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Investors flew to safe-haven assets in the first session of the week as they reacted to the weekend's drone strike on Saudi Arabia's oil production facilities.

On Tuesday, the better-than-expected release of February PMIs fueled an increase in investors’ expectations for the path of official interest rates, which, in turn, pushed sovereign bond yields up in the euro area and in the US.

Thursday's trading was driven by two US data points: September inflation, which came in slightly higher than expected, and weekly jobless claims, which came in higher than expected, indicating some weakness in the labour market. The debate on the Fed's next move was further fueled by Fed's Barkin words saying it was too soon to declare victory over inflation.

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.

Stock markets rebounded at the start of the week, as investors digested a new batch of mixed economic indicators and took advantage of attractive valuations, following the sharp decline in stock indices in recent weeks. Sovereign bond yields ticked down in the US and continued to edge higher across Europe.

Investors started the week with fresh optimism as the EU and the UK are set to continue negotiating to reach a deal before the transition period ends by December 31st.

Precaution and volatility continued to set the tone across financial markets on Thursday. Eurozone HICP inflation surprised on the upside (headline: 8.5% y/y in February after 8.6%; core: 5.6% after 5.3%) while, in the US, data showed unit labour cost accelerated in Q4 and new weekly jobless claims fell further last week.

Economic data releases on Friday boosted investors' sentiment and allowed sovereign yields to edge down and equities to advance. Price pressures continue to moderate but remain elevated, according to the ISM prices paid index in the US (which fell from 67.8 to 65.6) and the PPI in the euro area (which declined from 24.5% to 15.0% y/y).

In the last session of the week, global stocks remained near record highs lifted by the ongoing economic recovery from the pandemic and injections of fiscal and monetary policy stimulus.

Risk-off sentiment continued to dominate financial markets as tensions mounted in the Middle East. Oil prices rose 5%, with the Brent reference closing around $77/barrel, and the dollar strengthened.

Risk-off session in financial markets as the conflict in the Middle East intensified with an Iranian missile attack on Israel. Global stocks closed the session with losses of around 1%, while sovereign bonds, the US dollar and gold all rose as investors turned to safe assets. Brent oil prices rose by more than 2% close to $74/barrel.

Lower-than-expected inflation data on both sides of the Atlantic drove financial markets' sentiment. Preliminary figures from Spain and France showed headline inflation below 2%, at 1.5% and 1.2% respectively. In the US, the PCE price index fell to 2.2% from 2.5%, making solid progress towards the Fed's target.

On Friday, the release of HICP inflation data in the euro area centered the stage in financial markets. Headline inflation fell sharply from 8.5% to 6.9% y/y in March, but core inflation ticked up to 7.5% in a sign that price pressures are persisting. In this context, ECB member Villeroy de Galhau said there are still some more rate hikes to do.

Risk aversion continued to set the tone across financial markets on Tuesday as investors took position ahead of the Federal Reserve’s policy meeting today, with money markets pricing another 75 bp hike in the policy rate.

Stronger-than-expected retail sales and industrial production data in the US renewed expectations of a soft-landing for the economy, just as the Fed is expected to lower interest rates today. Rate futures are reflecting a 65% probability of a 50 bp rate cut and a total of -116 bp over the remaining three meetings this year.

Financial markets' sentiment improved in the first session of the week. Investors perceived that monetary and financial authorities are going to act in order to offset the negative impact that coronavirus can have on the economy.

During a volatile session, markets erased some of the early gains after comments by Fed VP Richard Clarida noting that the central bank could start discussing in upcoming meetings adjusting the pace of asset purchases (tapering). In addition, house prices in the U.S. continued to accelerate while consumer confidence stalled.

In yesterday's session, investors' concerns about the pace of economic activity in the coming months led to a generalized risk-off sentiment. In particular, the US manufacturing ISM declined from 47.7 to 46.3 while the prices paid subcomponent fell too (from 51.1 to 49.2).

In yesterday’s session, the US Federal Reserve meeting centered the stage. It raised official interest rates by 50bp up the 4.25%-4.50% target range, a slowdown in the pace of monetary policy tightening, but still a large move by historical standards. Jerome Powell signaled that ongoing interest rate hikes will be necessary to return price stability.