige Book showed some fears of a spike in prices as a consequence of tariff policies, for now there is more pressure on input prices than on selling prices. The most affected sectors would be construction, insurance, transportation and manufacturing. At the economic level, the latest data suggest a slight increase, but with consumers holding back on spending, especially on non-essential goods.
With all this, the stock markets experienced falls of some significance, which in the case of the United States led its main indexes to enter negative territory since the beginning of the year. The S&P 500 lost 3.10% during the week, leaving it with a negative balance of 1.90% in 2025. In the case of the technology sector, the Nasdaq 100 lost 3.27% for the week and 3.86% so far this year. For its part, Europe for now has a much more positive outlook, with the Euro Stoxx 50 up 0.03% to accumulate +11.63% for the year. And for its part, the Ibex 35, although losing 0.68% on a weekly basis, has accumulated a revaluation of 14.33% so far this year.
In the fixed-income markets, bond yields rose across the board. The 10-year Treasury went up to 4.30% or 10 bps higher. In Europe, the announcement of billions of euros in investments by Germany, both in infrastructure and defense, pushed European long-term debt yields up sharply. Specifically, the Bund ended at 2.84% or 45 bps above the previous Friday or 40 bps in the case of the Bond which closed with a 3.49% yield.
Gold remains above 2,900 USD/Onz, as it continues to act as a safe haven in the face of geopolitical uncertainty. For its part, Brent dropped by 3.73% due to the confirmation that OPEC will increase its production as from April, but in any case, the drop could have been significantly greater if it had not been for the announcement that the United States is going to allocate some 20 billion USD to replenish its strategic oil reserves.
This week will have few macroeconomic references, where we highlight the CPI and PPI data in China and the United States. In Europe the most relevant will be the industrial production data.
The sentence:
And we say goodbye with the following quote from Joseph Collins: “A wise man makes the most of his personal experience. A wise man makes use of the experience of others”.
Summary of performance of main financial assets(11/03/2025)
