Improved sentiment during yesterday's session was driven by optimism on trade talks between the EU and the US, and macroeconomic developments. US consumer confidence strongly rebounded, with the Conference Board index jumping to 98.0 in May from 85.7, and in France, inflation rose 0.6% yoy in May vs. 0.9% expected, and down from 0.9% in April.
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Investors ended the week with mixed results, balancing out a solid employment report in the US (payrolls rose by 431.000 in March and the jobless rate fell to 3.6%) with upside surprises in inflation in the eurozone (HICP went up by 7.5% y/y in March). Ongoing talks between Russia and Ukraine also remained in focus.
Yesterday, global financial markets delivered a mixed performance, shaped by judicial developments in the United States and uneven economic data. In the US, an initial court ruling blocked most of President Trump’s tariffs, only for a federal appeals court to later reinstate them, injecting renewed uncertainty into ongoing trade negotiations.
As expected, the Federal Reserve increased policy interest rates by 25 bp to the range 4.50%-4.75% but surprised by giving a dovish tone, noting that disinflationary pressures have started while the economy is starting to slow. The Fed reiterated that “ongoing increases” on interest rates would still be needed.
Financial markets were mixed yesterday. US Treasury yields were flat after the OECD lowered its global growth outlook from 3.1% to 2.9% in 2025, citing concerns over Trump's trade war and its impact on the US economy. JOLTS data showed the resilience of the US labour market in April, while new orders from businesses fell, possibly due to frontloading in Q1.
Sentiment deteriorated across financial markets on Wednesday, as investors digested the hawkish narrative in the accounts of the Fed’s latest meeting and the likely new imposition of sanctions against Russia.
Investor optimism around trade talks led to a moderate risk-on mood at the end of the week. In particular, officials said that sections of the first phase of a trade deal between the U.S. and China are nearly completed.
Yesterday, the UK and the EU reached a provisional agreement on the Brexit Withdrawal deal, which still needs to be approved by the legislative powers in both regions.
Volatility continued to dominate across financial markets at the start of the week, as investors took position ahead of the Federal Reserve meeting staring today and following the release of feeble economic sentiment data (final manufacturing PMIs). EU leaders were still evaluating a new round of sanctions against Russia.
Advanced-economy stocks rose across the board as investors found support on positive indicators both in the U.S. (a solid +0.8% mom increase in capital goods orders in January and muted price pressures according to the producer price index, which rose +0.1% mom in February) and the Eurozone (industrial production +1.4% mom in January).
On Thursday, German Bund yields rebounded by +5bp, partially reversing the broad decline seen earlier this week, following a positive surprise in the country’s industrial orders data in November (+5.6% mom). Other euro area sovereign yields were broadly stable, leading to a further narrowing of peripheral spreads.
Market sentiment remained subdued on Tuesday as investors awaited Thursday’s US inflation report for December, which could shed some light on the Fed’s future interest rate decisions. In this context, government bond yields rose in the eurozone, despite the negative surprise from German industrial production for November, and fell slightly in the US.
Financial markets started the week on a risk-off mood, as the Russian gas cut off worsened the European energy crisis and the region’s economic outlook.
On Friday, investors continued to weigh the hawkish monetary policy agenda of the main central banks and the upside surprises on inflation data. In the euro area, headline HICP inflation jumped from 9.1% to 10.0% and core inflation increased by 0.5pp to 4.8% yoy.
Markets showed limited reaction to the release of US December inflation data, which confirmed headline and core inflation unchanged at 2.7% and 2.6% yoy, respectively. US Treasury yields ended the session broadly flat, equities edged lower, and the US dollar was little changed against most major peers. Futures markets continue to price in the first Fed rate cut in June.
Investors ended the week on an upbeat note. Euro area PMIs suggested activity expanded during October (the composite index rose from 51.2 to 52.2), leading to higher sovereign yields and gains in the main equity indices. Cooler-than-expected U.S. inflation reinforced expectations of a Fed interest rate cut and boosted stock markets. The EURUSD held close to 1.16.
Markets ended the week in a mixed mood as investors pondered over the Fed's plans for stimuli withdrawal, risks from China's Evergrande and the announcement that Chinese authorities will ban all transactions and mining related to cryptocurrencies. Global stocks declined or closed flat while the USD rose against most AE and EM currencies.
For the second consecutive day, markets traded without a clear direction. Government yields ended flat on both sides of the Atlantic while stocks mostly fell, with some exceptions in the euro area, amid reports that the Trump administration is considering to curb exports to China made with US software.
Without any significant drivers, markets traded without a clear direction during yesterday’s session, pausing the previous’ days strong risk-on sentiment. Treasury yields edged lower in the US ahead of the Fed’s meeting next week (expected to lower interest rates by 25bp). European government yields fell across the region, keeping peripheral risk premia constant.
Risk aversion continued to set the tone across markets on Thursday, following the imposition of lockdown measures in some big urban areas in China. In the US, new weekly jobless claims and the manufacturing ISM survey surprised positively, which, in turn, exacerbated fears among investors of more aggressive interest rate hikes.