European markets commenced Thursday’s trading session with a keen eye on the United Kingdom, where a surprisingly robust economic performance offered a momentary bright spot.
However, underlying caution prevailed as economists tempered enthusiasm with warnings of a potential slowdown later in the year, even as corporate earnings from giants like Siemens provided individual stock focus.
The United Kingdom’s economy delivered a notable upside surprise, expanding by 0.7% in the first quarter of 2025.
This figure, released by the Office for National Statistics (ONS) on Thursday, significantly outpaced the lackluster 0.1% growth seen in the fourth quarter of 2024 and exceeded economists’ expectations of a 0.6% rise, as polled by Reuters.
The ONS attributed this growth primarily to a “0.7% increase in the services sector,” with production also contributing positively by growing 1.1%, while the construction sector remained flat.
This stronger-than-expected data will undoubtedly be welcomed in Downing Street, particularly by Chancellor Rachel Reeves.
“Today’s growth figures show the strength and potential of the UK economy,” Reeves stated in emailed comments as per media reports.
“In the first three months of the year, the UK economy has grown faster than the US, Canada, France, Italy and Germany,” she added, highlighting a rare piece of positive economic news for the Labour government, which has been under pressure to stimulate growth after months of sluggish performance.
Reeves further remarked on the government’s actions: “Up against a backdrop of global uncertainty we are making the right choices now in the national interest. Since the election we have already had four interest rate cuts, signed two trade deals, saved British Steel and given a pay rise to millions by increasing the minimum wage,” she said.
Despite the cheer, economists suggest this economic vigor might be short-lived.
Many attribute the surge not to improved underlying fundamentals but to temporary factors, including businesses front-loading activity ahead of anticipated tariff implementations and tax changes.
Deutsche Bank Economist Sanjay Raja noted this week that any first-quarter jump is likely to be a temporary phenomenon.
“By all accounts, a surprisingly stronger end to 2024 combined with some strength in domestic spending and front-running of trade ahead of Liberation Day, will have led to a bigger jump to start the year,” he said in a research note, though Deutsche Bank believes “risks are skewed higher.”
Raja elaborated on the outlook: “The bump higher in activity will likely be short lived, however. We expect GDP growth to reverse in the second quarter of 2025, before slowly edging higher through the course of the year – and eventually returning to its trend growth rate in early 2026.”
Corporate spotlight: Siemens holds firm amidst uncertainty
In the corporate arena, industrial technology conglomerate Siemens AG provided an update alongside its second-quarter results.
The German giant reiterated its financial outlook for the year, maintaining its guidance despite acknowledging “increased uncertainty in the economic environment.”
Siemens reported robust second-quarter total sales of 19.8 billion euros ($22.19 billion), surpassing analyst expectations of 19.2 billion euros.
The company also delivered a net profit of 2.4 billion euros, comfortably beating forecasts of 1.85 billion euros.
RBC Capital Markets analyst Mark Fielding commented on the results in a note to clients, describing it as a “Largely inline report, with an unchanged [financial year] guide, and overall no big changes to the equity story – even if there are a few moving parts.”
However, Fielding also cautioned, “We do note recent share price strength could create some short term downside risk.”
Shares in Siemens AG have demonstrated strong performance, rising 19% year-to-date.
Global market murmurs: Asia dips, US futures weaken
The broader global market sentiment offered a mixed backdrop.
Asia-Pacific markets mostly declined overnight, pulling back after gains in the previous session that were fueled by easing US-China trade tensions.
Japan’s benchmark Nikkei 225 fell 0.90%, and the Topix lost 0.75%. South Korea’s Kospi saw a decline of 0.29%, while the small-cap Kosdaq slipped 0.37%.
Across the Atlantic, US S&P 500 futures also slipped in overnight trading.
This followed a period where the broad market index had strung together three consecutive advances, reacting positively to the Trump administration and China reaching a temporary suspension of their tit-for-tat tariff dispute.
Futures tied to the S&P 500 were down 0.2%, Nasdaq-100 futures lost about 0.1%, and Dow Jones Industrial Average futures fell 173 points, or 0.4%.
US traders are now keenly awaiting key economic indicators, including producer price index data, retail sales, and industrial production numbers for April, all scheduled for release before the stock market opens.
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