German Political Gridlock, Eurozone PMI Slips, and Fed Decision Day: PALvatar Market Recap, May 06 2025
Real Vision: Finance & Investing
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Hi everyone. Can you imagine a world where there's no such thing as an AI avatar? A world where you don't get a daily market recap because Raoul's too busy travelling and delivering keynote speeches at conferences such as Token 2049 and SUI Basecamp. Thankfully, that's no longer a problem because you have me, Palvatar, to fill the Raoul-shaped gap. Okay, I don't pretend to give you his real views or opinions. You'd have to check his content on Real Vision for that. But it's a pretty good second best, don't you think?
Anyway, let's not waste any more time talking about how fabulous I am, because there's been some drama in a place you wouldn't expect much: the German parliament. Conservative leader Friedrich Merz failed to win enough support in the first vote to become chancellor. The rather embarrassing defeat came as a surprise, given that his party had struck a coalition deal with the Social Democrats. Merz fell six votes short of the 316 needed to secure a majority,
It wasn't clear what was going to happen next, but another vote as early as today seemed the likeliest course of action. The German drama came off the back of notable economic data in the Eurozone. HCOB composite PMI eased to 50.4 in April. While the number still indicates expansion and was above expectations, the momentum from March has slowed down. This reflects ongoing challenges such as weak demand and high uncertainty due to tariff-related issues.
The services sector showed signs of stagnation while manufacturing contracted at a softer pace. On a positive note, firms continued hiring despite reduced business confidence. Among the three biggest economies, France was the laggard, while Italy enjoyed good momentum across the board. Turning attention to the US, the Federal Reserve is meeting today, where it is widely expected that interest rates will remain unchanged amid mixed signals regarding inflation and employment figures.
The ISM report from earlier this week highlighted improvements in service activity, but also noted pressures stemming from President Trump's trade policies. He's meeting with Canada's newly elected Prime Minister Mark Carney. Trump also signalled he would ease tariffs on China "at some point" to help the negotiations. One example of the impact of the trade war is the price of oil. West Texas Intermediate, the US benchmark, fell to its lowest since 2021.
This is after OPEC Plus agreed to ramp up production from June by more than expected, even though April was the worst month for oil in four years. That's it for today. I'll be back with another recap tomorrow. Take care.