HFMarkets (hfm.com): Market analysis services.

[HFM]

Date: 19th August 2025.

 

German Economy Between Tariffs and Investment Boost.

 

Economic Contraction in the Second Quarter

The German economy is once again showing signs of strain, with activity contracting in the second quarter of 2025. Revised production figures revealed deeper weakness than initially reported, underlining the persistent struggles of Germany’s flagship manufacturing sector. The newly signed trade agreement with the United States is expected to bring additional headwinds, especially for automakers, while Berlin’s recently announced investment boost in infrastructure and defence will take time to filter through into actual production growth. At the same time, the surge in spending across the European Union may force the European Central Bank (ECB) to rethink its monetary policy sooner than expected.

 

Manufacturing Sector Under Pressure

For much of the past year, Germany’s growth figures have been flattered by businesses front-running anticipated U.S. tariffs. While GDP expanded during the last quarter of 2024 and the first quarter of 2025, much of that momentum came from exporters rushing orders ahead of tariff deadlines. As many analysts warned, this left a demand gap that became visible in the second quarter, when the economy contracted by 0.1% quarter-on-quarter. To make matters worse, first-quarter growth was revised lower to 0.3% from the previously reported 0.4%, confirming that overall momentum in the first half of the year was weaker than thought.

 

The industrial sector remains the hardest hit. Preliminary data point to a sharp contraction, with production plunging 1.9% in June. Adding to the gloom, May’s figures were revised drastically lower to just 0.1% growth from an initial 1.2%. This leaves industrial activity at its weakest level since May 2020. Much of the revision came from updated reports in the automobile sector, where uncertainty over tariff regimes has clouded output and investment decisions.

 

Tariffs Challenge German Automakers

It is worth noting that seasonal factors, such as Easter falling later in the quarter, may have slightly distorted the numbers. However, the broader trend is clear: Germany’s manufacturing sector continues to struggle. Purchasing Managers’ Index (PMI) readings confirm the weakness, and ongoing uncertainty over future trade relations with the U.S. has weighed heavily on sentiment. While some clarity has emerged since the deal was signed, the reality is that new tariffs will curb exports, particularly in the critical auto industry, while also disrupting supply chains that are central to German manufacturing.

 

German automakers, including BMW and Mercedes, had hoped for exemptions given their extensive U.S. investments. Reports even suggested that industry representatives travelled to Washington to propose a reciprocal arrangement: tariff-free imports of EU-made cars in exchange for every U.S.-produced vehicle shipped to Europe. Yet, such proposals failed to gain traction, and manufacturers are now facing the reality of a 15% tariff on U.S. imports of German goods. Behind the scenes, lobbying efforts are expected to continue, but for now, automakers must prepare for a more challenging trade environment.

 

Berlin’s Investment Boost in Infrastructure and Defence

Against this backdrop, Berlin’s new government has attempted to counteract the drag with an ambitious fiscal program. Having taken office in March, the administration moved swiftly to abandon strict debt limits and pledge a sweeping investment boost, with a particular focus on defence and infrastructure. These efforts build on the rearmament drive that began under the previous government in response to Russia’s invasion of Ukraine, but have now accelerated with additional funds.

 

The results are already visible in the orders data, although volatility remains high due to the presence of large-ticket defence and infrastructure contracts. In June, orders fell by 1.0% month-on-month, following a 0.8% decline in May. Yet, thanks to large-scale contracts, overall orders rose by 3.1% in the second quarter, offering some hope for stronger growth later this year. Stripping out these large orders, however, paints a more modest picture, with demand rising just 0.1% quarter-on-quarter. This suggests that any positive impact on GDP may not be immediate.

 

Orders Data Show Mixed Signals

A closer look at orders data reveals the deep impact of tariffs and shifting trade relations. Orders from abroad fell by 3.0% month-on-month in June, driven by a sharp 7.8% plunge in demand from non-Eurozone countries. By contrast, orders from within the Eurozone rose 5.2%, while domestic demand increased by 2.2%. The divergence underscores Germany’s growing dependence on European and local demand to cushion against the decline in U.S.-linked trade.

