Optimism over upcoming rate cuts in the United States helped the DAX shrug off recent worries about France. French President Emmanuel Macron delivered exactly what investors wanted to hear: no resignation, no snap elections, and a swift appointment of a new prime minister.
This sequence of events reassured markets and brought calm back to French bond trading. With political risks temporarily sidelined, investors are refocusing on incoming U.S. inflation data.
Producer prices today and consumer prices tomorrow will be the final hurdle before the Federal Reserve’s next meeting. Markets are pricing in a 25-basis-point cut as a done deal, along with as many as five additional cuts over the next 12 months. Still, risks loom. Core inflation remains at 2.8%, about 40% higher than the Fed’s target. Tariff-related cost pressures further limit Chair Jerome Powell’s room for maneuver. With expectations running this high, disappointment is a real possibility.
The Fed’s balancing act between price stability and employment has only become trickier. Job creation figures for April 2024 through March 2025 were revised down by 911,000. What initially looked like astonishing labor market strength now appears overstated. The data revisions suggest the U.S. economy is much weaker than assumed. While further downward revisions in January remain a risk, investors hope the adjustments will be less dramatic.
Away from macroeconomics, Novo Nordisk is sending shockwaves through European equities. The Danish drugmaker slashed its growth forecast, falling far short of February’s expectations. Analysts say management underestimated emerging competition and misjudged its own market position. Investors who bought in at higher valuations are paying the price, as the stock now reflects fading hopes of a return to its earlier growth trajectory.
Jochen Stanzl, Chief Market Analyst at CMC Markets
