Financial Markets 20/05/2025
Following the shock caused by Trump’s tariffs, which led to stock market declines exceeding 20% in some cases, calm returned (temporary?) thanks to a 90-day grace period granted to seek bilateral agreements that could satisfy all parties. The United Kingdom was the first to act, followed by the announcement of a productive negotiation phase between the United States and China. This has allowed major stock indices to recover to pre-April 2 levels, with some markets like the Ibex even reaching new annual highs.
The week ended with significant gains in the main stock exchanges. The S&P 500 rose by 5.47%, closing at 5,959.38 points, while the Nasdaq 100 gained 6.81%, ending at 21,427.94 points. In Europe, the gains were more modest, but the year-to-date performance remains stronger. The Euro Stoxx 50 added 2.26%, closing at 5,429.75 points, and the Ibex 35 rose by 3.65% to 14,049 points.
Fixed income markets showed more contained movements, though with some volatility throughout the week. The 10-year Treasury yield increased by 6 basis points to 4.44%, while the Bund rose by 4 basis points to 2.59%. The Spanish Bono remained unchanged at 3.21%.
Gold reflected this more conciliatory geopolitical environment, posting a 4.09% correction and ending at USD 3,207.05/oz. Meanwhile, Brent crude rose for the second consecutive week to USD 65.38/bbl, driven by renewed optimism for the global economy.
Macroeconomic data was relatively uneventful during the week. Noteworthy was the ZEW Investor Confidence Index, which returned to positive territory with a reading of 11.6, well above the market estimate of -3.5. Additionally, March industrial production in Europe once again exceeded expectations, growing by 2.6% versus the 1.9% forecast. In the U.S., the key data point was the CPI, which fell to 2.3% (2.4% expected), while core inflation remained stable at 2.8%. Retail sales increased slightly by 0.1%.
In a week where macroeconomic data took a backseat, Friday brought a surprise decision from Moody’s to downgrade the U.S. credit rating from AAA to AA+, following similar moves by S&P and Fitch in 2011 and 2023, respectively. The downgrade was justified by the high public deficit, which is unlikely to be corrected in the short term. This triggered corrections in equity markets, rising bond yields, and an uptick in gold prices. This week, investors will focus on PMI data in Europe and the U.S., as well as the release of European CPI and the ECB’s latest meeting minutes.
Quote of the week:
And we close with a quote from Alexander Graham Bell, British scientist and inventor who contributed significantly to the development of telecommunications:
«When one door closes, another opens; but we often look so long and so regretfully upon the closed door that we do not see the ones which open for us»
Summary of Key Financial Asset Performance (as of May 19, 2025)
Disclaimer:
This report does not provide personalized financial advice. It has been prepared independently of the specific circumstances and financial objectives of the recipients. This document has been created by Portocolom Agencia de Valores S.A. with the purpose of providing general information as of the date of issuance and is subject to change without prior notice. Portocolom Agencia de Valores S.A. is under no obligation to communicate such changes or update the content of this document. Neither this document nor its content constitutes an offer, invitation, or solicitation to buy or subscribe to securities or other instruments, or to execute or cancel investments, nor should it serve as the basis for any contract, commitment, or decision of any kind.
The information included in this report has been obtained from public sources considered reliable, and reasonable care has been taken to ensure that the information is neither uncertain nor ambiguous at the time of publication. However, we do not warrant that it is accurate or complete and it should not be relied upon as such. Portocolom Agencia de Valores S.A. accepts no responsibility for any direct or indirect loss that may result from the use of the information provided in this report. Past performance of variables may not be a good indicator of their future results.