The markets are dealing with a cold shower of data coming from the United States. The GDP in the first quarter had an annualized growth of 1.6%, a sharp decrease from the 3.4% in the previous quarter and lower than expectations, which were on average 2.5%. Personal consumption expenditure, a measure of inflation, accelerated in the first quarter: the core component rose by 3.7%, up from 2% in the previous quarter and above expectations. The inflation data move away the possibility of a rate cut by the Fed and some analysts are now talking about the specter of stagflation. As a result, on Wall Street, the three main indices dropped by around 1.5%, with the Nasdaq experiencing the largest decline (-1.57%).
In Europe, the Ftse Mib in Milan dropped by 0.97%, after initially falling by 1.5%. Similar declines were seen in Frankfurt and Paris, while London showed a positive trend (+0.48%). Yields on government bonds also rose in both the United States and Europe. The Italian Btp yield rose above 4% for the first time since December, before closing at 3.98%. Among the notable stocks, Meta experienced a significant drop of 12.6% after reporting its earnings. Although revenues increased, the costs associated with the development of artificial intelligence weighed heavily on the company.
On the Milan Stock Exchange, Bper was the best-performing stock, rising by 1.92%, while Iveco and Moncler saw the greatest declines, both dropping by 3%. StMicroelectronics rose by 0.98% after reporting its quarterly earnings.
The disappointing GDP growth in the United States has raised concerns in the markets, leading to a sell-off in stocks and an increase in bond yields. The fear of stagflation and the uncertainty regarding future Fed policies are contributing to the unease among investors. The performance of major indices in both the US and Europe reflects this negative sentiment, with declines seen across the board. Companies like Meta are facing challenges as they navigate the costs associated with innovative technologies such as artificial intelligence. Despite these headwinds, some stocks like Bper and StMicroelectronics managed to weather the storm and post gains in an otherwise turbulent market.
Moving forward, investors will closely monitor economic indicators and central bank policies to gauge the health of the global economy. The ongoing debate around inflation, interest rates, and the potential for stagflation will continue to drive market sentiment. Companies will need to navigate these uncertainties and continue to innovate to stay competitive in a rapidly changing environment. Overall, the market is facing a period of volatility and uncertainty, making it essential for investors to stay informed and adapt their strategies accordingly to navigate the challenges ahead.
