Evolution of the international financial markets and evaluation of the main events and economic indicators of the previous day session. Available in English.
On Friday, the release of HICP inflation data in the euro area centered the stage in financial markets. Headline inflation fell sharply from 8.5% to 6.9% y/y in March, but core inflation ticked up to 7.5% in a sign that price pressures are persisting. In this context, ECB member Villeroy de Galhau said there are still some more rate hikes to do.
Equity markets extended a rally across the globe on Thursday, as investors continued to switch their focus away from the stress in the banking sector and instead pondered about the likely path of monetary policy decisions ahead.
Investors traded with a risk-on mood on Wednesday. The main drivers were a rally in tech stocks, boosted by the restructuring plans from China’s Alibaba Group, as well as receding fears of contagion from the banking turmoil.
Precaution remained the key theme during a session with mixed results on Tuesday. Positive survey data in the US (the Conference Board’s consumer confidence index surprised by rising to 104.2 in March) suggested limited spillovers so far from the banking sector turmoil on consumer confidence.
Investors started the week trading with more appetite for risk, as concerns about the banking sector receded following the announcement that SVB is to be acquired by another institution (First Citizens Bank & Trust) and news reporting additional support from the US authorities for regional banks.
In the last session of the week, investors continued to trade with a risk-off mood amid continuing turmoil in the financial system. Doubts about the health of the banking sector led traders to think that central banks will have to stop hiking rates and start cutting them soon.
Monetary policy decisions remained the key focus for investors on Thursday. The Bank of England and the Swiss National Bank raised rates by 25bp and 50bp to 4.25% and 1.5%, respectively, following the move by the Fed on Wednesday to hike rates by 25bp and to signal that there could be additional increases if financial turmoil recedes.
The dovish hike delivered by the Federal Reserve and US Treasury Secretary Janet Yellen comments, signaling that regulators are not considering a broad expansion of deposit insurance, centered the stage in financial markets.
Renewed appetite for risk extended across financial markets on Tuesday, as widespread fears over the health of the banking sector abated and investors instead looked ahead for the monetary policy announcements at the Federal Reserve today. ECB President Christine Lagarde is also due to make a speech this morning.
On Monday, volatility continued to dominate financial markets. While the session started with losses in stock indices and sharp declines in sovereign yields, sentiment improved throughout the day following the communication by some ECB officials. Equities closed higher and yields on sovereign bonds rose in the US and were mixed in the euro area.
In the last session of the week, investors’ concerns about liquidity shortage in the banking system continued to dominate the scenario and risk-aversion set the tone in financial markets.
Volatility remained elevated across financial markets on Thursday, in a session characterized by risk-on sentiment. In line with expectations, the ECB announced a 50 bp hike in its policy interest rates, although refusing to pre-commit to a given size and pace of future adjustments, instead reiterating a data-dependency approach.