 

Fiscal Expansion and ECB Policy Outlook

The central question now is whether government spending can compensate for the tariff shock. If fiscal stimulus is supported by structural reforms and measures to encourage private investment, it could set the stage for a recovery. However, if higher public spending is not matched by efficiency gains and red-tape reduction, Germany’s fiscal expansion risks backfiring. Bond markets are already signalling concern, with the 30-year German yield climbing to its highest level since 2011.

 

For the ECB, the shifting policy landscape complicates the outlook. The combination of higher German yields, broader EU defence spending, and resilient inflation pressures could force policymakers to halt the easing cycle earlier than planned. While another rate cut in December remains on the table, markets are increasingly speculating that the ECB may be compelled to raise rates again in the second half of 2025.

 

Germany at a Crossroads

In short, Germany finds itself at a crossroads. Tariffs and global trade shifts are undermining its traditional export model, while domestic investment is only just beginning to gain traction. Whether the government’s spending spree can offset external headwinds remains uncertain, but the stakes are high—not just for Germany, but for the entire Eurozone economy.

 

Always trade with strict risk management. Your capital is the single most important aspect of your trading business.

 

Please note that times displayed based on local time zone and are from time of writing this report.

 

Click HERE to access the full HFM Economic calendar.

 

Want to learn to trade and analyse the markets? Join our webinars and get analysis and trading ideas combined with better understanding of how markets work. Click HERE to register for FREE!

 

Click HERE to READ more Market news.

 

Andria Pichidi

HFMarkets

 

Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.

[HFM]

Date: 20th August 2025.

 

NASDAQ Slides Amid AI Profit Concerns: Will The Decline Continue?.

 

The NASDAQ declines for a sixth consecutive day, measuring a total decline of 3.00%. The decline is largely due to the poor performance of NVIDIA, Broadcom, Palantir Technologies and AMD Stocks. Since April, the NASDAQ has enjoyed a strong run without experiencing a similar lasting decline. So what’s driving the pullback in the tech sector?

 

Technology Stocks Drag The NASDAQ Lower

The decline is primarily attributed to a speech by OpenAI CEO Sam Altman and a report from the Massachusetts Institute of Technology. The OpenAI CEO told journalists that the amount of demand which the technology sector is obtaining, mainly due to AI, could be a bubble. ‘When bubbles happen, smart people get overexcited about a kernel of truth,’ Altman said.

 

However, experts advise that Mr Altman was not referring to all companies investing in AI. Mr Altman’s message, economists note, highlights a growing trend. Investors are actively pouring money into companies simply because they’re tied to AI, whether startups or struggling firms, assuming that AI involvement guarantees potential. However, Altman cautions that this belief is misguided.

 

The report from the MIT (Massachusetts Institute of Technology) is of concern for the NASDAQ and the SNP500. The report revealed a troubling reality: 95% of companies are failing to generate returns from their generative AI investments, casting significant doubt on the technology’s profitability. Investors are concerned that the capital being invested ‘is not bearing fruit and will negatively impact the Return On Equity ratio.

 

Lastly, traders should note that the decline is also partially due to poor economic data from the week before. This includes extremely high Producer Inflation and a lower Retail Sales figure. Of the most influential stocks, the stocks witnessing the largest declines are Palantir Technologies (-9.35%) and AMD (-5.44%). On Tuesday, only 35% of the most influential stocks saw a price increase.

 

Will The NASDAQ’s Decline Continue?

When looking at technical analysis, it is understandable that indicators and price action will provide a bearish bias due to the bearish momentum. The price is trading below the Moving Averages, the day’s VWAP and is not trading at any significant support level. However, on larger timeframes, the price is not forming more than a retracement, meaning traders should keep in mind a rebound is possible.

 

The average size of retracements over the past 3 months is 3.56%. This also suggests that investors may still view the current downward price movement as a retracement or temporary pause.

