Strong rebound in sovereign yields especially for the Treasury yields that reached the highest level in two month mainly on the announcement of Donald Trump's tax-cut plan.
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New lockdowns in Europe shook investor sentiment yesterday. Volatility jumped to levels not seen since early June and stock markets tumbled across the world (the main U.S. and European indices dropped by close to 4%). Euro area core sovereign yields declined while peripheral spreads rose, and the EUR weakened below $1.18.
Investor risk appetite was mixed in the last session of the week. Advanced-economy stocks gained but EM equities nudged down, while the USD weakened and commodity prices declined.
In yesterday's session, investors traded with a risk-off mood amid concerns of growing COVID cases around the globe. Powell's speech in Congress in which he stated that the US economy is improving failed to provide much relief to investors, as he also said that there is a long way to go before a full recovery.
Markets traded on a positive mood in yesterday's session. Optimism on the economic recovery sent commodities and advanced-economy stocks higher, and in FX markets the USD eased against the major currencies. Yet, EM equities and currencies were mixed.
Yesterday, investors in the US traded with optimism as the Federal Reserve kept its official interest rates unchanged and reiterated its intention to "act as appropriate to support the economy".
Stock markets advanced in the U.S. and experienced a generalized decline in Europe, while sovereign yields picked up both in the U.S. and the Euro Area.
International stock markets were mixed with stronger declines in Europe and slighter decreases in the U.S., suggesting investors consider the effect of the tax reform is sufficiently priced in.
Equity markets have started the week in a very enthusiastic manner amid optimism that U.S. legislators are on the brink of passing the tax reform.
In the last session of the week, investors continued to digest the Federal Reserve's new inflation approach, in which it will be more tolerant to inflation increases.
Economic indicators favored a greater risk appetite in yesterday's session. China's industrial output rose +5.6% yoy in August while retail sales grew +0.5% and surpassed 2019 levels for the first time since the COVID-19 outbreak. Also, German investor sentiment continued to improve in September according to the ZEW index.
Market risk appetite declined in yesterday's session as investors continued to digest the outcome of the Fed meeting. Stock markets declined across advanced and emerging economies while the safe-haven JPY appreciated.
Stock markets diverged on both sides of the Atlantic as they posted moderate gains in the U.S. (S&P 500 flat, Nasdaq and Dow Jones on positive) but experienced widespread declines in Europe.
In the last session of the week, investors traded with a downbeat tone and stock indices declined across Europe and, following a tech sell-off, in the US. Asian equities, instead, increased mildly.
International markets experienced a surge in risk aversion during the last day of the week, with significant losses in most of developed stock markets and decreases in sovereign bond yields, as the investigation on a potential case of obstruction of justice by President Trump made a big step on Friday.
In yesterday's session, investor sentiment improved on the back of positive corporate earnings releases and the expectation of continuing support from the fiscal and monetary policies.
Developed stock markets registered reasonable gains as the earning season started on a the right foot, especially in the US.
Markets ended the week on a positive note as investors continued to eye negotiations on a new fiscal package in the U.S. Volatility declined and stocks rose across advanced and emerging economies. Commodity prices also benefited from positive sentiment and ended the session higher.
The adoption by the US Senate of a fiscal 2018 budget resolution brought optimism about the chances for tax cuts and supported a small decrease in sovereign yields.
Investors remained cautious during the last day of the week with most of the main developped stock markets relatively stable and small decreases in sovereign yields.