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.
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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 and risk aversion continued to set the tone across markets on Wednesday, with investors taking position ahead of a crucial inflation report in the US later today and the kickoff of the Q3 corporate earnings season on Friday.
Tueday saw a mixed session across markets. Fed Chair Powell acknowledged the resilience of the US economy but noted the labor market remains subdued, with limited hiring and firing activity, prompting a decline in short-term Treasury yields. Separately, the NFIB survey showed business confidence softened in September and many owners planned price increases.
Financial markets ended the week with an optimistic tone, on the back of better-than-expected employment creation in the U.S. and advances in trade negotiations between the U.S. and China.
Investor risk appetite soured and global risk assets fell after President Trump threatened a “massive” tariff hike on Chinese exports, citing “hostile” export controls over rare earths. Equity indices declined across the Atlantic, with the tech-focused Nasdaq among the worst performers. Trump’s threats were watered down over the weekend.
Investors closed the week trading cautiously under a volatile setting, still digesting political developments in the UK and signs of lingering inflationary pressures. In Europe, natural gas prices fell notably, following reports that Germany is likely to support a price cap to be included in the next EU package, to be agreed in coming weeks.
Without relevant macro data to trade on, no advances in negotiations to reopen the US government, nor any new developments in France, markets traded cautiously during yesterday's session. Euro area sovereign yields ended mostly flat while US Treasury yields edged lower, and stocks retreated globally. The euro weakened to 1.16 against the dollar.
Investors ended the week with mixed results, with sentiment supported by data showing employment growth in the US slowed down in August, in line with expectations, while the jobless rate rose by 0.2 p. p. to 3.7%. In the eurozone, producer prices (PPI) rose by 37.9% y/y in July, fueling concerns that inflationary pressures are building up.
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.
Markets ended the week on a cautious note, driven by a deterioration in investor sentiment towards the Middle East conflict and a selloff in tech stocks. Brent oil prices rose nearly 5% to close above $88 per barrel, and TTF gas surged towards €60 as the U.S. and Iran stepped up attacks across the Gulf.
During a volatile session, financial markets closed with mixed results, balancing out another upside surprise in HICP inflation data in the eurozone (up by 9.1% y/y in August) with signs that job creation in the US may have moderated in August (according to the ADP survey).
In yesterday’s session, global stock markets advanced as investors increased risk appetite following reports about a Chinese stimulus to support the local stock market, a better-than-expected earnings season in the U.S. so far, and a favorable US PMI reading. Sovereign bond yields edged lower in the euro area and slightly rose in the U.S.
Investors traded in an apparent risk-on mood in yesterday's session, with both stocks and sovereign yields rising across the board. Commodity prices also increased across energy, metals and agriculture products. In FX markets the USD wavered and the EUR traded close to $1.18. Market sentiment benefited from the announcement of a U.S.-Vietnam trade deal.
Investors traded cautiously in the last session of the week and stock indices rose mildly in most euro area trading floors and in the US (where the S&P 500 reached a new record high).
The main stock markets in advanced and emerging economies registered gains, with the exception of the Portuguese PSI and the Shanghai Index.
The last session of the week was marked by the announcement of the Italian 2019's fiscal deficit target (2.4% of GDP), which weighted on most European assets.
Financial markets recorded a positive start of the week, as investors increased the likelihood that the Fed will postpone the decision about when to start tapering its asset purchases.
With investor focus on the tech sector, equity markets moved lower during the session. US stock indices posted modest losses, with tech stocks under pressure as investors continued to digest Q4 earnings results. European indices were weighed by losses in business software companies amid concerns over the potential disruptive impact of AI on their business models.
Markets had a mixed session yesterday. Sovereign yields continued to decline across the U.S. and euro area, while the EUR crawled back above $1.17 and touched a 10-day high. European stock markets were mixed while the U.S.' S&P 500 wavered. This morning Japan's Nikkei rallied on the back of a U.S.-Japan trade deal that would set tariffs on Japan at 15% (incl. cars).