Stock Markets in a Coffee Break from Europe

The global market landscape has seen a flurry of activity over the past week, with significant developments shaping economic outlooks and investor sentiment. As we navigate these changes, let's explore what transpired and what lies ahead. Last Week's Summary The past week was marked by a blend of optimism and uncertainty, influencing various sectors and regions worldwide. Germany's election outcome brought a wave of positivity to European equities, with investors hopeful for growth opportunities, lower corporate taxes, and increased fiscal spending on defense and infrastructure. This renewed confidence has driven a rally in European stocks, signaling a positive shift in the region's economic prospects. However, the technology sector faced a downturn as shares fell following Nvidia's earnings report, which raised doubts about the company's profit outlook. This led to a broader sell-off in tech stocks, with investors reassessing their positions amid co...

Photo by Aad Brinkman The Eurozone's economic performance in 2024 has been marked by a blend of moderate growth and fluctuating momentum, reflecting the complex interplay of various economic factors. In the fourth quarter of 2024, the Eurozone's GDP grew by 0.9% year-on-year (YoY), maintaining the same growth rate as the previous quarter. However, the quarter-on-quarter growth was revised down to 0.1%, a notable decrease from the 0.4% growth observed in the preceding quarter. This downward revision suggests that while the Eurozone economy is expanding, the pace of growth is slowing, indicating potential underlying weaknesses. For the full year of 2024, the Eurozone's GDP grew by 0.7% YoY, a modest improvement from the 0.4% growth recorded in 2023. This growth reflects the economy's resilience in the face of numerous headwinds, including geopolitical tensions, supply chain disruptions, and the lingering effects of the COVID-19 pandemic. However, the decelerat...

Executive Summary The February 2025 Multi-Asset Barometer report highlights a cautious outlook for global financial markets, emphasizing the need for strategic asset allocation and vigilance amidst increasing economic risks. This report provides an in-depth analysis of global economic risks, market resilience, emerging market opportunities, sector performance, fixed income and currency outlooks, and the role of gold as a hedge against volatility. 1. Global Economic Risks - Risk Assessment: The global economy faces increasing risks, prompting a downgrade of equities to a neutral position and an upgrade of cash. - Key Concerns: Newly imposed trade tariffs, stretched equity valuations, and potential economic slowdowns are major concerns. - Investor Guidance: Recent market turbulence underscores the transient nature of market rallies, necessitating investor vigilance. 2. US Market Resilience - Market Outlook: The US market is expected to outperform others due to strong corporate earnings a...

This week, the focus will be on US inflation data and Federal Reserve Chair Jerome Powell's statements, but the most significant event will occur over the weekend: the Munich Security Conference, which will address geostrategic risk premiums. The corporate earnings season remains active and continues to support stock markets, as the aggregate figures are positive. With approximately three-fifths of listed American companies having reported, the average EPS stands at +13.3%, nearly double the expected +7.5%. This strong performance has once again provided reliable support for the stock markets for another quarter. Historically, stock markets align with corporate results over the long term. This week, the market's direction will largely depend on the US inflation data, scheduled for release on Wednesday at noon, and Powell's testimony before the Senate and Congress on Tuesday and Wednesday, respectively. Inflation is expected to remain steady at +2.9%, while the underlying ra...

In recent weeks, global stock markets have exhibited a tendency to rebound rather than retreat, driven by a confluence of factors that have bolstered investor confidence. This resilience is underpinned by several key developments in trade relations, geopolitical stability, and corporate performance. Trade Risk Reduction One of the most significant contributors to the market's positive trajectory is the reduction in trade war risks. The introduction of a 30-day grace period to negotiate tariffs with Mexico and Canada has eased tensions, providing a window for diplomatic resolution. This de-escalation has mitigated uncertainty, allowing markets to focus on fundamentals rather than geopolitical risks. Strategic Situation Geopolitical risks have also shown signs of abatement in key regions. The conflict in Israel appears to have temporarily subsided, reducing strategic risk in the Middle East. Meanwhile, the situation in Ukraine remains stable, although the upcoming peace conference in...

