The markets are weighing the cold shower of American data released at 2:30 pm. The US GDP in the first quarter of the year saw an annualized growth of 1.6%. This is a sharp drop from the 3.4% of the previous quarter and below the consensus expectations, which were averaging around 2.5%. The annualized data is the quarterly change multiplied by four. On the price front, personal consumption expenditures, a measure of inflation closely watched by the US central bank, accelerated in the first quarter: the core component rose by 3.7%, up from 2% in the previous quarter and above expectations. The market is now seeing both a growth slowdown and a rise in prices, leading to discussions of stagflation. The effects on the stock market are clear: the S&P 500 index fell by 1.24%, the Nasdaq by 1.45%, and the Dow Jones by 1.70%. In Europe, the Ftse Mib in Milan fell by 1.16%, with similar declines in Frankfurt and Paris, while London remained slightly positive at +0.22%.
Among the other consequences of the US data release: bond yields are rising in both the US (T-Bond at 4.71%, up 6 basis points) and in Europe. The yield on Italian Btps has risen above 4% for the first time since December. As of 4:20 pm, it is at 4.00%, up 7 basis points from yesterday. In terms of individual stocks, Meta took a hit after its earnings report, dropping by 11% on the Nasdaq. Despite higher revenues, the costs for developing artificial intelligence weighed down the company’s performance.
The disappointing US data release has had a significant impact on global markets, with stocks falling on both sides of the Atlantic. In addition to the drop in major US indices, European markets also experienced declines, mirroring the negative sentiment. The rise in inflation and the slowdown in growth are causing concerns among investors, leading to increased volatility. The increase in bond yields, both in the US and Europe, reflects these concerns about inflation and economic growth. Italian bond yields reaching above 4% suggests growing unease among investors about the country’s economic outlook and financial stability. The decline in Meta’s stock price following their earnings report highlights the sensitivity of tech stocks to macroeconomic factors and company-specific performance.
As economic uncertainties persist, investors are closely monitoring developments in the US and global markets. The implications of the recent data release on inflation and growth will likely continue to shape market trends in the coming days. Central banks, including the US Federal Reserve, will be closely watching these developments to assess the need for any policy adjustments in response to changing economic conditions. The ongoing discussions about stagflation and its potential impact on financial markets will be a key focus for market participants. In this challenging environment, diversification and risk management will be essential for investors to navigate market volatility and protect their portfolios.
Overall, the combination of slower growth, rising inflation, and market volatility underscores the complex challenges facing investors in the current economic environment. As data continues to drive market sentiment, investors will need to stay informed and adapt their strategies to navigate the evolving landscape. The interconnected nature of global markets highlights the importance of staying vigilant and proactive in managing investment risks. The coming weeks will likely see continued market reactions to economic data releases and central bank announcements, shaping the investment landscape in the short term. Amidst these uncertainties, a cautious approach and a focus on long-term investment goals will be crucial for investors to weather market fluctuations and achieve financial stability.
