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Global markets started the week with a mixed session. In Europe, stocks rose across the board and sovereign yields advanced as investors eyed negotiations over the EU stimulus plan ahead of the European Council.

A week-long losing streak in global stock markets ceased on Friday as better than expected earnings results outweighed a worsening of coronavirus cases in the US and Europe. In Europe, the Eurostoxx50 ended the session 1.7% higher despite new coronavirus retrictions in some cities, while the S&P 500 edged up very slightly.

In yesterday’s session investors traded cautiously as they awaited today’s release of September US employment report, which should give further signs for the future path of interest rates. Weekly US unemployment claims, released yesterday, ticked up modestly as expected and set the stage for today’s data.

In another session without major macroeconomic references, monetary policy took center stage. The Riksbank decided to reduce its official interest rate by 25 bp to 3.75%, the first cut since 2016, and ECB and Fed officials commented on their respective economic and monetary policy outlooks.

In yesterday’s session, investors paid attention to economic data in the US pointing to a further cool down in the labor market and to the BoE monetary policy meeting, where interest rates were kept unchanged at 5.25%, as expected.

Trading in global markets was subdued on Tuesday as US markets were closed due to a domestic holiday and there was little in the way of data releases to guide investors. The most notable of these was German exports, which fell -0.1% m/m in May, missing analysts’ expectations of a 0.3% rise.

In yesterday's session, investors traded with optimism as they weighed the details on the phase-one trade deal with the weaker-than-expected business sentiment data in advanced economies.

In yesterday’s session investors traded cautiously ahead of tomorrow’s release of US April inflation data, which will be key for the Federal Reserve’s policy decisions. In this context, sovereign bond yields were mostly unchanged on both sides of the Atlantic, while equities were flat in the US and modestly lower in the euro area.

Investors continued to trade with a risk-on mood on Thursday, lifting demand for “buying the dip” and after the release of positive economic data (e.g. the decline in weekly jobless claims in the US).

US November CPI report came mostly in line with expectations: prices grew 0.1% MoM (vs. 0.0% expected) and 3.1% YoY (as expected) down from 3.2% in October, reinforcing the view the Fed will leave rates unchanged at its meeting today. The lack of surprises left markets rather muted, with treasury yields flat and stock indices slightly advancing.

Investors continued digesting this week’s data releases in the US, including the CPI report, retail sales, and new data showing industrial production stalled in April after growing 0.1% in March. In the euro area, remarks from ECB officials including De Guindos, Centeno and De Cos, all pointed to June for an interest rate cut but asserted caution thereafter.

Investors started the week trading cautiously in a session without major economic events. Central bank officials’ comments, then, took center stage with different FOMC members insisting that the latest inflation readings have not given them enough confidence to start cutting rates at this stage.

Concerns about the spread and the economic impact of the coronavirus rattled markets for a second day in a row (following a rapid increase in cases in countries other than China).

Investor sentiment was mixed on Thursday. In the eurozone, political uncertainty following the upcoming snap elections in France, with Moody’s even issuing a credit rating warning on the country, weighed on equities, with French banks suffering the most.

Markets took a pause after last week’s rally which brought the main stock indices to post their best monthly advance in years, and sovereign bond yields their largest monthly cuts in two years. Investors have now turned cautious ahead of this week’s US employment data while still pricing in the likelihood of interest rate cuts as soon as March 2024.

Eurozone investors closed last week by reducing their risk exposure as the chances of a new French parliament willing to increase the country's budget deficit increased. This pushed eurozone government bond yields lower, although spreads widened, particularly on French bonds. Equity indices also fell across the board.

In the last session of the week, investors weighed better-than-expected economic data releases in the US with a hawkish tone from Federal Reserve officials. In particular, Christopher Waller and Thomas Barkin highlighted that inflation remains too high and stubbornly persistent, which might prompt a 25bp rate hike at the July meeting.

The week started on a mixed note for financial markets. Eurozone government bond yields rose across the board, with peripheral spreads narrowing in stark contrast to French spreads, which widened again. However, equity performance was more mixed across the region, with French indices rising on comments from Le Pen’s party on their respect for institutions.

Yesterday’s session was dominated by the ECB’s 25bp hike, which brought the deposit facility rate to 3.5%, and by a hawkish tone from President Lagarde. She strongly hinted at a further 25bps hike in July, stating that the bank still had some ground to cover and was not considering a pause.