The risk-on mood triggered by trade negotiations continued to support markets but lost some steam in yesterday's session. Sovereign yields rose on the back of a hawkish reading of the ECB's meeting, while euro area and U.S. stocks posted moderate gains with a mixed sectorial performance (European banks rallied on favorable earnings and higher rates).
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Markets ended the week with a mixed session. Optimism over trade deals continued to support U.S. equity markets, sending the S&P 500 and the Nasdaq to new record highs, while euro area stocks ended mostly lower as investors traded cautiously awaiting news of a trade deal. Sovereign yields were little changed after the ECB meeting and Trump's visit to the Fed.
Initial optimism over the EU-U.S. trade deal, which had boosted European stocks early in the trading session, soon faded and the region's main indices closed lower with losses led by German stocks (-1%). U.S. stocks had a choppy session and ended mostly flat, while large-cap tech stocks edged higher. The euro slipped to just below $1.16, its lowest in over a month
Euro area investor sentiment recovered following the EU-US trade deal, sending stocks higher across the region. In the US, investors traded in a risk-off mood on news that, after two days of negotiations in Stockholm, Chinese and US officials failed to deliver a trade deal and agreed only to seek an extension of the 90-day tariff truce. Stocks fell, and Treasuries rallied.
The Federal Reserve held the federal funds rate at 4,25%-4,50%, citing solid labor market conditions and above-target inflation. Financial markets made a hawkish reading of the Fed's accompanying statement and pushed back expectations of the next cut from September to October. The probability of a second cut in December dropped from 80% to 40%.
Investors ended August with a mixed session as markets remained focused primarily on inflation data and monetary policy expectations.
Markets had a muted reaction to a U.S. federal appeals court which ruled 7–4 that tariffs imposed under the IEEPA exceed congressional authority, affecting general bilateral tariffs but not sector-specific ones. The tariffs remain in place until October 14 while parties may seek Supreme Court review.
Renewed fears about inflation and fiscal discipline prompted a broad sovereign bond sell-off. The Japanese 20-year bond yield reached levels not seen since 1999, the 30-year UK yield touched highs from 1998, and the yields on the 30-year US Treasury came close to 5%. Risk-off sentiment spread to global stock markets which pared losses during the session.
Dovish remarks from Fed Governor Chris Waller and a JOLTS job report that showed US job openings fell in July to the lowest in 10 months, reniforced market expectations of a Fed rate cut in its September meeting. US Treasruy yields fell and stocks advanced, while the dollar edged lower.
Data released yesterday, which continued to point to a cooling US labor market, including higher-than-expected unemployment benefit claims and slower private job creation, reinforced expectations of a Fed cut later this month. Dovish remarks from NY Fed President Williams, who sees gradual rate cuts, further supported this narrative.
Risk-off sentiment drove markets after a weaker-than-expected U.S. labor market report (nonfarm payrolls +22k in August, and June-July revised down to a cumulative +66k [prior: +87k]). Advanced-economy stock markets declined and sovereign yields dropped amid stronger market expectations over Fed cuts. The euro strengthened above $1.17 and gold rose.
Global stocks rebounded and sovereign yields continued to decline as investors cemented their expectations for rate cuts ahead of the Fed's next week meeting. The USD weakened moderately across other major currencies and gold prices continued to surge.
Investors seemingly recovered some appetite for risk in yesterday's session. Stock markets rose moderately across advanced economies and sovereign yields increased both in the U.S. and Europe. The euro reversed Monday's gains and fluctuated close to $1.17 while commodity prices were mixed.
U.S. equity markets reached new highs, led by technology, as sovereign yields declined after producer prices fell more than expected in August (-0.1% m/m), driven by lower services prices. The data reinforced market expectations of a Fed rate cut next week. In Europe, major indices closed mixed, with the notable gains in the IBEX-35 and the defense sector.
Markets were mixed in yesterday's session. Global stock markets advanced and U.S. sovereign yields nudged down as the U.S. CPI report did not depress investor expectations about Fed cuts. In Europe, the euro strengthened on the back of a hawkish reading of the ECB's meeting, German sovereign yields nudged up but peripheral spreads ticked down.
Investors ended the week with a mixed session. Euro area sovereign yields continued to rise on the back of a hawkish reading of the ECB's tone, while US yields had only modest gains following sessions with sharp declines ahead of the Fed's meeting. The euro-dollar cross remained at 1.17 and stocks were mostly flat on both sides of the Atlantic.
Positive session for stock markets in the U.S. and the euro area, with declines in sovereign bond yields on both sides of the Atlantic, as investors await the Federal Reserve’s decision on Wednesday. The euro appreciated slightly against the dollar, rising to 1.176.
Investors traded cautiously during yesterday's session ahead of the FOMC meeting today, in which the Fed is expected to lower interest rates by 25bp (see our take here). US Treasury yields edged down, euro area sovereign yields were flat, and stocks fell on both sides of the Atlantic. The euro rose against the dollar to its highest in 4 years, close to 1.187.
Markets had a choppy session on the day of the FOMC's meeting. US Treasury yields initially fell, stocks gained and the dollar fell on the announcement of the widely expected 25bp rate cut. But all later reversed course as investors digested a disperse dot plot which signaled a large group of the FOMC still remains hawkish. Treasury yields rose and stocks ended mostly flat.
Global stocks advanced, with the S&P 500 and Nasdaq hitting new record highs, while sovereign bond yields rose on both sides of the Atlantic.