Financial Markets 27/05/2025
Trump’s threats once again interfere with the course of financial markets. Posts on various social media platforms complaining about the slow progress of tariff negotiations with Europe—now threatening a 50% tariff (when on April 2nd he said 20% was the worst-case scenario for the continent)—and new threats to impose taxes on Apple and Samsung if they don’t manufacture their phones in the U.S., triggered significant short-term sell-offs, resulting in declines in major stock indices.
The S&P 500 dropped 2.61% last week, closing at 5,802.82 points, and the Nasdaq 100 fell 2.39% to 20,915.65 points. Similarly, the Euro Stoxx 50, which includes the largest European companies with strong commercial ties to the U.S., fell 1.82% to close Friday at 5,328.65 points. Once again in 2025, the Ibex 35 stood out by rising 0.13%, as its components are less affected by potential tariff increases. The week began with broad gains after the 50% tariff was postponed until July 9.
The government bond market saw slight changes compared to the previous week, though with some volatility between weekly highs and lows. The 10-year Treasury yield rose to 4.51%, up 7 bps. In Europe, changes were minimal: the Bund yield fell 2 bps to 2.57%, and the Spanish Bono remained unchanged at 3.21%.
As we’ve been reporting for weeks, gold—seen as a key risk indicator—surged strongly. After hitting new short-term lows at the start of the week, it ended at $3,357.20/oz, up 5.33%, clearly reflecting the uncertainty sparked by the U.S. president’s media interventions.
Macroeconomic highlights:
- In China, unemployment dropped to 5.1%, and industrial production dipped slightly to 6.4% YoY in April. The People’s Bank of China cut its one-year loan prime rate by 0.10% to 3.0%, and the five-year rate to 3.5%.
- In Europe, headline inflation remained at 2.2%, while core inflation rose to 2.7%, in line with forecasts. Preliminary May PMIs came in below expectations and under 49, indicating contraction. ECB minutes revealed that Trump’s April tariff announcements influenced the decision to continue with rate adjustments despite economic uncertainty.
- In the U.S., May PMIs exceeded expectations and remained expansionary, but the Leading Economic Index fell to -1% vs. -0.7% expected.
This week, markets will watch for China’s PMIs, U.S. consumer confidence (Conference Board), Fed minutes, and Friday’s PCE data—the Fed’s preferred inflation gauge. No major events are expected in Europe.
Quote of the week:
“It is never too late to be what you might have been.”
Mary Ann Evans (George Eliot)
Summary of the performance of main financial assets (May 26, 2025)
