Evolution of the international financial markets and evaluation of the main events and economic indicators of the previous day session. Available in English.
Financial markets started the week in a cautious tone. Tensions in euro area sovereign bond markets remained in focus, even though the French spread narrowed, as peripherals were flat. Sovereign curves steepened on both sides of the Atlantic as short-term references fell, while long-term ones rose. The euro weakened against its main peers.
A soft US September jobs report, with payroll growth below expectations (29k vs 90k expected) but not weak enough to trigger growth concerns, alongside mixed Factory and Capital Goods orders data, prompted a modest upward reassessment of Fed rate expectations. Markets now price a hike in December and at least two more thereafter. Treasury yields rose.
Thursday's session carried a sharply divergent tone between the two sides of the Atlantic. France's risk premium reached 140 bps as investors intensified their fiscal concerns and continued to lead a widening in sovereign spreads, with yields on German Bunds dropping amid safe-haven flows. European stocks fell markedly, with France leading losses.
Wednesday's session carried a cautious tone. U.S. stocks were mixed and European equities fell broadly, while crude oil edged higher and TTF natural gas surged sharply, reversing recent declines. In FX markets, the dollar strengthened moderately, weighing on the euro.
Investors traded cautiously in Tuesday's session. Equities posted losses across the U.S. and Europe, and sovereign yields were volatile even as energy prices declined. The U.S. 30-year Treasury yield surged to levels not seen since the early 2000s, despite finding a partial reprieve after NY Fed President John Williams signaled no urgency to deliver the next rate hike.
Monday's session exhibited a risk-off tone after U.S. President Trump rejected Iran's proposal to reopen the Strait of Hormuz. Brent oil and TTF gas closed higher, and stocks declined across the board, with U.S. equities underperforming Europe (the former was dragged down by its IT overweight, while the latter was cushioned by its energy-heavy composition).
Markets ended the week on a constructive tone, with news of diplomatic negotiations in the U.S.-Iran conflict driving oil and gas prices lower and feeding into risk-on sentiment. Stocks rallied on both sides of the Atlantic, led by gains in the technology, financial, and consumer sectors. Early this morning, however, the pattern reversed.
Markets were mixed on Thursday, after a combination of higher energy prices following Saudi Arabia's interception of Houthi ballistic missiles targeting its energy infrastructure and a raft of hawkish comments from ECB and Fed officials (with ECB's Schnabel pointing to spreading price pressures) pushed up inflation expectations and policy rate odds.
Wednesday saw a risk-off session in financial markets, as stronger-than-expected September PMIs, hawkish ECB and Fed comments, and higher Brent prices prompted an upward repricing of inflation expectations and policy rates, with markets pricing more than four ECB hikes and almost four Fed hikes over the next 12 months.
Financial markets had a mixed session on Tuesday. Brent prices declined after Saudi Arabia moved to restart its East-West pipeline, while Trump reported some diplomatic progress with Iranian representatives.
Financial markets started the week on a positive note, as hopes of a diplomatic resolution to the war in Iran caused energy prices to fall, pushing inflation expectations lower on both sides of the Atlantic. This also eased central banks' rate hike expectations, although investors still price in three rate hikes by both the ECB and the Fed over the next 12 months.
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.