In the first session of the week, investors continued to reassess their expectations on the upcoming easing of the ECB and Fed’s monetary policy stance. The January PMI and ISM data releases showed a stronger-than-expected start of 2024 that decreased further the probabilities of seeing the first rate cut in April and May for both central banks.
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The US Federal Reserve meeting centered the stage in yesterday's session with a 25bp interest rate hike, as expected by the consensus. The description of the economic outlook was very similar to June's, while the president Jerome Powell recognized that the last CPI inflation release surprised them slightly on the positive side.
Financial markets started the week with mixed results. Investors balanced out the risk from the COVID outbreak in Europe with the re-appointment of Jerome Powell as the next Fed president and the nomination of Lael Brainard as the next VP, signaling policy continuity at the helm of the central bank.
In yesterday’s session, markets digested mixed economic data from the US. The ADP monthly employment report showed hiring at private companies grew at the slowest pace since the beginning of the year, a sign the labor market might be cooling. Instead, the sharp rise in the ISM services index from 49.4 to 53.8 pointed to a rebound in the sector.
In the last session of the week, investors focused their attention on the disinflationary pressures in the US, after December PPI unexpectedly declined by 0.1% m/m (-0.1% in the previous month). In this context, yields on sovereign bonds declined on both sides of the Atlantic, particularly so in the short-end of the curve.
In yesterday's session, German bonds extended their decline, with the 10-year bund yield reaching 2.83%, and the euro appreciated against the dollar as the ECB cut interest rates by 25 basis points to 2.5%. President Christine Lagarde did not pre-commit to setting rates in any direction in the upcoming meetings, and warned of the uncertainty surrounding the effects of the trade war and increased defense spending.
The Fed held rates at 3.75%–4.00%, in a 10-2 vote, with Governors Cook and Hammack dissenting in favour of a hike. Markets now fully price in two further hikes in the first half of 2027. Treasuries sold off on the long end, as the 10-year yield rose to 5.02%, while the 2-year edged to 4.70%. In Europe, sovereign bonds were broadly stable and spreads contracted. Elsewhere, the BoC raised rates 25bp to 2.50%, while the RBNZ unexpectedly held rates, leading to sharp fall in the NZ dollar.
The Federal Reserve lowered interest rates by 25bp to 4.25-4.50% and signaled it will slow down the pace of cuts given its upward revision to the inflation forecast for the next two years. The Fed considered that the good health of the labor market and the little progress made on inflation in the recent months gives it room to act more cautiously from now on.
Investors ended the week on a negative note, extending the losses after the change of tone by the Fed during the 15-16 June monetary policy meeting. In stock markets, the S&P 500 edged down by 1.3%, reaching a 4-week low. Future prices and the heavy losses during the Asian session point to further declines on Monday.
Markets were mixed in the first session of the week as investors remained cautious on the outlook of the global economy. In the euro area, sovereign bonds ended flat and the main stock indices edged lower as markets await further details on tariffs from the US. The euro area composite PMI rose to 50.4 this month from 50.2 in February.
In the last session of the week, investors' sentiment kept the upbeat tone seen on Thursday following the decrease in the October US CPI inflation figures. Money markets continued to price a lower monetary policy tightening from the ECB and the Fed than the one implied before the CPI release.
Les perspectives de l’economia espanyola i dels seus sectors d’activitat són positives. Esperem un major ritme de creixement per als sectors lligats a la transició digital, com les TIC i els serveis professionals o sectors en què Espanya despunta per una elevada competitivitat, com el farmacèutic o el turístic.
Yesterday’s Federal Reserve meeting resulted as a nonevent for financial markets as the 25bp rate increase to the 5.00%-5.25% target range was 100% priced in. Also, the removal of an explicit reference in the press release of further interest rate increases in the coming meetings was consistent with the expectation of a pause in the hiking cycle.
The week started with a very quiet session, as there were no macroeconomic data releases and the US financial markets were closed due to the President’s day festivity. All eyes will remain attentive to the release of the Fed and ECB last meeting minutes (Wed. and Thu., respectively) and the flash PMIs for the main advanced economies (Thu.).
In yesterday session, investors traded cautiously amid ECB officials’ comments pointing towards further normalization in the assets' holdings and as they waited for the outcome of the US midterms. Early this morning, the most probable outcome is that Republicans have won the House while Democrats will control the Senate by a small margin.
In the last session of the week, investors weighed concerns on rising COVID cases with another pickup in CPI inflation in the US (headline at 6.8%, highest since 1982, and core at 4.9%). Despite these high figures, the release was broadly in line with the consensus and it did not change investors' expectations for the Fed's first interest rate hike.
Espanya ha experimentat, en els últims anys, un augment sostingut de l’emprenedoria empresarial, que ha assolit el seu nivell més alt des del 2012. No obstant això, la creació d’empreses es continua situant per sota de la mitjana europea i persisteixen importants desafiaments estructurals: una elevada mortalitat prematura de les noves empreses, una forta concentració geogràfica de l’emprenedoria i una escassa orientació cap a sectors d’alt valor afegit. Malgrat aquestes febleses, emergeixen senyals encoratjadors als sectors vinculats a la digitalització i a l’economia 4.0. El gran repte és aprofitar aquest focus de dinamisme per aconseguir que més projectes sobrevisquin, es consolidin i s’orientin cap a sectors més productius, de manera que tot això es tradueixi en un creixement econòmic més sòlid, equilibrat i durador.
Markets closed the week on a mixed note on Friday. Market odds for further interest rate hikes rose, with investors discounting three hikes for the Fed and three to four for the ECB over the next 12 months. The ECB's Lagarde and Vujcic pushed back somewhat against these market expectations, explaining that the bank will look beyond higher energy prices alone when deciding its monetary policy.
In the last session of the week, the mood was disparate in both sides of the Atlantic. In Europe, losses in the main stock markets were moderate and broad-based, while in the U.S., the S&P 500 bounced back from the losses registered on previous days.