Market Report.
📉 The US GDP contracted by 0.3% during the first quarter (Q1). Likewise, the PCE inflation rate was slightly higher than expected: 2.3% compared to the expected 2.2%, but below the 2.7% of the previous period. Weakening economic growth and declining inflation pave the way for the Federal Reserve to finally cut rates. This would be interpreted as bullish, as we mentioned in previous reports. That is why, on the morning of 1 May, a public holiday in Europe and Ibero-America, US futures are on the rise.
🚢 The main driver for this contraction of the GDP is a surge in imports as businesses rushed to avoid higher tariff costs. Incoming shipments surged by 41.3%, marking the highest increase since Q3 2020 during the COVID-19 crisis that disrupted international supply networks.
⚖️ This surge, combined with only a modest export increase, created a significant trade deficit that slashed an unprecedented 4.83% from the gross domestic product.
🇯🇵 The Bank of Japan (BOJ) left its benchmark interest rate unchanged at 0.5%, as expected, amid heightened uncertainties due to U.S. tariff measures. The BOJ pushed back the timing for when it expects to reach its 2% inflation target, now projecting it will be achieved around the second half of fiscal 2027, a year later than previously forecast. The central bank halved its economic growth projection for the current fiscal year to 0.5%, signaling heightened caution following the U.S. tariffs.
💴 Despite the uncertainties, the BOJ retained its commitment to raising borrowing costs if its economic outlook is realized, indicating it will proceed with rate hikes once the economic outlook becomes clearer. The yen fell against the U.S. dollar after the announcement.
🧐 The BOJ’s cautious stance contrasts with speculation over potential rate cuts in the U.S. and Europe as the pace of inflation has slowed and the economic outlook has dimmed.
🇪🇺 The Eurozone economy grew faster than expected in the first quarter of 2025, with GDP expanding by 0.4% – beating expectations of 0.2% growth.
🇩🇪 Germany’s GDP growth rate for the first quarter (Q1) was 0.2%, in line with expectations and an improvement on the -0.2% recorded in the previous period. However, its annualised growth rate remains at -0.2%, indicating that this year will end in contraction for the third consecutive time.
🇫🇷 In France, the growth rate for the first quarter (Q1) was 0.1%, in line with expectations and an improvement on the -0.1% recorded in the previous period. However, the annualised growth rate of its economy rose to 0.8% compared to the expected 0.7%, indicating that the French economy could end the year with growth close to 1% if this trend continues.
🔍 Both countries experienced a rebound in the CPI rate, which was higher than expected, indicating a trend towards higher inflation. However, this may also reflect a revival in economic activity.
🏙️ The average price of resale homes across 100 Chinese cities fell by 0.7% month-on-month in April, according to a report by the China Index Academy. This indicates a softening in China’s property market, which is significant as real estate accounts for around a quarter of the Chinese economy at its peak. First estimations indicates that home prices have slumped by 20-30% since a peak in August 2021 amid a protracted property crisis in China.
🇨🇳 U.S. officials have reached out to their Chinese counterparts for talks on the vast tariffs that have hammered markets and global supply chains, according to a Beijing-backed outlet. The Chinese outlet, Yuyuan Tantian, cited sources saying Washington is “proactively” reaching out to China via “multiple channels” for talks on the tariffs. The outlet stated that “from a negotiation standpoint the US is currently the more anxious party” due to the “multiple pressures” the Trump administration is facing.
🤝 While U.S. President Trump has claimed China has reached out for talks, Beijing has vehemently denied any such talks are taking place, though it has called for dialogue in a “fair, respectful and reciprocal” manner. However, China has also said it will fight a trade war to the bitter end if needed.
🚗 Tesla’s Chair of the Board, Robyn Denholm, dismissed a false media report today suggesting that the company had engaged recruitment firms to replace CEO Elon Musk. Denholm emphasized that this claim is “absolutely false” and had been refuted to the media prior to publication. She reaffirmed the Board’s unwavering confidence in Musk’s leadership and his ability to drive Tesla’s ambitious growth plans forward, reinforcing the company’s commitment to its visionary trajectory.
Geopolitics:
🤝 The U.S. and Ukraine have signed a minerals deal after a two-month delay, in what the Trump administration calls a new form of U.S. commitment to Kyiv after the end of military aid.
⛏️ Ukraine says it secured key interests, including full sovereignty over its rare earth minerals, which are vital for new technologies and largely untapped. Trump had initially demanded rights to Ukraine’s mineral wealth as compensation for the billions of dollars in U.S. weapons sent under the previous administration. The deal establishes a Reconstruction Investment Fund with 50/50 voting rights between the U.S. and Ukraine. Ukraine retains full control over its resources and will not be asked to pay back “debt” for U.S. military aid.
🇺🇦 The deal comes as the Trump administration is pressing for a settlement to the Ukraine-Russia conflict, with Ukraine unwilling to concede Crimea to Russia. Ukraine holds significant mineral resources, including around 20% of the world’s graphite, an essential material for electric batteries. Russia currently controls about 20% of Ukraine’s territory. The minerals deal is seen as a new form of U.S. commitment to Ukraine, as Trump seeks to scale back U.S. security commitments globally.
🗣️ Recently, when asked by the press who he would like to see as the next pope, Donald Trump replied: ‘I could be the next pope, that would be my first choice.’ He clarified that he was joking, although he added that the cardinal he had in New York could be a good choice.
Market View:
📊 In line with our forecasts in yesterday’s report, US futures appear to be responding positively to the macroeconomic data released. US GDP contracted, and inflation remained below the previous period, although slightly above expectations. This could make it easier for the Federal Reserve to cut interest rates. Mini S&P 500 futures are responding upwards and, despite initial declines after the data, are trading at 5,640 points. Nasdaq futures are following suit and are trading at 19,920 points.
💵 Paradoxically, the dollar index is strengthening and beginning to trace what appears to be a bullish pattern, which is also being detected in other currency pairs such as the dollar/yen. The DXY dollar index is estimated to reach 100 points, currently trading at 99.90. Consequently, the euro/dollar is falling towards the 1.13 zone and beginning to show a bearish pattern.
🇪🇺 In Europe, DAX 40 futures are continuing their upward trend, with a strong 55-200 moving average crossover forming this week, which seems to be fuelling the uptrend, currently reaching 22,790 points. However, the Eurostoxx 50 remains paused in the 5,130 point zone.
🛢️ Crude oil markets continue their dramatic decline, with Brent falling below $61 a barrel, currently trading at $60.90. This could be driven by poor macroeconomic data confirming the impact of the trade war.
🥇 Gold has fallen below $3,300 per ounce and began a sharp correction yesterday, hitting lows of $3,228. The United States appears to have conceded certain conditions to Ukraine for the signing of a peace agreement, which could be discounting the announcement of the end of the war.
💰 Meanwhile, Bitcoin continues to push in the $94,985 zone. As we indicated yesterday, breaking above $95,000 would mark significant progress in its recovery from its all-time highs.
