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Comments by central bankers centered the stage at the start of the week in a session with no relevant economic data releases. In the euro area Christine Lagarde reiterated that a rate hike in 2022 is "very unlikely" even if the current inflation spike might be higher and longer than initially expected.

Markets ended the month in a mixed session, as European stocks fell and the S&P 500 recovered from the previous day's losses. Safe haven bond yields rose and the dollar appreciated against the euro.

With little novelties on the data front, investors started the week resuming their positioning to higher rates for longer selling off sovereign bonds, bringing yields up again. The surge was greater on long-term references and widespread across developed economies, with the US 10-year benchmark rising 9 bps. to hit multi-year highs.

Greetings back to work in a week beginning with the downbeat echoes of Friday, when investors traded in a risk-averse mood. Sovereign bond yields ended the week sliding across the board, especially in Europe, and so did stocks, with the biggest falls in China. The USD was broadly flat, while commodities rose slightly.

A session with mixed results across markets on Tuesday, as investors returned from the Easter holiday and took position ahead of the March inflation report in the US today. The Fed also releases the account of its March meeting.

Improving prospects of a de-escalation in the Middle East supported risk sentiment, with reports suggesting both the US and Iran may be open to ending the conflict. Sovereign yields fell for a second straight session, as inflation concerns eased, while equities moved higher, led by a strong rally in the US (the S&P 500 saw its largest daily gain since May).

Investors continued to err on the side of caution on Wednesday, balancing out data showing US inflation cooled slightly more than expected in March with warnings set out in the minutes of the last Fed meeting of the risk of a mild recession in the US later this year.

In yesterday's session, the pause in a vaccine trial after a patient fell ill weighed on sentiment. Stock indices declined across the globe (in the US, Q3 earnings season started disappointing investors) and yields on sovereign bonds edged slightly down. In FX markets, the US dollar strengthened against advanced and emerging economies' currencies.

Investors started the week trading with a cautious approach. On the positive side, sentiment continued to be supported by expectations that the Chinese government could relax some of its COVID zero policy. On the opposite direction, data showed further weakness in China’s economic recovery.

Investors started the year trading with a risk-on mode, taking on board data showing receding inflationary pressures in Europe, a slowdown in economic growth in the US and a further decline in energy prices across the globe. As a result, investors revised down modestly their expectations for future policy interest rate hikes. 

Negotiations to raise the US debt ceiling progressed over the course of Thursday, with both the Government and the opposition party suggesting talks were in a better place, though not finalised yet. Should a deal be reached soon, Parliament would have to approve it before June 1, the deadline stated by Treasury Secretary to run out of cash.

Financial markets diverged across the Atlantic on Tuesday. In the US, sentiment was supported by optimism around US‑Iran peace talks, despite US missile strikes in southern Iran. In the eurozone, by contrast, the rebound in European benchmark energy prices—Brent crude and TTF natural gas—after a few sessions of relief weighed on investor sentiment.

In yesterday’s session, US debt ceiling negotiations continued to center the stage in financial markets as President Joe Biden and Republican speaker of the House Kevin McCarthy keep pushing for a deal to avoid a default on sovereign bonds. Biden specified that negotiations are on the fiscal budget, not on whether the US will pay or not its debt.

Markets ended the week on a constructive tone, with news of diplomatic negotiations in the U.S.-Iran conflict driving oil and gas prices lower and feeding into risk-on sentiment. Stocks rallied on both sides of the Atlantic, led by gains in the technology, financial, and consumer sectors. Early this morning, however, the pattern reversed.

Tensions around the US debt ceiling negotiations continued weighting on investors’ sentiment. Even though the opposition leader, McCarthy, signaled optimism about a deal after the latest round of talks, rating agency Fitch Ratings warned the nation’s AAA rating may be downgraded due to the political standoff.

With no meaningful progress in the peace negotiations between the US and Iran, market focus shifted toward macroeconomic data releases and earnings results. Investors also remained attentive to President Trump’s arrival in China for talks with President Xi Jinping, where discussions are expected to focus on the implications of the Middle East conflict and on efforts to ease trade tensions between the two countries.

In the last session of the week, investors’ expectations on additional interest rate hikes by the US Federal Reserve were seen as more probable. That, together with debt ceiling concerns and an increase of inflation expectations seen in the University of Michigan survey, pushed US Treasury yields higher.