Financial markets 08/04/2025
Last Wednesday we learned of the tariffs imposed by the United States on the rest of the world. These tariffs were much higher than expected by investors, which caused a strong reaction in all financial markets. We highlight the 20% tariff imposed on the countries of the European Union or the additional 34% on China (previously imposed 20%), and already knowing that the tariff on cars and their components had been set at 25%. Of the amounts set for each economy, 10% came into force on April 5 and the additional part will come into force on April 9, unless an agreement is previously reached bilaterally. It should also be noted that these tariffs would be the maximum amounts that will be imposed if no countermeasures are taken (a new threat from Trump), a circumstance that both China and Europe have stated they will do to protect their own interests.
The consequence of the high impact generated by the tariffs has been the very strong fall experienced by the markets in the last two sessions of the week, which led the main indexes to fall almost 10% in the week, a movement that was continued in Monday’s session. The S&P closed at 5,074.05 points, which represents a weekly fall of 9.8%, and the Nasdaq 100 closed at 9.77% to end at 17,397.70, its lowest level in a year. Europe also suffered the consequences of economic forecasts in which economic growth in the United States was revised to between 1% and 1.5%, i.e. growth in 2025 will be very moderate, but at the same time inflation is expected to grow by between 1% and 1.5%, which would limit the Fed’s ability to lower interest rates. Thus, the Euro Stoxx 50 closed 8.72% lower at 4,866.15 points, with the Ibex 35 being one of the best performers with a 6.6% drop to end at 12,430.60 points.
In the government bond markets, the 10-year US Treasury dropped 25 bps to close with a yield of 4%, while the Bund and the Bono dropped 15 and 10 bps, respectively, to a yield of 2.58% and 3.26%. The biggest drop in the US was due to the market starting to discount that there will be 3 25 bps cuts in the interest rate set by the FED.
Commodities also suffered declines, including gold, which has been left out of the tariff scope for now. Gold fell by 2.53% to close at 3,035 USD/Onz but having set a new all-time high on Thursday at 3,201.60 USD/Onz. Oil (Brent) fell sharply for two reasons: i) tariffs will reduce economic activity and therefore the demand for crude oil, and ii) OPEC confirmed that in May it will begin to increase its production and will do so with a higher volume than estimated by the market. Friday’s close reflected Brent at 66 USD/b, which implies a fall of 9.31%, a crude oil price not seen in Europe since April 2021. If this price level consolidates, we could see a significant correction in inflation in the coming months.
Macroeconomics will bring few references throughout the week, but it could happen again that good macro data go unnoticed by the market due to the strong pressure generated by the US government and its tariffs. Last week brought us very positive employment data and a more than correct evolution of the PMIs that were not reflected in the prices. This week we will know i) the evolution of prices in China, ii) the retail sales data in Europe, and iii) the CPI and the minutes of the last FED meeting in the United States.
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And we bid farewell with the following quote from Peter Lynch, US entrepreneur and manager of the Magellan fund at Fidelity Investments, which achieved an average annual return of 29.2% between 1977 and 1990: “You can lose money in the short term, but you need the long term to make money.”
Summary of the performance of the main financial assets (7/4/2025)
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