Evolution of the international financial markets and evaluation of the main events and economic indicators of the previous day session. Available in English.
A renewed surge in energy prices, which sent Brent crude oil above $100 and TTF natural gas close to €80, set a risk-off tone across markets. Inflation expectations rose, as did expectations of central bank tightening, with markets pricing around 85 bps of ECB tightening over the next 12 months (starting with 25 bps today), and almost 70 bps for the Fed.
A risk-off mood prevailed across financial markets on Tuesday, as energy prices rose, with Brent crude oil nearing $100 and TTF natural gas climbing above €75. Market-based inflation expectations increased, particularly in the US, as did expectations for higher interest rates, with a Fed hike next week priced at a 60% probability.
The week started with US markets closed for Labour Day. Elsewhere, energy prices edged higher, lifting eurozone market-based inflation expectations as well as ECB rate expectations. A hike at Thursday's meeting is priced by investors as almost certain, as well as two additional increases discounted over the next twelve months.
Markets closed on a mixed note on Friday, as a blowout US employment report showed job creation well above expectations in August (162,000 vs. 55,000 expected), alongside an upward revision to July's figures. Hawkish comments from the Fed's Hammack also pushed up market expectations for a Fed rate hike, with a September move priced in again.
Thursday's session shifted toward a risk-on tone, supported by dovish remarks from Fed Governor Christopher Waller, who signaled openness to holding rates steady. Markets pared bets on a September Fed rate hike (to 50%), lifting equities and bonds on both sides of the Atlantic while weighing on the dollar.
Wednesday's session had a more mixed tone compared to Tuesday's broad selloff, with U.S. equities staging a partial recovery. European equities, however, remained under pressure, weighed down by higher sovereign yields. In FX markets, the yen strengthened against the dollar amid hawkish BoJ speak, while the euro remained roughly stable.
Tuesday's session opened September on a risk-off note. The re-escalation of U.S.-Iran tensions continued to fuel a rally in oil and gas prices, adding pressure to market-based inflation expectations and reinforcing market-implied probabilities of Fed and ECB rate hikes.
Renewed U.S.-Iran strikes weighed on investor sentiment and led to a volatile session. Energy prices rose, with Brent oil and TTF gas around $90 and €70, respectively. Stock markets declined across the board and the USD weakened against a basket of major currencies, with the euro strengthening moderately above $1.16.
Markets saw high commodity prices and elevated sovereign yields throughout August, driven by the ongoing conflict in the Middle East, pressure on inflation expectations, and hawkish central bank rhetoric. Yet stocks trended higher on the back of a solid earnings season, while the USD weakened against the main currencies.
Risk appetite improved on Thursday amid supportive macro data and lower energy prices, as war tensions around Hormuz did not escalate. Eurozone sovereign yields fell, with steeper curves and tighter peripheral spreads, after GDP growth surprised to the upside across the euro area and its main economies. ECB expectations were little changed ahead of today’s June CPI print, though markets pared odds of a third rate hike.
Thursday was dominated by a hawkish-hold FOMC, ongoing AI-capex concerns, and a sharp re-escalation of the US-Iran war.
Markets weighed lower geopolitical risk and falling energy prices against growing concerns over AI-capex returns. Brent oil fell to $84/barrel, lowering inflation expectations (especially in the short-term) and sovereign yields on both sides of the Atlantic.
Risk appetite surged on Monday as US strikes on Iran remained paused for a second consecutive night. Energy prices declined sharply, with Brent dropping below $90 per barrel. This lowered inflation expectations, with euro area 1Y inflation swaps falling by around 0.2 p.p. to 2.4%. Sovereign yields also declined across the board, particularly in the euro area.
