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In the last session of the week, the awaited release of the September US employment report changed investors’ expectations of the path of interest ahead. Non-farm payrolls increased by a 336k, notably above expectations, and the two previous months were revised by 119k higher. The unemployment rate remained unchanged at 3.8%.

In the last session of the week, investors continued to digest the patient approach for the monetary policy ahead expressed by ECB and US Federal Reserve officials. For example, San Francisco Fed President Mary C. Daly said that the Fed could take its time to do things right, signaling that no further rate hikes are in sight for the moment.

In yesterday’s session, investors focused their attention to macroeconomic data releases. In the UK, inflation decreased by more than expected in November, from 4.6% to 3.9% the headline index and from 5.7% to 5.1% the core, reinforcing the idea that the BoE might start cutting rates in the first half of 2024.

Investors are starting the year cautiously as risk appetite seems to have eased over the holidays. As central bank officials tried to push market expectations of imminent rate cuts, although these expectations remain anchored in March for the Fed and April for the ECB, government bond yields rose across the board, particularly in the euro area.

Stock markets edged higher and sovereign bond yields fell modestly in the US and the euro area as investors slightly increased their risk apetite ahead central bank decisions from the ECB and the BOJ, US 4Q GDP and PCE deflator later this week, as well as further earings reports in the US market.

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%.

The hawkish rhetoric from central bank officials was the main driver in yesterday's session, which saw sovereign yields on the rise in the euro area and in the US. In the ECB, Pierre Wunsch said that interest rates might remain at restrictive levels for longer than previously anticipated considering the labor market strength and increasing wages.

In yesterday’s session, a mixed release of February’s flash PMIs and a patient tone on inflation from the ECB, according to the last meeting minutes, were the main drivers in financial markets. Sovereign yields edged down in the euro area while increasing in the short end of the US treasury curve. Stock indices managed to advance across the board.

In the first session of the week investors traded cautiously as they wait for new messages coming from central bank officials on the interest rate path ahead. In particular, all eyes are on the ECB Governing Council meeting on Thursday, where the ECB is expected to keep rates unchanged and reiterate the data dependency approach for 1H2024.

Central bank communication preparing the ground to start easing the monetary policy stance soon was the main driver in yesterday’s session. In the euro area, the ECB kept interest rates unchanged and reinforced the data dependency approach, assuring that there is still some more progress to be done in domestic inflation.

In the last session of the week investors digested the US February jobs report, which gave mixed signs about the conditions of the labor market. In particular, the unemployment rate rose from 3.7% to 3.9%, while 275k new jobs were created, as opposed to the 200k expected. Treasury yields ended mostly flat and US equities fell following a strong rally.

Markets kicked off the week with a tranquil session ahead of a week full of central bank meetings, starting with the Bank of Japan today, and continuing with the Fed and the BoE later on. In this context, sovereign bond yields slightly rose across the board, while equities advanced modestly in the US led by tech stocks, and were mixed in the euro area.

Economic activity data and central bank decisions centered the stage in yesterday’s session. On the one hand, the Bank of England kept interest rates unchanged and hinted that the next move could be a rate cut, as there have been “further encouraging signs that inflation is coming down”. The Swiss National Bank cut rates by 25bp to 1.50%.

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. 

In the first session of week, investors traded with an optimistic tone following the release of better-than-expected economic data in the euro area. In particular, the 2.1% m/m increase in Germany's industrial production in February hinted that one of the laggards in economic growth in the region for the past quarters might have bottomed out.

In yesterday’s session financial markets traded on the diverging outlook between the Federal Reserve and the ECB. Fed officials highlighted that inflation seems to have gotten stuck in the US and so they are in no rush to cut rates, while ECB members all pointed to June as the month they are looking at to lower interest rates.

Investors started the week trading cautiously as they await for key economic data releases (such as the Q1 GDP figures for the US on Thursday or today’s April flash PMIs) and for the corporate profits of 180 S&P500 companies, which represent about 40% of the index market capitalization (including five of the “Magnificent Seven”).

Investors’ risk appetite increased yesterday after US CPI data for May showed encouraging results in the disinflation process. Government bond yields fell sharply on the news on both sides of the Atlantic, although the gains were somewhat reversed later in the day as the Fed held rates steady and reduced its forecast for rate cuts in 2024 from 3 to 1.

Another session of mixed results across markets on Wednesday. Sovereign bond yields remained rather flat amid low trading volumes on both sides of the Atlantic. In the eurozone, all eyes were set on today’s ECB meeting, where the bank is expected to leave interest rates unchanged. In the US, Fed officials said they are “closer” to cutting interest rates.