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Financial markets had a mixed start to the week as investors tried to reconcile seemingly contradictory signals. In the eurozone, government bond yields fell after September's PMI showed a weak manufacturing sector weighing heavily on the core economies. A sharp, unexpected deterioration in the French services PMI also pushed up the country's spread.

Investors traded with a risk-off sentiment during a volatile session on Tuesday, weighting in a potential ban on Russian coal exports by the EU and taking on board a new round of hawkish commentary from the Fed. The minutes of the March meeting will be released by the Fed later today.

Markets traded without a clear direction as investors remained cautious awaiting further announcements from the Trump administration and central bank meetings next week. ECB officials' remarks continued to support further interest rate cuts, while Fed officials are in the "blackout" period ahead of the meeting and cannot comment about monetary policy.

In yesterday's session, investors traded with mixed optimism as they continued to digest inflation data for the US, which might have peaked in March. On monetary policy, the Bank of Canada hiked rates by 50bp to 1% and said it would allow bonds to roll off as they mature. Today's focus will be on the ECB meeting.

Financial markets struggled to find a clear direction amid heightened geopolitical tensions in the Middle East. Oil prices had a volatile session, with the Brent reference touching $76/barrel in intraday trading, to close at around $74/barrel. Equity markets closed with slight losses in the euro area and flat in the US, while the volatility index remained elevated.

Investors started the week shunning risk, with most equity indices around the world posting some losses, which were more pronounced in the US. Chipmakers and other AI companies, particularly Nvidia, suffered a rout as a newly released Chinese AI model proved more efficient and investors questioned how much value US AI companies would add in the future.

Inflation eased below 2% in Germany and Italy in September (1.6% and 0.7% yoy, respectively), as it did in Spain and France. ECB President Lagarde remarked recent data has strengthened the central bank's confidence in the return of inflation to target, sending the probability implied by futures markets of a 25bp cut in the October meeting to 90%.

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.

Investor's remained cautious yesterday as they await for more clues on the upcoming macroeconomic and political outlook. In the U.S., results from technological companies surprised to the upside, while the industrial sector suffered from concerns about economic growth.

In yesterday's session, investors' sentiment deteriorated amid the expectation of a tighter monetary policy from the Federal Reserve and the ECB and disappointing corporate results. Concerns about the Covid-19 situation in China added to the somber sentiment.

Lower-than-expected PMIs for July in the euro area (services 51.9 vs. 52.9 expected, and manufacturing 45.6 vs. 46.1 expected) sent the region's sovereign bond yields higher. Equities were mixed, ending mostly lower, while the PSI20 advanced and the Ibex-35 ended flat, boosted by the energy and utilities sectors.

Investors ended the week with renewed risk appetite as inflation data released during the day was broadly in line with expectations. In the US, the core PCE price index rose 0.2% month on month in June, as expected, bolstering hopes of a Fed rate cut in September. In the eurozone, 1 and 3 year inflation expectations remained at 2.8% and 2.3% respectively.

The Federal Reserve left interest rates unchanged at 5.25-5.50%, as expected, and hinted that if inflation readings continue in the right direction, a September rate cut "could be on the table." Markets reaffirmed their expectation of three 25bp interest rate cuts for the remainder of 2024. Treasury yields fell by +10bp, and US equities rallied.

Stock indices were mixed as financial markets digested the downward revision of global growth forecasts from the OECD and the downbeat economic releases in the US (2018's trade deficit, the largest since 2008, and ADP employment report slightly below consensus).

Stocks declined across the board on Friday as downbeat activity figures in the U.S. (nonfarm payroll employment +20,000 in February after +311,000 in January) and China (export growth dropped from 9.1% yoy in January to -20.7% in February) added to the OECD and the ECB's downgraded macroeconomic projections earlier in the week.

The Federal Reserve's decision to lower interest rates by 50 bp sent global stocks soaring during yesterday's session. Equities climed more than 2% in the euro area, and in the US, the S&P 500 reached a new all-time high, as stocks priced in the soft-landing scenario.

Market sentiment was mixed on Wednesday. On the one hand, higher-than-expected US inflation data for January (headline: 0.5% mom, 3.0% yoy; core: 3.3% yoy) pushed back market expectations for the next Fed rate cut from early summer to the end of the year, and the probability of a second cut went down to virtually zero.

With U.S. markets closed for the Memorial Day holiday, European stocks advanced moderately at the start of the week as investors digested the results of the weekend's European Parliament election.

Markets had an intense risk-off session following weaker-than-expected manufacturing data in the US, and as investors position themselves for the US jobs report on Friday, which could determine the Fed's next move. In particular, the ISM index for July came in at 47.2, slighlty higher than last month's, but still in contractionary territory.