The financial markets have experienced a tumultuous start to 2025, with recent events such as the announcement of US tariffs and the DeepSeek incident causing significant volatility. Stocks initially fell by 2% following the tariff announcement, but a 30-day grace period for negotiations provided some relief, leading to a slight recovery. This adjustment comes after a strong start to the year, which saw markets gaining considerable momentum. A Complex Year Ahead 2025 is shaping up to be a complex year for financial markets. Analysts anticipate high risk premiums and erratic market behavior, driven by ongoing uncertainties about inflation, interest rates, economic growth, and geopolitical strategies. Given these challenges, stocks are expected to make little progress until the summer, when the economic outlook is likely to be clearer. Key Economic Indicators and Events Several critical economic indicators and events are scheduled for this week, which could further influence ...

This week begins on a turbulent note, despite some favorable macroeconomic and corporate developments. While stock markets had been regaining stability more swiftly than anticipated, today's events will disrupt this trend. The implementation of tariff increases by the US on Canada, Mexico, and China will lead to a volatile Monday, characterized by stock market declines, significant losses in cryptocurrencies, a stronger dollar, and lower bond yields, which will serve as a safe haven. Fears of a potential trade war will result in a bearish and unpredictable week. On a more traditional front, European inflation data released today is expected to remain at +2.4%, with the underlying rate potentially improving by a tenth to +2.6%. Later in the week, US employment figures are anticipated to be slightly weaker due to reduced economic activity in California caused by wildfires. Friday's Non-Farm Payrolls report is likely to show a slowdown to around 150,000 jobs created, c...

Apple has released results and guidance that exceeded market expectations, despite disappointing performance in China. In after-hours trading, the stock rose by 3.01%. Key Figures Against Consensus (Bloomberg): - Sales:$124.3 billion (+4% YoY), compared to the expected $124.1 billion. - EBIT:$42.832 billion, against an anticipated $42.429 billion. - Net Income:$36.330 billion (+7%), surpassing the expected $35.500 billion. Regarding its performance in China, the company reported sales of $18.513 billion, reflecting an 11% YoY decline and falling short of expectations, which were set at $21.567 billion. For the next quarter, Apple anticipates mid/low single-digit growth, slightly above expectations. Opinion on Apple’s Results: Despite the disappointment with figures from China, we view Apple's overall results positively. The company has met expectations and is making progress in its mixed-revenue business model, where the services segment is increasingly gaining importan...

Yesterday, the ECB's decision to cut rates by -25bp, bringing them to 2.75/2.90%, was largely uneventful. It met expectations and reiterated the message that future adjustments will hinge on incoming data—definitely not exciting! In the U.S., the 4Q GDP reported a growth of +2.3%, which, although considered weak by its standards, was somewhat favorable for Wall St. Meanwhile, the Eurozone's GDP growth remained unchanged at +0.9%, falling short of the +1% forecast. Notably, Germany reported a decline of -0.2%, while France (+0.7%) and Italy (+0.5%) also underperformed. In contrast, Portugal (+2.7%) and Spain (+3.5%) excelled, reinforcing the belief that "SPA, PT, and IRL are the new GER." Corporate results were generally positive, aside from UPS, which saw a -14% drop following disappointing guidance and a significant decline in business with Amazon. The 4Q EPS for the S&P500 is currently at +10%, exceeding the expected +7.5%. After the New York market closed, Visa...

Market Overview: The recent hours have seen a somewhat lackluster performance in the markets, though semiconductors have shown resilience (SOX +0.2%). Bond yields have remained relatively stable at manageable levels (Bund 2.58%; T-Note 4.52%), which is crucial. Federal Reserve Update: Last night, the Federal Reserve maintained interest rates at 4.25/4.50%, as anticipated, following a series of reductions since September '24. The Fed adopted a more hawkish stance, indicating a reluctance to further lower rates in the near term. They removed the mention of inflation "progressing" towards the 2% target and emphasized that price increases remain "somewhat elevated." This aligns with our expectations, and we do not foresee additional rate cuts until possibly September '25. This stance will likely lead to a stronger USD and a weaker euro as the market absorbs this outlook. Today's Key Events: Today, we await GDP releases for the EMU and the US. More importantl...

