Market Report.
📈 There is much to discuss today, but first, remember that today we will have US retail sales data and Powell’s speech from the Fed, which could move the dollar, which has been very active since last week.
🇬🇧 At the moment, data published a few minutes ago on UK GDP shows that the economy is growing above expectations. In Q1, the UK economy grew by 0.7%, bringing its annualised rate to 1.3%, escaping the European pattern of negative forecasts from France and Germany.
🌏 In previous reports, we suggested that if the trade conflict between the US and China was not resolved, Europe would face the risk of deflation, given the impossibility of absorbing the surplus of Chinese products.
📉 Well, today Bloomberg mentions the growing trade imbalance between China and the European Union, raising new worries that the EU’s 27 member states could become a repository for low-cost Chinese merchandise.
💶 We have insisted, contrary to the comments of ECB bureaucrats, that we are not facing a new era of euro strengthening, but rather a mirage, and that capital flows will abandon the euro, causing a fall in the EURUSD. Today, Reuters mentions the following:
📉 A recent EY professional services survey reveals that European foreign direct investment (FDI) declined for the second year running in 2024, hitting a nine-year low. The continent experienced a 5% reduction in FDI, with Germany witnessing a 17% decline in projects amid ongoing economic and political uncertainty, despite recording a 35% rise in job numbers.
🇺🇸 American investment in European markets decreased by 11% compared to 2023 and showed a steeper 24% drop from 2022 levels, as strengthening domestic conditions in the U.S. created competition for investment capital. The impact of U.S. tariffs has led 37% of investors to delay, abandon, or reduce their European investment strategies, although 61% maintain an optimistic outlook regarding Europe’s investment appeal over the next three-year period.
💡 To attract more foreign capital, the survey suggests that Europe should shift its focus from regulatory measures toward enhancing its competitive position in the global market.
⚠️ According to ECB Governing Council member Joachim Nagel, financial markets nearly experienced a collapse following President Trump’s implementation of retaliatory tariffs in April. Characterizing the circumstances as “disruptive,” Nagel indicated that markets approached “meltdown” conditions, evidenced by worldwide stock declines and dollar depreciation.
🤝 Nagel expressed optimism that American policymakers would recognize the counterproductive nature of increased trade barriers, suggesting the possibility of a “learning curve.” He stressed that European nations should approach negotiations with the U.S. administration from a position of equal partnership, while highlighting that the United States stands to lose more than Europe in any potential trade conflict.
📉 However, the US trade deficit with Europe makes it clear that Nagel is wrong, given that Europe depends on US consumption and not the other way around. On the other hand, it is Europe that is facing difficulties, given its economic contraction in recent years, especially Germany, which is facing its third year without economic growth.
🌍 On just the second day of Donald Trump’s Middle East tour, he secured a series of landmark agreements, underscoring his administration’s focus on economic and strategic gains in the region. These achievements included gaining control over Syrian oil and mineral rights, a $600 billion economic cooperation agreement with Saudi Arabia, a $200 billion deal to sell 160 Boeing aircraft to Qatar, and a staggering $1.2 trillion comprehensive economic cooperation agreement with Qatar. These deals not only demonstrated the administration’s commitment to bolstering U.S. economic interests abroad but also underscored the deepening economic ties between the United States and key Middle Eastern allies.
🛡️ Yesterday, in his roughly 50-minute speech, Trump lavished praise on the Saudi kingdom and Crown Prince Mohammed, calling him the “greatest representative” and saying “I like him too much. The main announcement from the event was $600 billion in investments by Saudi Arabia into the U.S., including a $142 billion deal to purchase American weapons – the largest such agreement to date.
✈️ In relation with Boeing deal, Boeing and Qatar Airways announced a deal for the Middle Eastern airline to buy up to 210 jets, marking Boeing’s largest-ever order of widebody aircraft. The order includes 130 Boeing 787 Dreamliners and 30 Boeing 777-9s, with options for up to 50 more planes. It is the largest order in Qatar Airways’ history. The deal also includes an agreement with GE Aerospace for over 400 engines to power the Boeing planes, the largest engine order in GE Aerospace’s history. According to White House estimates, the aircraft agreement, valued at $96 billion, is projected to generate 154,000 annual U.S. jobs and create more than 1 million domestic positions overall. Boeing and Qatar Airways’ own calculations suggest approximately 400,000 U.S. jobs will result from this deal. This development represents a significant victory for Boeing, which has weathered various challenges including safety issues, production difficulties, and operational disruptions in recent years.
