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Volatility and risk aversion continued to set the tone across financial markets in the last session of the week. On the one hand, investors sentiment continued to be impaired by liquidity concerns in the banking sector, sparked by the crisis and subsequent closure by regulators of a small tech-focused financial group in the US (SVB).

In the last session of the week, the awaited release of the September US employment report changed investors’ expectations of the path of interest ahead. Non-farm payrolls increased by a 336k, notably above expectations, and the two previous months were revised by 119k higher. The unemployment rate remained unchanged at 3.8%.

Remarks by central bank officials took center stage in yesterday's session. From the ECB, Luis de Guindos reiterated that the ECB is on its path to cut interest rate as inflation data is on track to its 2% target. On the other hand, Fed Chairman Powell said there is no need to rush to lower rates given the strong economic backdrop in the US.

Investors closed the week trading with a risk-on mode, recovering some of the losses of previous sessions following the hawkish rhetoric by major central banks, including the 75 bp interest rate hike by the ECB and comments by Fed Chairman Jerome Powell, who reiterated the need to act forthrightly on inflation “until the job is done”.

Investors started off the week on a mixed tone. In the money market, interbank rates rose as investors reassessed their expectations of further aggressive interest rate cuts. Sovereign bond yields also rose on both sides of the Atlantic, with the US treasuries' curve flattening as short-term benchmarks rose the most.

The advance PMI figures for December extended the recent trend of divergent growth between the US and euro area countries. The composite PMI in the US rose from 54.9 last month to 56.6, whereas the euro area composite index stayed below 50, albeit improving from 48.3 to 49.5, boosted by a recovery in the services sector (to 51.4).

A speech by the president of the Federal Reserve, reinforcing the expectation that the central bank will hike rates by 50bp in December, centered the stage in yesterday’s session. In the euro area, headline inflation decreased in November from 10.6% to 10.0% y/y while the core measure remained unchanged at 5.0%.

Cada vegada són més les persones que viuen de lloguer. En els 5 últims anys, el percentatge de llars que lloguen l’habitatge principal ha augmentat de manera significativa: del 16,1% el 2013 al 17,8% el 2018. La forta demanda d’habitatges de lloguer ha fet repuntar els preus, en especial a les grans ciutats i als punts turístics, tot i que, en els trimestres més recents, s’ha observat una certa tendència a la moderació. De cara al futur, s’espera que la demanda d’habitatge de lloguer continuï sent robusta, de manera que serà necessari augmentar l’oferta de forma compassada per evitar més pressions sobre els preus.

Risk aversion extended across financial markets during a volatile session on Wednesday, fueled by concerns about the health of the banking sector in Europe, in the aftermath of the collapse of some regional banks in the US and renewed concerns about the financial position of Swiss lender Credit Suisse.

Financial markets ended the week on a cautious tone as investors fully digested the ECB's decision to lower interest rates and as they positioned themselves ahead of the Fed's FOMC meeting later this week given the latest prices data: higher-than-expected import and producer prices during November.

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.

In the last session of the week, investors continued to digest the decisions taken by the main central banks in advanced economies. Although at different speeds, and with the exception of the Bank of Japan, all central banks shifted towards a tighter monetary policy despite rising COVID-19 cases.

In the first session of a week with low trading volumes, investors' sentiment kept the negative tone seen on Friday amid rising COVID-19 cases. In the US, Joe Biden's $1.75 trillion spending package was rejected in the Senate and contributed to the worsening economic outlook for the coming quarters.

A wave of weaker-than-expected economic data both in the US and the euro area yielded a moderation in the expected path of policy interest rates which, in turn, pushed sovereign yields downs in both sides of the Atlantic. Stock indices edged up in the euro area and in emerging markets while closing mixed in the US.

Volatility rose during the last session of the week amid heightened tensions in the Middle East, mixed corporate earnings, and expectations of the FOMC meeting later this week. Stocks fell across the globe, with US and European stock indices entering “correction” territory after falling 10%  their most recent peak in July.

Financial markets had another mixed session on Tuesday, with little in the way of data releases to guide investors. In the money market, interbank rates moved higher on both sides of the Atlantic as investors reassessed their expectations for central banks' policy. Fed officials speaking yesterday stressed the importance of a cautious Fed in achieving its twin target.

Investors traded with cautious optimism at the last session of the week, taking on board a new round of hawkish comments from Fed officials, weak survey data (e. g. the monthly fall in the IFO business climate in March) and the EU-US plan to cut reliance on Russian natural gas. The Ukraine-Russia war has now extended for over 1 month.

Financial markets ended the week on a slightly positive note as the earnings season in the US kicked off with the big banks posting solid results. Investors also continued to digest inflation data received during the week which confirmed expectations of a 25bp rate cut instead of a 50bp cut from the Fed. 

In Friday’s session, markets traded again with strong risk appetite as investors continued to price in the end of the central banks’ tightening cycle. US employment data showed signs of a cooling labor market, further fueling investors’ expectations of no further rate hikes. Markets are now pricing in a rate cut in June by the Fed and in April by the ECB.