Financial Markets 25/03/2025
Financial markets continue to be affected by the uncertainty generated by the US government, which immediately translates into volatility and profit taking in the stock markets. That is what happened last week until the Fed’s decision and its conclusions on the state of the US economy.
Their message was clear and once again reiterated: given the current macro outlook, they have no need to continue with interest rate cuts, as the government announced measures could affect forecasts on various aspects of the economy such as trade, immigration or fiscal policy, with a direct impact on inflation, which has led to an increase in uncertainty at a global level. That said, the message on the health of the U.S. economy remains positive for the U.S. despite raising the inflation estimate for the current year to 2.7% from 2.5% and lowering GDP growth to 1.7% from 2.1%.
The economy will continue to grow, will not enter recession and the impact of the imposition of tariffs will only cause a transitory increase in inflation (according to the FED), therefore they continue to anticipate two 25 bps interest rate cuts in 2025, that is, unchanged from the previous meeting, although in this case there are four out of nineteen members who do not see a rate cut and four others who anticipate only one. Government policies and their potential consequences will keep the Fed dependent on data.
As mentioned above, the stock markets welcomed the Fed’s comments with some optimism and ended the week with slight gains. The S&P 500 closed at 5,668.90 points, up 0.77%, and the Nasdaq 100 closed at 19,753.97 points or 0.25%. In Europe the movement was similar, and the Euro Stoxx 50 ended Friday’s session at 5,412.45 points with a +0.15% and the Ibex 35 was once again one of the most outstanding indexes, rising 2.63% and closing at 13,347.70 points.
The bond market received the same positive message and the main government bonds fell in their yields as a result of the Fed’s pseudo-optimism. The 10-year Treasury was down 7 bps to a yield of 4.25%, the Bund was down 11 bps to 2.76% and the Bono fell back to 3.40% or 10 bps.
With optimism restored, albeit temporarily, Brent crude futures gained 2.17% to close the week at 72.11 USD/b. The latest moves in China to stimulate domestic consumption and that the United States will not enter recession, encouraged buyers. Gold, which set a new all-time high at 3,069.09 USD/Onz, continues to reflect the fear of the macroeconomic and geopolitical situation, which we must not forget, is still present.
For the current week, the most important data we will have to pay attention to will be the PMIs (provisional data for the month of March), which were released yesterday, Monday. In Europe, the improvement of the industrial sector continues, with a figure of 48.7 compared to an estimate of 48.3 and a previous figure of 47.6, but the services sector also continues to deteriorate, with a figure of 50.4 (51.2 estimated). On the other hand, in the United States we had a double surprise, as the manufacturing PMI did not meet forecasts and returned to contraction territory at 49.8 (versus 51.9 estimated), but the services PMI regained its momentum, rising to 54.3, when the forecast was 51.2. Throughout the week, we will know the economic forecasts for the European Union, the final GDP data for the fourth quarter in the United States (+2.3%) and the PCE data for February, which should confirm the Fed’s expectations.
The sentence:
And we bid farewell with the following quote from Alexander Hamilton, economist, statesman, politician, writer, lawyer, and the first U.S. Secretary of the Treasury: “the first duty of society is justice”.
Summary of the performance of the main financial assets (3/24/2025)
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