EUR 100.00 For Business Accounts Only

IBERIAN DAILY 25 MAY (ANÁLISIS BANCO SABADELL)

NEWS SUMMARY: BBVA, MELIÁ HOTELS.

German business confidence weakens
Sharp drops in European stock markets in view of the fears of macro resilience, persistent inflation and the lack of an agreement on the US debt ceiling. In the Euro STOXX, all the sectors were in the red, with Energy and Telecoms the best relative performers and Technology and Consumer Goods ending with the biggest losses. On the macro side, in the UK April’s inflation fell less than expected, while the core component rose unexpectedly to 6.8%, a 30-year high. This raised expectations of rate hikes in June, and the market now expects a terminal rate of 5.5% (vs. the current 4.5%). In Germany, May’s IFO fell more than expected, due especially to the current conditions component, which shows the weakness of the German sector, and in line with the manufacturing PMI at 42.9. In the US, the Fed’s meeting minutes showed division regarding if rate hikes should continue, but many members are leaning towards a halt, though with possible future hikes not ruled out if needed. As for the debt ceiling, the Fed was willing to act if need be to stabilise the markets. In this regard, the negotiations continue with no progress made towards raising the limit of US$ 31.4 Tn before 01 June, while Fitch put the debt rating of AAA under revision (negative outlook). Lastly, Russia and China signed partnership agreements in commercial services and agricultural product exports. Russian energy deliveries to China are expected to rise +40% this year, and both countries are debating the supply of technological equipment, with the US opposed. In US business results, NVIDIA beat expectations and raised its guidance thanks to AI.
What we expect for today
European stock markets would open with slight gains, with the technology sector faring better. Currently, S&P futures are up +0.37% (the S&P 500 ended +0.15% higher vs. the European closing bell). Volatility in the US rose (VIX 20.03). Asian stock markets are mixed (China’s CSI 300 -0.56%, Japan’s Nikkei +0.27%).
Today in Germany we will learn the final 1Q’23 GDP; in the US weekly jobless claims, the second reading of the 1Q’23 GDP, April’s Chicago Fed index and April’s pending home sale; and in Mexico April’s trade balance. Debt auctions: Italy (€ 2.75 Bn in bonds due 2025).