Evolution of the international financial markets and evaluation of the main events and economic indicators of the previous day session. Available in English.
Risk-off sentiment drove markets after a weaker-than-expected U.S. labor market report (nonfarm payrolls +22k in August, and June-July revised down to a cumulative +66k [prior: +87k]). Advanced-economy stock markets declined and sovereign yields dropped amid stronger market expectations over Fed cuts. The euro strengthened above $1.17 and gold rose.
Data released yesterday, which continued to point to a cooling US labor market, including higher-than-expected unemployment benefit claims and slower private job creation, reinforced expectations of a Fed cut later this month. Dovish remarks from NY Fed President Williams, who sees gradual rate cuts, further supported this narrative.
Dovish remarks from Fed Governor Chris Waller and a JOLTS job report that showed US job openings fell in July to the lowest in 10 months, reniforced market expectations of a Fed rate cut in its September meeting. US Treasruy yields fell and stocks advanced, while the dollar edged lower.
Renewed fears about inflation and fiscal discipline prompted a broad sovereign bond sell-off. The Japanese 20-year bond yield reached levels not seen since 1999, the 30-year UK yield touched highs from 1998, and the yields on the 30-year US Treasury came close to 5%. Risk-off sentiment spread to global stock markets which pared losses during the session.
Markets had a muted reaction to a U.S. federal appeals court which ruled 7–4 that tariffs imposed under the IEEPA exceed congressional authority, affecting general bilateral tariffs but not sector-specific ones. The tariffs remain in place until October 14 while parties may seek Supreme Court review.
Investors ended August with a mixed session as markets remained focused primarily on inflation data and monetary policy expectations.
The Federal Reserve held the federal funds rate at 4,25%-4,50%, citing solid labor market conditions and above-target inflation. Financial markets made a hawkish reading of the Fed's accompanying statement and pushed back expectations of the next cut from September to October. The probability of a second cut in December dropped from 80% to 40%.
Euro area investor sentiment recovered following the EU-US trade deal, sending stocks higher across the region. In the US, investors traded in a risk-off mood on news that, after two days of negotiations in Stockholm, Chinese and US officials failed to deliver a trade deal and agreed only to seek an extension of the 90-day tariff truce. Stocks fell, and Treasuries rallied.
Initial optimism over the EU-U.S. trade deal, which had boosted European stocks early in the trading session, soon faded and the region's main indices closed lower with losses led by German stocks (-1%). U.S. stocks had a choppy session and ended mostly flat, while large-cap tech stocks edged higher. The euro slipped to just below $1.16, its lowest in over a month
Markets ended the week with a mixed session. Optimism over trade deals continued to support U.S. equity markets, sending the S&P 500 and the Nasdaq to new record highs, while euro area stocks ended mostly lower as investors traded cautiously awaiting news of a trade deal. Sovereign yields were little changed after the ECB meeting and Trump's visit to the Fed.
The risk-on mood triggered by trade negotiations continued to support markets but lost some steam in yesterday's session. Sovereign yields rose on the back of a hawkish reading of the ECB's meeting, while euro area and U.S. stocks posted moderate gains with a mixed sectorial performance (European banks rallied on favorable earnings and higher rates).
The announcement of a U.S. - Japan trade deal and hopes of a deal between the EU and the U.S. unleashed investors' risk-on sentiment in yesterday's session. Global stock markets rallied and sovereign yields declined across the board. Safe-haven assets (such as gold and the CHF) retreated while the EUR strengthened towards $1.18.