Search results

Central bank communication remained at the center stage yesterday, as Fed and ECB officials reiterated that monetary policy would need to be restrictive for a while. In the eurozone, GC member Klaas Knot, said the ECB should only decrease the pace of rate hikes once it sees underlying inflation abating, pointing to a 50bp hike in May.

In yesterday’s session, investors traded cautiously, closing with mixed results in the US and in Europe. The lower-than-expected HICP inflation print in Germany (9.2% in January from 9.6%) pushed down yields on sovereign bonds in the euro area (despite the hawkish tone from some ECB officials) and allowed stock indices to increase.

Investors continued to err on the side of caution during a volatile session marked by the release of US CPI inflation for January. The report showed headline CPI rose by 0.5% m/m (+0,1% in December), while the year-on-year rate eased only mildly (6.4% after 6.5% in December), above expectations (6.2% according to Bloomberg).

On Tuesday, the better-than-expected release of February PMIs fueled an increase in investors’ expectations for the path of official interest rates, which, in turn, pushed sovereign bond yields up in the euro area and in the US.

Stock markets rebounded at the start of the week, as investors digested a new batch of mixed economic indicators and took advantage of attractive valuations, following the sharp decline in stock indices in recent weeks. Sovereign bond yields ticked down in the US and continued to edge higher across Europe.

Precaution and volatility continued to set the tone across financial markets on Thursday. Eurozone HICP inflation surprised on the upside (headline: 8.5% y/y in February after 8.6%; core: 5.6% after 5.3%) while, in the US, data showed unit labour cost accelerated in Q4 and new weekly jobless claims fell further last week.

Economic data releases on Friday boosted investors' sentiment and allowed sovereign yields to edge down and equities to advance. Price pressures continue to moderate but remain elevated, according to the ISM prices paid index in the US (which fell from 67.8 to 65.6) and the PPI in the euro area (which declined from 24.5% to 15.0% y/y).

Renewed appetite for risk extended across financial markets on Tuesday, as widespread fears over the health of the banking sector abated and investors instead looked ahead for the monetary policy announcements at the Federal Reserve today. ECB President Christine Lagarde is also due to make a speech this morning.

On Friday, the release of HICP inflation data in the euro area centered the stage in financial markets. Headline inflation fell sharply from 8.5% to 6.9% y/y in March, but core inflation ticked up to 7.5% in a sign that price pressures are persisting. In this context, ECB member Villeroy de Galhau said there are still some more rate hikes to do.

In yesterday's session, investors' concerns about the pace of economic activity in the coming months led to a generalized risk-off sentiment. In particular, the US manufacturing ISM declined from 47.7 to 46.3 while the prices paid subcomponent fell too (from 51.1 to 49.2).

Risk appetite extended across financial markets on Thursday, with sentiment lifted by resilient economic data and further signs that inflationary pressures are easing. The focus today turns to the kickoff of the Q1 corporate earnings season, with results from some large US banks. 

In the first session of the week, investors traded cautiously amid hawkish comments from some FOMC member and mixed results in the US corporate earnings season. In particular, Richmond Fed President Thomas Barkin said that more evidence that US inflation is easing will be needed before changing the monetary policy stance.

Investors traded with caution in yesterday’s session, amid mixed economic data releases and hawkish central banks’ communication. In particular, the minutes of the last ECB meeting showed how Governing Council members agreed to further tighten monetary policy if the inflation outlook in March’s projections is confirmed.

Investors started the week trading with no clear direction, taking on board mixed signals from the ECB and looking ahead for a new batch of corporate results and the Q1 GDP data for the world’s largest economies later this week.

Investors closed the week trading with more appetite for risk, taking on board another upside surprise in labour market data in the US and easing financial pressure in the country’s regional banks.

In the first session of the week, investors traded with a cautious mood amid hawkish rhetoric from regional Federal Reserve presidents and an upbeat revision of the euro area forecasts done by the European Commission. 

In yesterday’s session, investors continued to trade with caution amid intensifying political negotiations in the US to raise the debt ceiling and mixed economic data releases. In Europe, the May’s ZEW survey fell in the euro area and Germany, showing that investors’ sentiment remains gloomy.

In the last session of the week, investors traded with an optimistic mood amid steady economic indicators and as the US debt ceiling deal seemed more likely. In fact, on Saturday President Joe Biden and House speaker McCarthy reached a deal to raise the ceiling that will now have to pass Congress.

Yesterday’s session was dominated by the ECB’s 25bp hike, which brought the deposit facility rate to 3.5%, and by a hawkish tone from President Lagarde. She strongly hinted at a further 25bps hike in July, stating that the bank still had some ground to cover and was not considering a pause.