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.
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The global stock rout deepened on Thursday as the sell-off in US Treasuries continued affecting markets across the world. The yield on 10-year US sovereign bonds rose sharply to 1.53%, and the 5-year yield jumped 21 basis points, the second-largest one day increase seen in the past decade, as investors anticipated large stimulus measures.
In yesterday's session, investors traded with an optimistic mood following positive economic sentiment data releases for June in the euro area (EC Economic confidence rose from 114.5 to 117.9) and in the US (Conference Board consumer confidence at 127.3 from 120.0).
Yesterday investors paused their concerns on the evolution of the pandemic and traded with an optimistic mood amid better-than-expected corporate results. Since the start of the earnings season, more than 85% of the S&P 500 companies that have released results have beaten analysts’ expectations.
In yesterday's session, investors' sentiment improved and recovered from Monday’s lows amid upbeat corporate results. Stock indices in the euro area and in the US rose as traders bought the dip (the S&P 500 registered its biggest daily increase since March).
In the first session of the week, investors traded with a risk-off mood amid rising COVID-19 cases and concerns that the Delta variant might delay the economic recovery. Demand for safe haven assets (such as US Treasuries, the Swiss Franc or the Japanese Yen) increased.
Last Friday, investors' sentiment worsened amid rising COVID-19 cases, now more contagious with the Delta variant.
Treasury yields fell as Federal Reserve Chairman Powell testified before Congress that rising inflation is likely to be transitory and that the central bank would continue to support the economy. The Bank of Japan left its 10-year bond yield target unchanged at about 0% after concluding its meeting and also kept the policy-balance rate at -0.1%.
Jerome Powell maintained his view that strong inflation will be temporary and said that the US economy was still far from levels the central bank wanted to see before tapering its monetary support.
Investors turned their attention to the start of second-quarter earnings season and to inflation concerns in the US, after the consumer price index jumped to 5.4% yoy in June (4.5% yoy the core index). This level is the higher seen since 2008 and fuels speculation that the Federal Reserve will begin curbing asset purchases soon.
The S&P 500 Index closed at another record high as investors looked to a highly anticipated second-quarter earnings season, which will start today with Goldman Sachs, JPMorgan Chase & Co. and PepsiCo Inc. European equities hit a record high with investors rotating out of cyclical sectors and into more defensive.
In the last session of the week, investors' sentiment improved and markets ended the day with positive results.
In a volatile session, investors’ sentiment was clouded by disappointing labour data in the US (new jobless claims unexpectedly rose to 373k during the first week of July) and uncertainty about the evolution of the pandemic. In Europe, the ECB confirmed a decision to modify its inflation target to a symmetric 2%.
Investors traded with a positive mood on Wednesday, easing concerns about a rapid withdrawal of monetary accommodation by the major central banks.
Financial markets ended the day with negative results, following the release of disappointing survey sentiment data in both the US (the services ISM fell to 60.1 in June from 64.0 in May) and in Germany (the ZEW sentiment indicator dropped from 79.8 to 63.3). In addition, industrial orders in Germany plummeted in May (-4% m/m).
During a session with low trading volumes (markets were closed in the US), investors recorded modest gains, fuelled by positive sentiment data across Europe (the service PMI was revised up by 0.3 points to 58.3 in June, the highest level since July 2007).
Investors ended the week on a positive note, following the release of solid labour market data in the US: non-farm payrolls rose by 850K in June while the unemployment rate remained broadly stable at 5.9%. As a result, equity indices rose in both sides of the Atlantic, reaching new records in the US.
Concerns over the evolution of the pandemic and, especially, the Delta variant worsened investors' sentiment in the last session of June. In addition, IMF chief economist Gita Gopinath said that the access to vaccines is unequal across countries and is causing a "diverging recovery".
Yesterday, the prevailing mood in the financial markets was calm before the end of Federal Reserve's meeting. Investors expect the central bank to keep the pace of asset purchases unchanged until at least August or September.
Investors traded with optimism as they awaited for clues from the Fed about the tapering of asset purchases.