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In the last session of the week, a mixed US labor market report left investors trading cautiously. While the pace of job creation eased to the lowest reading in 30 months in June (209k) and the previous two months were revised lower, wage increases remained elevated (4.4% y/y) and the unemployment rate ticked down to 3.6%.

Risk appetite extended across markets on Thursday, as fears about inflation and monetary tightening eased following soft labour data in the US (weekly jobless claims rose to the highest level since January). Meanwhile, news reported that China’s government is considering more fiscal support by raising by $220bn the issuance of special bonds.

Another employment report in the US reaffirming the tightness in the labor market moved financial markets' expectations for the Federal Reserve's first interest rate cut. As of today, a 25bp cut in June has an implied probability of 51%, compared with the 74% of Thursday's close. In the euro area, a June rate cut remains almost fully priced-in. 

Investors traded cautiously during yesterday’s session as they digested a mixed bag of economic data releases. Euro area March inflation cooled to 2.4% y/y from 2.6%, slightly below consensus. In the US, the ISM services index surprised to the downside by falling to 51.4, down from 52.6 in February, while the ADP employment report surprised to the upside.

Financial markets reversed part of the large movements from the previous session following the US January CPI report. Sovereign bond yields fell on both sides of the Atlantic, while equity markets recovered most notably in the US.  The VIX volatility index fell below 15 once again.

Investors continued digesting this week’s data releases in the US, including the CPI report, retail sales, and new data showing industrial production stalled in April after growing 0.1% in March. In the euro area, remarks from ECB officials including De Guindos, Centeno and De Cos, all pointed to June for an interest rate cut but asserted caution thereafter.

Risk-off mode took over financial markets on Friday, as the US employment report showed a cooling labour market. Hiring in the US is slowing down, but not falling off a cliff, so implicit interest money market rates are still discounting a 25 b.p. cut from the Fed at its September meeting.

Risk appetite extended across markets during the last session of the week, boosted by signs that inflation in the US may have peaked while consumer spending remained strong at the start of Q2, according to the April’s PCE report.

Markets had an intense risk-off session following weaker-than-expected manufacturing data in the US, and as investors position themselves for the US jobs report on Friday, which could determine the Fed's next move. In particular, the ISM index for July came in at 47.2, slighlty higher than last month's, but still in contractionary territory.

Investors ended the week focused on the US employment report for June, which signaled the labor market is cooling as job creation slowed and the unemployment rate ticked up from 4.0% to 4.1%. This boosted expectations for two rate cuts this year, which sent Treasury yields lower and stocks higher, with the Nasdaq and S&P 500 hitting new record highs.

US January CPI report surprised markets by showing an increase in prices of 3.1% y/y vs 3.0% expected, down from 3.4% last month, with core inflation unchanged at 3.9%. The news shook markets, sending global government bond yields higher and equity markets sharply lower, while pushing back the expectation of the Fed’s first cut from May to June.

Investors started the week with a risk-on mood, with sentiment supported by easing COVID restrictions in China, including reports that Chinese regulators are relaxing some rules against some tech giants. Data also showed the decline in the Chinese services sector eased in May (the services PMI rose from 36.2 to 41.4).

Market sentiment was dampened by weak investor confidence data in Germany (ZEW index dropped to 7.4 from 13.1 in the previous month), where also Chancellor Scholtz announced elections will be held in February after the ruling coalition collapsed last week. Sentiment was further dampened by caution ahead of today's inflation report in the US.

Financial markets experienced a risk-on session on Friday as the US employment report for September came in better than expected, shrugging off geopolitical concerns. The strength of the labour market underlined the dynamism of the economy and eased pressure on the Fed to cut interest rates more aggressively to support the economy.

Financial markets traded without a clear direction ahead of the US CPI report expected today. In the US, assets had a choppy trading session, as early optimism driven by unexpectedly low US wholesale inflation in December (PPI +0.2% mom vs. +0.4% expected) was muted later on. In this context, US sovereign bonds and equities closed the session flat.

Financial markets had a mixed session on Wednesday. As investors awaited today's ECB meeting, the biggest macro driver yesterday was the US CPI report for August, which showed that prices rose in line with expectations (0.2% MoM), but core inflation showed some stickiness (0.3% MoM) due to higher than expected costs for housing and other services.

Financial markets had a mixed session yesterday, although the overall mood among investors remained gloomy as they await today's U.S. inflation report for August, which is expected to show easing price pressures. Government bond yields fell across the board on both sides of the Atlantic.

In the last session of the week, investors traded with a risk-on mood as their economic optimism outweighed concerns of a tighter monetary policy stance by the US Federal Reserve. The release of January employment report in the US showed that its labor market remains tight, with 353k more payrolls and the unemployment rate still at 3.7%.

Risk aversion returned to the fore during a volatile session on Tuesday, as investors reassessed the risk of a global recession amid ongoing disruptions in gas supply in Europe and reports of new COVID cases in some regions in China.

Investors started the week with mixed results, taking on board hawkish commentaries by some ECB officials and news reporting that the US government may announce a decision to lift certain tariffs on Chinese imports.