 

 

 

USA100 2-Hour Chart

 

 

Another factor which investors will be keeping a close eye on is global political tensions. Ongoing negotiations between the US, Russia, the EU, and Ukraine have given investors hope for a potential peace agreement, though its details remain unclear. Experts see a possible trilateral summit between the US, Russia, and Ukraine to address key disputes. If this becomes more likely over the upcoming days, the market’s risk sentiment can increase, boosting the NASDAQ.

 

Key Takeaway Point:

• The NASDAQ fell for a sixth straight day, dropping 3%, largely due to weak performances from NVIDIA, Palantir, and AMD.
• OpenAI CEO Sam Altman and an MIT report warn that much of the AI-driven investment is not generating returns. The development is raising doubts about the tech sector's profitability.
• High Producer Inflation and weak Retail Sales contributed to the tech sell-off, with only 35% of major stocks seeing gains.
• Technical indicators suggest the decline may be a temporary retracement, while ongoing US-Russia-Ukraine negotiations could improve market sentiment if progress occurs.

 

Always trade with strict risk management. Your capital is the single most important aspect of your trading business.

 

Please note that times displayed based on local time zone and are from time of writing this report.

 

Click HERE to access the full HFM Economic calendar.

 

Want to learn to trade and analyse the markets? Join our webinars and get analysis and trading ideas combined with better understanding of how markets work. Click HERE to register for FREE!

 

Click HERE to READ more Market news.

 

Michalis Efthymiou

HFMarkets

 

Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.

[HFM]

Date: 21st August 2025.

 

Has Gold’s Bullish Trend Lost Its Steam?

 

The price of Gold has been trading within a recurring price range between $3,240 and $3,456 throughout the summer months, leaving traders wondering. Has the commodity, which has witnessed one of the strongest trends of the past 2 years, lost its steam?

Most economists believe that Gold will continue to experience a bullish trend throughout the remaining months of 2025. However, technical analysis is not currently indicating upward price movement for the medium to long term. Instead, indications currently point to the range-bound condition continuing, meaning the average price will play a key role in analysis and traders’ targets.

Average Price of Range: $3,330.50

 

XAUUSD Daily Chart

 

Throughout August, the price of Gold has mainly fallen due to peace talks between Russia, the US and Ukraine keeping to a positive tone. The increased likelihood of a ceasefire would boost the market’s sentiment towards risk, pressuring the price of Gold. Economists advise that the price of Gold is likely to come under pressure in the event that the conflict comes to an end, but is not likely to fully correct the gains over the past 2-years.

Furthermore, yesterday, the US Department of Commerce broadened its sectoral tariffs, which had previously focused mainly on metals and automobiles. The new measures impose 50% duties on an additional 407 categories of imported goods, including fire extinguishers, building materials, and aluminium or steel-based chemicals. Experts caution that these tariffs could intensify inflationary pressures, as they now cover goods valued at an estimated $320 billion, up from $190 billion.

The additional cost, if put into effect, is likely to be passed on to consumers, resulting in inflation. Therefore, easing the monetary policy in the near term will become more difficult for the Federal Reserve. If the Federal Reserve opts not to cut interest rates in September, the price of Gold may witness renewed pressure.

Currently, an interest cut remains the main likelihood; however, the possibility of a pause continues to increase. Due to the high producer inflation and new tariffs, investors are contemplating whether the Fed will indeed cut in September. Currently, the Fedwatch Tool’s possibility reading for a ‘pause’ continues to rise to 21%. This is significantly higher than last week’s reading of 7.9%. The ongoing Jackson Hole Symposium may also provide further indications of the future path of interest rates.

If a pause by the Federal Reserve continues to become a likely possibility, and the Ukraine-Russia conflict looks on track to reduce tensions. The price of Gold may break the current pattern and decline. The commodity’s main support level can be seen at $3,122.00.

 

Always trade with strict risk management. Your capital is the single most important aspect of your trading business.

 

Please note that times displayed based on local time zone and are from time of writing this report.

 

Click HERE to access the full HFM Economic calendar.

 

Want to learn to trade and analyse the markets? Join our webinars and get analysis and trading ideas combined with better understanding of how markets work. Click HERE to register for FREE!

 

Click HERE to READ more Market news.

 

Michalis Efthymiou

HFMarkets

 

Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.