Financial Markets 06/05/2025
The recovery of stock markets continues amid a calmer geopolitical landscape, which is also being reinforced by good corporate results, along with estimates for the year that have not yet been affected according to company comments. Last week, the S&P 500 rose 2.92% to end at 5,686.68 points, while the Nasdaq 100 gained 3.45% and recovered to 20,102 points. In Europe, the Euro Stoxx 50 followed the American pace by recovering 2.52%, and the Ibex 35 rose only 0.50%, although it is the only index on the verge of marking a new annual high.
In the bond markets, a less complicated environment has reduced expectations for monetary policy adjustments on both sides of the Atlantic. Although more interest rate cuts are still expected from both the ECB and the FED, they will probably be in line with economic growth and inflation trends. The main government bonds saw their yields increase by 6bps linearly to end the week at 4.31%, 2.53%, and 3.19% for the American Treasury, the Bund, and the Spanish 10-year bond, respectively.
The greater calm in the markets has been reflected in the behavior of commodity prices, which have seen less pressure, with both gold and oil prices correcting. Gold closed for the second consecutive week with declines to close at 3,247.85 USD/Oz, a 1.53% drop, and Brent fell significantly to 61.45 USD/b, a 6.61% drop. Remember that this May, the increase in quotas approved by OPEC comes into production, which will increase the supply of crude oil in an already well-supplied market.
On the macroeconomic front, last week left important data across the main economies. In China, PMIs failed to meet consensus targets, and even the manufacturing sector returned to contraction territory with a reading of 49. In Europe, the manufacturing PMI exceeded estimates to stay at 49, on the verge of expansion territory, and the first preliminary GDP data for the first quarter of 2025 was also known, at 1.2% annualized, clearly surpassing the estimated 1% and maintaining the growth pace seen at the end of 2024. On the negative side, the increases in CPI and core CPI data to 2.2% and 2.7% respectively (provisional data), and the rise in the unemployment rate to 6.2%, the same level as the previous month, which was revised up by one-tenth.
In the United States, there were many and relevant references: I) The Conference Board fell again to 87, but the previous data was slightly revised up to 93.9, ii) the Jolts and ADP employment survey data fell clearly below estimates and previous data, but the non-farm payroll data clearly improved forecasts, although the previous data was significantly revised down from 228,000 to 185,000, iii) PCE data fell to 2.3% and 2.6% (core PCE), but previous data was revised up by two-tenths, iv) the preliminary GDP for the first quarter was -0.3% compared to the +0.2% expected, and v) the unemployment rate remained at 4.2%.
For the current week, we highlight import and export data in China, retail sales in Europe, and the FED’s monetary policy interest rate decision in the United States, for which rates are expected to remain at 4.5%.
The earnings season is evolving positively in the United States. With more than 70% of S&P 500 companies having reported, EPS is growing by 12.5% (initially estimated at 6.7%). 76% exceed consensus estimates compared to 20% that have fallen short of forecasts (this data is above the average of recent quarters).
The Quote:
And we say goodbye with the following quote from Paul Robin Krugman, American economist and Nobel Prize in Economics, which emphasizes the need to incorporate rationality into our financial decisions: «We are all vulnerable to beliefs that are convenient for us.»
Summary of the performance of major financial assets (5/5/2025)
