On April 17, 2025, the European Central Bank (ECB) made headlines by implementing its seventh rate cut since June 2024, slashing the deposit rate to 2.25%, the refinancing rate to 2.40%, and the marginal lending rate to 2.65%. This decision, while expected, has not managed to uplift the mood in European stock markets, which continued their downward trend, albeit with reduced losses.
The mood on the trading floors was further dampened by remarks from Jerome Powell, the Chair of the Federal Reserve. Powell indicated that the Fed would be waiting for "greater clarity" before making any decisions regarding rate cuts, even as he affirmed the robustness of the U.S. economy. He also warned that tariffs could temporarily inflate prices, complicating the monetary policy landscape.
On Wall Street, the situation was equally tumultuous. Following a significant drop of 3% in the Nasdaq the day before—largely attributed to a 6% fall in Nvidia shares and Powell's statements—the Dow Jones opened down over 1%, dragged down by a staggering 20% collapse in UnitedHealth. The uncertainty surrounding the meeting between Italian Prime Minister Giorgia Meloni and U.S. President Donald Trump added to the market’s jitters.
Meloni's meeting with Trump was highly anticipated, particularly as discussions were set to center on tariffs affecting the European Union. Trump expressed confidence in reaching a fair trade agreement with the EU, stating, "I am sure we will make a fair trade deal with the EU." He further noted that there was no rush for a deal with China, emphasizing the U.S.'s competitive edge.
In macroeconomic news, Germany reported a 0.2% decline in producer prices for March, following a 0.5% rise in February. Meanwhile, at Piazza Affari, the Italian stock exchange, attention was focused on Mps after its assembly approved the 2024 financial statements, which concluded with a net profit of 1.92 billion euros, alongside a capital increase related to the Ops on Mediobanca.
The luxury sector faced challenges as shares of Moncler, Cucinelli, and Hermès fell following disappointing earnings reports. Moncler saw a 2.51% drop, while shares of Hermès fell by 2.16%. The banking sector remained under scrutiny following the ECB's seventh rate cut.
Unicredit, however, received a boost with Barclays raising its target price to 56.3 euros. Additionally, Stellantis announced its acquisition of Automha through Comau, expected to be completed by the second quarter of 2025.
As for the bond market, the spread between Btp and Bunds closed at 117 points, with the yield on the Italian ten-year bond rising to 3.71%. Oil prices continued their upward trajectory, driven by U.S. sanctions on Iran, with WTI priced at $63.13 and Brent at $66.40 per barrel.
Gold experienced a slight decline after reaching record highs, trading at $3,327.35 per ounce, while the euro-dollar exchange rate remained stable at 1.1359.
In the broader context, the ECB's actions have been framed within the ongoing trade tensions that have exacerbated economic uncertainties in the Eurozone. Christine Lagarde, the ECB President, noted that the risks to growth in the Euro area have increased, attributing this to rising trade tensions that are likely to dampen investment and consumer spending.
In a related development, Kristalina Georgieva, the Managing Director of the International Monetary Fund (IMF), stated that while growth estimates would see significant downward revisions, a recession was not anticipated. This perspective aligns with the IMF's view that while trade disruptions would incur costs, the global economy is not on the brink of recession.
As the financial markets navigated these turbulent waters, the sentiment among investors remained cautious. A report indicated that 70.2% of Italian savers no longer see liquidity as a guarantee of security, with 60% expressing interest in long-term investments, a notable increase from 47.9% in 2022.
As for the luxury market, analysts are closely monitoring the performance of brands like Hermès and Moncler, especially as Hermès plans to adjust its prices in response to U.S. tariffs. The brand announced that it would fully compensate for the impact of the 10% tariffs by increasing its prices in the United States starting May 1.
Amid these developments, the Hang Seng index in Hong Kong rose by 1.6%, reflecting optimism from progress in U.S.-Japan trade negotiations, while the Chinese stock exchanges showed mixed results, with Shanghai up 0.13% and Shenzhen up 0.08%.
In summary, the financial landscape remains fraught with uncertainty as global trade tensions, monetary policy shifts, and corporate earnings reports continue to shape market dynamics. Investors are keenly watching for signals from upcoming meetings and economic data releases that could provide clarity on the direction of both the U.S. and European economies.
