Financial Markets 01/07/2025
The financial markets seem to have once again entered a period of complacency, which is allowing a more than positive performance in most financial assets. As a result, most of the relevant indices will close the first half of the year with capital gains that would have been impossible to imagine in mid-April. The latest macroeconomic data (hard data) and surveys (soft data) continue to reflect mixed readings. For example, PMIs remain strong in the US while home sales have yet to improve notably, suggesting that the market status quo remains unchanged and therefore the positive tone can continue.
Recent geopolitical events and communiqués seem to be supporting this optimistic environment. The end of the fighting between Israel and Iran has allowed the price of oil to return to levels favorable to inflation control (66 USD/b), and India and the United States could be close to reaching a trade agreement, and would not be the only country on the right track to do so (Canada and Taiwan are also close to reaching an agreement). This situation, in which tariffs would not rise from current levels, has led managers to discount that in the face of a lower inflationary risk the FED could begin the process of adjusting monetary policy earlier than expected, and some members of the body have even been encouraged to suggest that it could come at its next meeting this July. In any case, forecasts have not yet changed and the market has been discounting for weeks now that 2025 will end with two 25 bps cuts by the Fed. All this theoretical exercise could change next week when the evolution of the US labor market is known, which could be slowing down as the unemployment rate is discounted to rise one tenth of a point to 4.3%.
The stock markets experienced a new rise during the last seven days, a circumstance that will allow closing the first half of the year with gains, in many cases significant, with the exception of the two large Asian markets, China and Japan. The S&P 500 gained 3.44% to close at 6,173.13 points and the Nasdaq 100 gained 4.20% or 22,534.20 points, both of which returned to annual highs last week. In Europe, gains were more moderate, with the Euro Stoxx 50 closing at 5,329.05 points, up 1.82%, and the Ibex 35 up 0.72% to 13,950 points.
The bond market performed unevenly between the United States and Europe, mainly due to two factors: the first, which allowed US bond yields to fall, was the possibility of an early rate cut by the FED, and the second, which caused the Bund’s yield to rise, was that Germany will start issuing debt from September onwards corresponding to the defense and infrastructure program announced at the beginning of the year, i.e. earlier than expected. The yield on the 10-year Treasury yield fell 10 bps to close at 4.28%. The Bund rose 8 bps to 2.59% and the very stable bond closed at 3.23%.
The most relevant movement of the week occurred in oil prices. At the close of the week, Brent was down 12% to close at 66.41USD/b, but from the weekly high to the weekly low, Brent moved practically 20%, closing close to the lows of the session. As far as gold is concerned, it seems that a certain calm has reached the markets and this has been transferred to the prices of the safe-haven security par excellence, which was reflected in its second consecutive weekly fall, closing at 3,286.25 USD/Onz or, in other words, a drop of 2.94%. If the geopolitical environment remains stable, the US labor market does not fall notably and if tariffs remain at current levels, we could continue to see falls in both Brent and gold prices in the coming weeks. No less relevant is the fall accumulated in the year by the USD, which has been above 1.17 in its exchange rate against the Euro. The situation will not improve significantly until the United States recovers its lost confidence, and to a large extent this will depend on how they deal with the increase in the fiscal deficit in which they are immersed.
The quote:
And we say goodbye with the following sentence by Walter Riso, clinical psychologist of Italian origin, specialist in cognitive therapy and Magister in Bioethics: “Solidarity never implies submission”.
Summary of the performance of the main financial assets (30/6/2025)
This report does not provide personalized financial advice. It has been prepared irrespective of the particular circumstances and financial objectives of the persons receiving it.
This document has been prepared by Portocolom Agencia de Valores S.A. for the purpose of providing general information at the date of issue of the report and is subject to change without notice. Portocolom Agencia de Valores S.A. assumes no obligation to communicate such changes or to update the contents of this document. Neither this document nor its contents constitute an offer, invitation or solicitation to purchase or subscribe for securities or other instruments or to make or cancel investments, nor may they form the basis of any contract, commitment or decision of any kind.
The information contained herein has been obtained from public sources believed to be reliable, and while reasonable care has been taken to ensure that the information contained herein is neither uncertain nor unequivocal at the time of publication, we do not represent that it is accurate and complete and it should not be relied upon as if it were. Portocolom Agencia de Valores S.A. assumes no responsibility for any loss, direct or indirect, that may result from the use of the information provided in this report. Past performance of variables may not be a good indicator of future performance.