🧐 However, the arrangement might intensify scrutiny of Qatar’s proposed donation of a luxury 747 aircraft intended to serve as the new Air Force One, a gesture that has already attracted criticism from both Democratic and some Republican lawmakers.
📰 These new deals are barely being mentioned by the international press, which does not seem very happy with the achievements of the much-hated Trump. The narrative over the last few weeks has been that Trump would destroy the US economy. Could they have been wrong again?
🌾 The EU abandons Ukraine: We knew this would happen from the day Polish farmers blocked the roads used by trucks carrying Ukrainian grain. According to a Wednesday Financial Times report citing diplomatic sources, the European Union is planning to significantly increase import duties on Ukrainian goods in the coming weeks, potentially dealing a serious blow to Kyiv’s economy.
📜 Based on a recently circulated proposal to EU member states, the plan would significantly reduce the duty-free allowances for agricultural products, which have been essential for sustaining Ukraine’s farming sector and national budget, the Financial Times reported.
⚖️ Geopolitics:
💬 The EU General Court has issued a verdict against European Commission President Ursula von der Leyen regarding her failure to release private text communications with Pfizer’s chief executive during COVID-19 vaccine procurement discussions. The ruling favored the New York Times’ legal challenge, with the court stating that the Commission failed to provide a credible justification for not possessing these messages or to adequately explain whether the texts were erased or if the president’s device was changed.
📱 Despite acknowledging that text exchanges occurred during the EU’s urgent efforts to acquire vaccine supplies, the Commission maintained that these messages were not considered significant enough to warrant preservation as official records. Pfizer, which faces no allegations of misconduct in this matter, did not provide an immediate response to the court’s decision.
💰 Today, NATO members will debate allocating 5% of their budgets to defence. The discontent this will cause among the European population, who will face greater tax pressure, will be diluted by claiming that these are Trump’s demands and Putin’s fault for wanting to invade Europe, thus ignoring the European bureaucracy’s much-criticised warmongering stance.
🤔 It seems that Putin does not trust going to a NATO country to sign a peace agreement with Ukraine: President Vladimir Putin of Russia has designated several junior-level officials to attend the forthcoming Ukraine peace negotiations in Turkey, suggesting he will not personally participate in the discussions. In response, Ukrainian President Volodymyr Zelenskyy, who had expressed his intention to attend and engage in direct dialogue with Putin, indicated that the summit would be “futile” without Putin’s presence.
🇺🇸 Meanwhile, U.S. President Donald Trump minimized expectations regarding his own attendance at the Turkish peace talks, although he indicated he remained open to a possible future visit if it could contribute to resolving the conflict.
📈 Market View:
📉 US futures remain static ahead of Powell’s statements this afternoon. Mini S&P 500 futures have not advanced much since Tuesday, remaining in a sideways movement and without clearly exceeding 5,900 points. They are currently trading at 5,895 points.
📊 Nasdaq 100 futures are showing similar behaviour, although perhaps with a little more optimism due to the agreements reached in the Middle East, which are strengthening the US technology sector. Nasdaq 100 futures are currently trading around 21,360 points.
💵 Yesterday, the dollar index (DXY) reached 101 points again, but has been weakening again in recent hours, currently trading at 100.70 points. This is allowing the EUR/USD and GBP/USD pairs to recover some of the losses suffered after Monday’s bullish rally. The EUR/USD is recovering to the 1.12 level, while the GBP/USD is approaching 1.33.
📉 In Europe, DAX 40 futures, which reached new highs on Monday, are also lagging behind and have been on hold since then, currently trading at 23,500 points. Meanwhile, Eurostoxx 50 futures are unable to break through 5,400 points, remaining in a sideways movement and hovering around 5,375 points.
🛢️ Crude oil has experienced further declines, losing the $66 per barrel of Brent gained earlier in the week. It is currently trading at $64.60 per barrel.
🏅 There has also been an interesting decline in gold, which has lost its support in the $3,215 zone and now stands at $3,145. This is due to possible trade agreements this week, which are reducing the perception of risk in the markets.
💻 Bitcoin fell back to $102,325 after approaching $105,000 twice this week, a level it briefly exceeded on Monday. This level has become the new resistance.
