Investors traded cautiously in yesterday's session. The IMF updated its global economic forecasts – raising world GDP growth in 2021 to 5.5% but lowering the euro area's 2021 projections to 4.2% (-1.0pp). Spain's 2021 GDP growth forecast was lowered to 5.9% (-1.3pp).
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Markets suffered a risk-off session yesterday. Volatility jumped to levels not seen since autumn and stocks sold off across advanced and emerging economies, while the USD strengthened and commodity prices declined.
Investors traded in a risk-on mood yesterday amid better-than-expected GDP data in the eurozone (-0.7% qoq in Q4) and a continuation of stimulus negotiations in the US.
Investors traded with optimism during yesterday's session. In Europe, the upward revision of the German Q4 GDP (from +0.1% qoq to +0.3%), supported by exports and construction, led to a rise of 0.5% in Eurostoxx50. European sovereign yields also rose and peripheral spreads widened slightly.
In yesterday's session, investors extended the sell-off of equity and most stock indices across advanced economies registered losses. Jerome Powell reiterated in a speech that the Fed is committed with its objectives and that it will keep easy credit conditions even when economic conditions improve.
Markets traded in a risk-on mood as investors signaled greater optimism about the economic recovery and lower concerns over inflation risks in yesterday's session. Volatility declined, stocks rose across advanced and emerging economies and tech-equities resumed their rally. Commodity prices also gained amid greater risk appetite.
In yesterday's session investors traded with a less optimistic tone amid rising global COVID-19 cases and new lockdown measures in Germany. Additionally, Fed President Jerome Powell played down concerns of an overheating US economy as he said that the increase in inflation "will be neither particularly large nor persistent".
Markets ended the week with a risk-on session on Friday. Stocks rose across advanced and emerging markets, sovereign yield curves steepened and commodity prices advanced, while in FX markets the USD was roughly flat against major currencies.
Yesterday, markets traded more cautiously as investors eyed the Easter holidays. Stock markets were mixed, declining moderately in most regions while U.S. benchmarks closed slightly higher on the back of tech shares.
Investors continued to trade in a low volatility environment as comments from policy makers reiterated their intention to support economic growth. In particular, Janet Yellen, US Treasury Secretary, urged the main economies to adopt an expansionary fiscal stance to secure a robust recovery.
Markets started the week in a cautious mood as investors pondered over pandemic dynamics and the economic outlook. Stock markets declined moderately across most advanced and emerging economies while commodities were mixed and FX markets were little changed.
Global stock markets advanced across the board in yesterday's session. U.S. stocks reached new record highs on the back of robust retail sales data (+9.8% mom in March), but gains were more modest elsewhere.
Investors closed the week with an optimistic tone. Positive corporate earnings releases and Q1 activity data in China (GDP rose by 0.6% qoq and 18.3% yoy, due to base effects) contributed to the improvement in sentiment.
Investors traded in a more cautious way in yesterday's session. U.S. and euro area sovereign yields nudged up on the back of a surge in U.S. consumer confidence (the Conference Board's index rose to 121.7 points in April, its highest level since February 2020), while global stock markets were mixed.
Markets ended yesterday's session with no major movements. Risk assets gained, with commodity prices and most stock markets advancing moderately, but U.S. equities nudged down as investors eyed Biden's presentation of the $1.8trn American Families Plan – to be financed with higher taxes on the wealthy.
Volatility rose and stocks sold off as investors focused on the outlook for supply shortages and inflation. Stock market losses were widespread across sectors and countries while commodity prices advanced, the USD weakened, and U.S. sovereign yields nudged up.
Yesterday, volatility rose amid investor inflation worries. U.S. CPI inflation jumped in April to +4.2% yoy (headline index, +1.6pp) and 3.0% (core index, +1.4pp). Fed Vice Chair Richard Clarida reiterated the central bank's view that the inflation rebound is largely transitory as it is mostly driven by base effects and short-term supply bottlenecks.
Rising COVID-19 cases in some regions and inflation concerns, particularly in the US, were yesterday's main drivers in financial markets. Fed Governor Richard Clarida, though, eased fears of an early monetary policy tightening as he said that April's disappointing employment report showed that further substantial progress has not been made yet.
The Fed held its benchmark short-term interest rate and said it will continue to buy $80 billion in Treasury securities and $40 billion in mortgage-backed securities each month. Policymakers now see the first rate increase coming in 2023 instead of 2024.
Investors are now debating when the Fed is likely to start trimming its monthly bond purchases, while the Bank of Japan announced it will unveil a new tool to support efforts to address climate change.