In yesterday’s session, markets digested mixed economic data from the US. The ADP monthly employment report showed hiring at private companies grew at the slowest pace since the beginning of the year, a sign the labor market might be cooling. Instead, the sharp rise in the ISM services index from 49.4 to 53.8 pointed to a rebound in the sector.
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The Federal Reserve lowered interest rates by 25bp to 4.25-4.50% and signaled it will slow down the pace of cuts given its upward revision to the inflation forecast for the next two years. The Fed considered that the good health of the labor market and the little progress made on inflation in the recent months gives it room to act more cautiously from now on.
In yesterday's session, German bonds extended their decline, with the 10-year bund yield reaching 2.83%, and the euro appreciated against the dollar as the ECB cut interest rates by 25 basis points to 2.5%. President Christine Lagarde did not pre-commit to setting rates in any direction in the upcoming meetings, and warned of the uncertainty surrounding the effects of the trade war and increased defense spending.
The Spanish real estate market accelerated in 2024, supported by the easing of financial conditions and the strength of the country’s economy. In 2025, we expect that demand will remain very strong and, although supply will continue to gradually increase, the housing deficit accumulated in recent years will sustain significant price growth at levels similar to the current ones.
Markets were mixed in the first session of the week as investors remained cautious on the outlook of the global economy. In the euro area, sovereign bonds ended flat and the main stock indices edged lower as markets await further details on tariffs from the US. The euro area composite PMI rose to 50.4 this month from 50.2 in February.
The Spanish agri-food sector is approaching 2025 with renewed vigour, consolidating the growth path begun in 2023 and standing out for the dynamism of its exports. At the same time, it faces an increasingly demanding commercial environment, marked by new tariff barriers in key markets such as the US and China. Despite these challenges, agri-food maintains its role as an economic and territorial pillar, key to international competitiveness, regional cohesion and strategic autonomy.
The new expansionary cycle in Spain’s real estate sector is getting stronger quarter by quarter. House sales have been posting double-digit figures for the past three years, there is strong growth in construction and prices are clearly on the up. What will the future bring? As explained in this Report, this positive trend is expected to continue in the sector, both because of the Spanish economy’s good performance and also the healthy state of the industry itself.
In the last session of the week, investors weighed concerns on rising COVID cases with another pickup in CPI inflation in the US (headline at 6.8%, highest since 1982, and core at 4.9%). Despite these high figures, the release was broadly in line with the consensus and it did not change investors' expectations for the Fed's first interest rate hike.
The evolution of home prices, the strength of foreign demand in Spain and the risk of a housing bubble in some developed Markets are just some of the tòpics covered in the new Real Estate Sector Report 2S 2022.
In yesterday session, investors traded cautiously amid ECB officials’ comments pointing towards further normalization in the assets' holdings and as they waited for the outcome of the US midterms. Early this morning, the most probable outcome is that Republicans have won the House while Democrats will control the Senate by a small margin.
Investors continued to err on the side of caution at the start of the week, with the focus turning to the risk of a global recession amid expectations of further monetary policy tightening from major central banks and the ongoing deterioration in the COVID pandemic in China.
In the last session of the week, yields on sovereign bonds rose markedly, particularly so in the euro area, and stock indices advanced across the board. The surprise in the PPI m/m inflation in Germany (-0.4% vs consensus -1.2%) and the hawkish comments from ECB GC member Holzmann contributed to the increase in yields.
Risk aversion continued to set the tone during the last session of the week, fueled by a further upward revision in investors’ expectations for the likely path of policy interest rates ahead. These worries were compounded by the announcement from Russia that the country will cut its oil production by 500k barrels a day next month.
Concerns about the health of the banking sector and the potential implications for the trajectory of monetary policy remained the key themes during a volatile session on Monday. Money markets showed a notable correction in expectations for terminal policy rates in both the US (5% in May) and the eurozone (3% in September).
Yesterday’s Federal Reserve meeting resulted as a nonevent for financial markets as the 25bp rate increase to the 5.00%-5.25% target range was 100% priced in. Also, the removal of an explicit reference in the press release of further interest rate increases in the coming meetings was consistent with the expectation of a pause in the hiking cycle.
In the first session of the week, investors traded cautiously ahead of today's key inflation data release in the US and the upcoming central bank meetings in the US (where we expect the Fed to pause its aggressive rate hike cycle) and the euro area (where the ECB will most likely hike rates by 0.25pp).
The Spanish tourism sector is showing great signs of resilience: demand is keeping up with the inflationary environment and growth has surprised very positively in the first half of the year. The second half will be very marked by the summer months, for which we especially expect new positive results. In late 2023 and early 2024, we expect the tone of the sector to change slightly and become less buoyant.
In the last session of the week, investors digested the central bank presidents’ speeches at the awaited Jackson Hole conference. There, Jerome Powell said that the US Federal Reserve will proceed carefully in the coming months and that monetary policy will remain restrictive for longer, hinting at a possible pause in the September meeting.
In yesterday’s session, government bond yields fell slightly on both sides of the Atlantic. In the eurozone, German export data for November, which surprised to the upside on the back of strong EU demand, contributed to the move. In the US, the NY Fed’s metric of consumer’s one-year inflation expectations fell to 3.01%, the lowest level in almost three years.
The week started with a very quiet session, as there were no macroeconomic data releases and the US financial markets were closed due to the President’s day festivity. All eyes will remain attentive to the release of the Fed and ECB last meeting minutes (Wed. and Thu., respectively) and the flash PMIs for the main advanced economies (Thu.).