Markets ended the week on a weak note, following the release of disappointing employment data in the U.S. (non-farm payrolls rose by 194k in September after 366k in August). The report, however, showed wage growth picking up (4.6% y/y), which reinforced fears that inflationary pressures are building up across the economy.
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Financial markets started the first session of the week with modest gains, focusing on the release of positive earnings results for Q3 (around 80% of the S&P listed firms have reported better-than-expected results) and bringing the S&P to a new record high. In Washington, Democrats lawmakers stepped closer to a deal on Biden’s fiscal agenda.
In yesterday's session, investors traded with an optimistic mood as they digested the Fed's decision to initiate the tapering of net asset purchases this month and the dovish confirmation that it will keep its policy interest rates unchanged for the foreseeable future.
Financial markets ended the week on a positive note, supported by stronger-than-expected employment data in the US (non-farm payrolls rose by 531k in October while the jobless rate edged down by 0.2 p.p. to 4.6%) and the approval by lawmakers in Washington of the $1.2tn infrastructure spending bill.
Comments by central bankers centered the stage at the start of the week in a session with no relevant economic data releases. In the euro area Christine Lagarde reiterated that a rate hike in 2022 is "very unlikely" even if the current inflation spike might be higher and longer than initially expected.
Markets ended the week with a risk-off sentiment, driven by hawkish commentary by some Fed officials about the potential need to readjust policy to deal with the rebound in inflation. In contrast, ECB president Christine Lagarde reiterated prices will stabilize in the euro area in line with the central bank's target.
Financial markets closed the week with a sell-off session amid concerns of a new coronavirus variant identified in South Africa. The main concerns are the speed at which this variant can spread and whether it will be immune to the vaccines. Volatility rose and demand for safe assets increased.
Financial markets started the week with a risk-on session, as fears about the risk that the spread of the omicron variant could lead to more severe restrictions eased. In addition, China's central bank said it would cut the amount of cash that banks must hold in reserve, releasing 1.2 trillion yuan in long-term liquidity.
Investors traded with a risk-on mode during the first session of the year, extending recent gains while shrugging off a further deterioration in the number of COVID daily infections across the world.
On Tuesday investors traded with a risk-off mood as they took position ahead of the release of key reports for the Q4 earning season this week and the first monetary policy meeting by the Fed on 25-26 January.
Financial markets started the week with a risk-off session, fueled by the escalation in tensions involving Ukraine. The rising geopolitical risk is adding to investors’ concerns about the persistence of inflationary pressures and the prospect of a more aggressive withdrawal of monetary policy stimuli by major central banks.
The military operations of Russia in Ukraine centered the stage in yesterday’s session and investors traded on a risk-off mood. Stock indices declined in the euro area, Asia and Latin America, while US equities rose, as they already declined in the previous session. Russian equities fell by almost 50%.
In yesterday's volatile session, investors remained concerned about the implications the Russian-Ukrainian conflict can have on economic activity and inflation. Nevertheless, rumors that the EU is discussing a plan to increase the joint issuance of bonds benefited risk perception in Europe.
In the last session of the week, investors traded cautiously amid ongoing talks between Russian and Ukrainian authorities, although during the weekend Russia intensified aerial attacks on the western part of Ukraine. This week talks are expected to continue between both countries and officials from China and the US will also hold a meeting.
Investors traded with a risk-off sentiment during a volatile session on Tuesday, weighting in a potential ban on Russian coal exports by the EU and taking on board a new round of hawkish commentary from the Fed. The minutes of the March meeting will be released by the Fed later today.
The manufacturing sector continued to recover steadily in 2021 with activity growing by over 8%, turnover up by 16% and exports by almost 20%. Although expectations were for a gradual recovery in the following months, the outbreak of war in Ukraine has intensified some of the drawbacks already suffered by the sector in 2021: rising commodity and energy prices and supply problems in certain industries.
In yesterday's session, investors traded with mixed optimism as they continued to digest inflation data for the US, which might have peaked in March. On monetary policy, the Bank of Canada hiked rates by 50bp to 1% and said it would allow bonds to roll off as they mature. Today's focus will be on the ECB meeting.
In yesterday's session, investors' sentiment deteriorated amid the expectation of a tighter monetary policy from the Federal Reserve and the ECB and disappointing corporate results. Concerns about the Covid-19 situation in China added to the somber sentiment.
Investors traded under a cautiously optimistic mood on Tuesday, waiting for the outcome of the Federal Reserve meeting to be announced today. Consensus expectations look for a 50 bp hike in the policy rate as well as details of the plan to reduce the central bank’s balance sheet.
In line with expectations, the Federal Reserve raised its policy rate by 50 bp to the 0.75-1.00% range and confirmed a plan to reduce the size of its balance sheet (with a monthly cap of $95 billion). The Fed chair Powell noted that the recovery could withstand tighter monetary policy but also ruled out more aggressive rate hikes of 75 bp.