Financial markets are beginning to stabilize after the initial turmoil caused by DeepSeek’s emergence. U.S. technology stocks rebounded yesterday, following Monday’s steep losses, as investors adjusted to the reality of China’s new AI contender. Described as faster, more efficient, and cheaper—at least on paper—DeepSeek has sparked both intrigue and controversy. Microsoft and OpenAI have raised concerns, suspecting that DeepSeek may have trained on OpenAI’s data, an allegation they find deeply troubling. The irony is hard to miss: the same companies that have been mining global data for their own AI models are now protesting. Amid this ethical tangle, one overlooked group remains caught in the crossfire—content creators, whose work continues to fuel the AI arms race. Despite Monday’s 3% drop fueled by fears over AI investments, the Nasdaq has already reversed course, regaining half its losses. Nvidia, a bellwether for the AI sector, saw its stock plummet 17% before rebounding 9% yester...

The sudden rise of DeepSeek in the AI landscape has sent ripples through the market, affecting a wide range of companies. Key examples include: - Hardware Suppliers: Nvidia and Broadcom dropped 17%, Dell Technologies fell 8.4%, and ASML decreased by 7%. - Data Center Equipment: Vertiv plunged 30%, and Schneider Electric dipped 10%. - Energy Production Equipment: GE Vernova fell 21%, Siemens Energy 20%, and Prysmian 9%. - Energy Providers: Vistra dropped 28%, and Constellation Energy 21%. Notably, Nvidia's market cap shrank by $589 billion in a single day, surpassing its previous record drop. Investors, anticipating a correction, saw a shift from AI euphoria to caution. DeepSeek's achievements with fewer resources suggest reduced investment in AI-related sectors. Despite dramatic downturns, the impact was mainly on overvalued companies like Vistra and Vertiv. This wasn't a market-wide meltdown but a targeted correction. Analysts debate whether this is a "DeepSeek evolut...

This week is filled with significant events, including: - Corporate Earnings: Reports from Meta, Microsoft, ASML, and others are expected. - Federal Reserve Meeting: Rates are projected to remain unchanged at 4.25%/4.50%. - ECB Rate Decision: A 25 basis points cut is anticipated, lowering rates to 2.75%/2.90%. - Other Central Banks: Sweden and Canada are also expected to announce rate cuts. - U.S. PCE Deflator: Due on Friday, with an expected increase to +2.6% from +2.4%. Market Overview Last Monday, we observed that the improved market sentiment from the previous week was likely to solidify, which has indeed occurred. This week may follow a similar path, although the beginning of Monday could be affected by some "technological noise" due to the emergence of DeepSeek, a Chinese AI development alternative. DeepSeek utilizes simpler chips and may present a short-term challenge to dominant AI models from companies like Nvidia and ChatGPT. Currently, Nasdaq-100 futures are down a...

Week This week witnessed Donald Trump's inauguration and his initial proclamations, generating significant excitement in the markets. The S&P 500 celebrated by reaching a new all-time high on Thursday. Meanwhile, across the Atlantic, Europe showcased a remarkable rebound, driven by the banking sector, luxury goods, and the positive outlook of a lessened trade conflict with the United States. Quarterly earnings reports have continued to enhance the stock market's momentum, presenting a generally optimistic scenario. However, with important central bank decisions approaching and impending earnings releases from major U.S. tech companies, investors should prepare for ongoing volatility. Looking ahead, the last week of January is set to be eventful: Central Banks in Focus Monetary policy decisions are anticipated in Canada, the United States, Europe, and Brazil. Macroeconomic Indicators Investors will closely examine the first estimate of U.S. GDP for Q1 and the Dec...

The market is currently performing exceptionally well. Trump's focus on immigration, the most populist aspect of his policy, is the least practical and has minimal immediate impact on the market. This allows the market to absorb his policies without much disruption. Supported by gradually improving corporate results for Q4 2024, the market is rebounding with a hint of complacency. Current Market Performance As of 2025: ES-50: +6.3% S&P 500: +3.5% Nq-100: +4% This increase may come off as somewhat complacent and risky. However, the positive corporate results and Trump's moderate approach to key short-term market issues (like tariffs, taxes, and deregulation) have boosted investor confidence. The decrease in perceived risk has also stabilized bond yields at acceptable levels: Bund: 2.50% T-Note: 4.60% This stabilization is critical for allowing high liquidity to flow positively into the market, fostering a buying sentiment. TODAY'S MARKET OUTLOOK The market is...

