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Investors traded without a clear direction during the last session of the week, as they continued to digest a raft of macro data and central bankers' remarks to assess the monetary policy path ahead. Sovereign bond markets were mixed, with yields slightly rising in the US but edging lower in the euro area. Stock markets advanced on both sides of the Atlantic. 

With no major macro data to trade on, financial markets continued to digest President Trump's first executive orders. Overall, investors were relieved that tariffs were not imposed on the first day, and while Mexico and Canada appear to become the first targets, a more gradual approach towards China and Europe is now expected.

Investor sentiment was mixed across the globe on Friday. In the eurozone, government bond yields rose as preliminary PMI data for January came in above expectations thanks to a slight improvement in the manufacturing sector to 46.1. US Treasury yields fell as both the services PMI and the U. of Michigan consumer sentiment index surprised to the downside.

Investor sentiment recovered on Tuesday after Monday's rout in chipmakers and AI-related companies. Most equity indices around the world rose, with the US Nasdaq 100 up 2.0%. European equity indices were also higher, with the Ibex 35 leading the way, while Japanese equities were lower earlier in the day, still weighed down by Monday's tech pessimism.

Yesterday's market sentiment was driven by the ECB's rate cut announcement, the fifth cut since last June, leaving depo rate 25bps lower at 2.75%. Officials kept the door open to further policy easing, given euro area GDP data was stagnant and could be hit by a trade war from the new US Administration. By end of session, markets expected 3 more cuts in 2025.

A relative sense of caution prevailed in the US stock market, ahead of corporate earnings and January’s jobs data, while stocks edged up in the eurozone.

Uncertainty and risks surrounding US trade policy drove sentiment in financial markets during the session. President Trump imposed 25% tariffs on all steel and aluminum imports, to which European Commission President von der Leyen responded "will not go unanswered" while Canada's PM stated that his country will give a "firm and clear" response.

Investor sentiment ended the week on a mixed note. Eurozone government bond yields rose moderately after the second reading of Q424 GDP came in slightly better than the first (0.1% QoQ vs. 0.0%), with peripheral spreads widening.

Investors started the week on a slightly positive note, with US markets closed for the President's Day holiday. In the eurozone, government bond yields rose on the likelihood of increased public spending on defence. Peripheral spreads narrowed as German bonds came under some selling pressure ahead of Sunday's general election.

Investor risk appetite remained relatively high on Tuesday. In the eurozone, government bond yields were broadly unchanged. The ZEW index showed a rise in German investor sentiment in February, and ECB's Cipollone had some dovish comments on future interest rates, both of which offset news of future higher public spending on defence in the EU.

Yesterday's session was mixed across asset classes and regions. In the Eurozone, sovereign yields rose and peripheral spreads widened as countries grapple with the need for higher military spending. Separately, ECB's Schnabel argued the 2.75% rate is not undoubtedly restrictive, while ECB's Panetta argued that the consumer-led recovery is not materialising.

Markets were mixed across the globe during yesterday's session. In the euro area, renewed talks on increasing defense spending and finding a peace deal for Ukraine drove positive sentiment, while in the US, President Trump's announcement that 25% tariffs to Canada and Mexico would be reinstated on March 4th sent markets into a risk-off trading session.

In yesterday's session, German bonds extended their decline, with the 10-year bund yield reaching 2.83%, and the euro appreciated against the dollar as the ECB cut interest rates by 25 basis points to 2.5%. President Christine Lagarde did not pre-commit to setting rates in any direction in the upcoming meetings, and warned of the uncertainty surrounding the effects of the trade war and increased defense spending.

Investors remained cautious on Friday in an uncertain global political environment. Eurozone government bond yields were flat, although peripheral spreads widened slightly. US Treasury yields were also slightly higher, with curves flattening, after the Fed's Powell said that tariffs could fuel inflation but that the economy was fine so the Fed should remain cautious.

The week started with a strong risk-off move, particularly in the US. In the eurozone, the Sentix index of investor confidence for March hit its highest level since 2021, while German industrial production for January came in above expectations. Sovereign yield curves flattened as the short end declined, while the long end and spreads were broadly flat.

Risk-off sentiment dominated investors for most of yesterday's session. In the Eurozone, peripheral spreads narrowed and the German Bund yield curve steepened as talks between political parties over new spending plans continued. US Treasuries rose as well after the JOLTS report showed an increase in job openings in January.

Investors' risk appetite rebounded slightly yesterday following Trump's comments late Tuesday on the strength of the US economy. Eurozone government bond yields fell slightly amid the ongoing negotiations to lift the German debt brake. US Treasury yields rose and the curve flattened as trade concerns offset the optimism from the strong February CPI print.

Markets traded cautiously yesterday, ahead of the Federal Reserve's policy rate decision today. US Treasury yields were almost flat, as markets expect Fed's policy rate to stay at its current level. On the other side of the Atlantic, euro area sovereign yields were flat, as the German Bundestag approved a fiscal package to boost defence spending, as expected.

Friday's session was mixed as investors continued to weigh tariff uncertainty, monetary policy decisions and the Fed's updated macro forecasts. Sovereign bond yields edged lower on both sides of the Atlantic, while stock markets registered losses in the euro area and Asia, and barely advanced in the US. The dollar was mostly flat.

Generalized risk-off sentiment during yesterday's session following news that President Trump would impose tariffs on the automotive sector by the end of the day, which he finally did (25% on all finished auto imports). Stock markets fell sharply on both sides of the Atlantic, dragged lower by industrial stocks. The dollar strengthened to $1.07 against the euro.