Markets cautious the late stage of the economic cycle

Markets cautious at the late stage of the economic cycle

Weak macro data reinforce the slowdown scenario as stock markets await Wall Street

Today’s session in European equity markets unfolded under the banner of caution, with investors recalibrating macroeconomic expectations in light of a flow of data confirming that the global cycle is now in an advanced phase of slowdown. Ahead of the opening of Wall Street, sentiment remains fragile and selective, with limited movements and restrained risk appetite.

In Japan, the December composite PMI fell to 51.5 from 52, confirming a loss of momentum compared with previous months. The figure reflects divergent dynamics: the manufacturing sector edged up to 49.7, but remains in contraction territory, while services slowed to 52.5 from 53.2. Overall, the Japanese economy continues to grow, but with signs of a gradual weakening in domestic demand.

Disappointment was more pronounced in the Eurozone, where the composite PMI came in at 51.9, well below expectations (53.6) and down from the previous month. Manufacturing remains below the 50-point threshold (49.2), signaling a persistent contraction in industrial activity, while services are losing momentum. This backdrop weighed on European equity indices, particularly penalizing cyclical and industrial sectors, while defensive sectors held up better.

From the United Kingdom comes a further sign of cooling in the labor market: the unemployment rate rose to 5.1%, in line with expectations but higher than the previous reading. In Italy, inflation continues to decline: the monthly figure stands at -0.2%, while the annual rate slows to 1.1%, below estimates. This confirms easing price pressures, but at the same time reflects weak domestic demand.

In the United States, markets are closely watching labor data. Non-Farm Payrolls surprised to the upside with 64,000 new jobs, above expectations and a sharp rebound from the previous month. However, attention remains focused on the unemployment rate, expected to rise to 4.6%, a factor that could reinforce the interpretation of a labor market in an advanced phase of normalization.

Overall, as highlighted by the MacroMetrics model of 4FT Invest Ltd, this set of indicators is consistent with a late-stage cyclical slowdown, with rising risks of a transition toward a recessionary phase in the coming quarters. This scenario explains the wait-and-see attitude of equity markets today: investors are prioritizing risk management, awaiting clearer signals from the U.S. macroeconomic outlook and the future direction of central banks. It now seems clear that there is a broad slowdown in global markets; the real question is: will it be a soft landing?