The positive market tone observed last week is expected to strengthen, driven by the easing of US Core Inflation (+3.2% vs +3.3%) and solid results from American banks. TODAY'S MARKET STATUS New York is closed today due to a holiday, coinciding with Trump’s inauguration. The market outlook remains undefined, with no immediate need to reduce positions as previously considered on Friday. If Trump unexpectedly implements any known policies (tariffs, immigration, taxes, deregulation) with his usual dramatic flair, the market might view this favorably for the US GDP, especially if it includes tax cuts. This could positively influence Wall Street. However, it is likely that he will focus on his more populist and less feasible measure: immigration, which will serve as political leverage without impacting the market significantly. CORPORATE RESULTS AND INFLATION: The earnings reports from American companies are becoming increasingly significant. Their ability to exceed expectations will li...

Today's Significance: Today marks a crucial day of the week as American inflation figures are released, alongside earnings reports from major American banks. Market Recap from Yesterday: Stock Market Performance: New York: +0.1% Europe: +0.5% Bond Yields: Bund at 2.65% (+3bp) T-Note stable at 4.79% The slight rise in the markets was primarily driven by American Industrial Prices for December, which increased less than expected (+3.3% year-over-year vs. +3.5% estimated and +3.0% previous). This sets an optimistic tone for today's American CPI data. European Economic Highlights: Noteworthy interventions from ECB officials Lane and Rehn, who maintained a dovish stance, advocating for further rate cuts and emphasizing their intention to act independently from the Fed. Current EUR/USD exchange rate stands at 1.029. UK Inflation Data: This morning, the UK reported a good inflation reading of +2.5%, slightly below the expected +2.6%. The core inflation rate also declined t...

Market Overview Stocks and bonds are currently processing the robust employment data from the US released last Friday. The anticipation for Fed rate cuts is diminishing, with predictions now at -27 bp, down from -43 bp before the employment report. Economic Expectations The market is likely shifting to a "risk-off" stance ahead of the US CPI data scheduled for Wednesday, which is projected to increase from +2.7% to +2.9% for December. Additionally, Trump's inauguration on Monday will reveal the extent of his proposed measures and threats. Impact on Yields and Stocks In this environment, it seems challenging for bond yields to decrease while stocks make gains without hesitation. Notably, Wall Street saw a rebound yesterday, although the technology sector lagged. ECB Insights Lane, the chief economist of the ECB, highlighted the risk of inflation dropping below the 2% target if European interest rates remain excessively high. Rehn from Finland, speaking from Asia, emphasize...

Wall Street experienced a correction on Friday with noticeable vigor (S&P500 -1.5%, NDX -1.6%). Employment statistics confirmed the robustness of the American job market, which heightened concerns about a more aggressive Federal Reserve and led to an increase in bond yields (T-Note at 4.76%). The rise in oil prices, following a new set of US sanctions on Russia, did not provide any support. This upward trend is continuing today (WTI up by 2.1% to $78.2 and Brent up by 1.9% to $81.3), contributing to fears of ongoing inflation. This week is particularly significant as the US Consumer Price Index (CPI) will be released next Wednesday. There’s an anticipated increase in the overall rate to +2.9% from +2.7%, while the core rate is expected to hover around +3.3%. The effects of these figures will be binary: a worse-than-expected result could pressure bond yields and stifle stock market growth, while a better result could provide some relief. This week can be seen as split into two segme...

The bond sell-off seems to be moderating slightly (Bund 2.52% T-Note 4.66%), but yields are still too high for stocks to advance. Yesterday, they just flattened, distracted and worried about US employment data to be released tomorrow, which is likely to be stronger than desired, which would push the Fed away from cutting rates... which would favor bond yields not giving in. That is the main obstacle. However, surprisingly, the ADP Private Employment Survey came out somewhat weak yesterday (122k vs 140k expected vs 146k previous). But tomorrow's employment figures (2:30 PM) are the decisive ones, by official figures. Payrolls or Non-Farm Payroll Creation of only 160k vs 227k previous, Private Employment 135k vs 194k, Unemployment Rate repeating at 4.2% and Wages also repeating at +4.0% are expected. These figures, rather weak, would be good for stocks to stabilize and try to rebound a bit because yields would relax somewhat. But it is advisable not to trust because it would be stran...