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Financial markets had a mixed session yesterday, although the overall mood among investors remained gloomy as they await today's U.S. inflation report for August, which is expected to show easing price pressures. Government bond yields fell across the board on both sides of the Atlantic.

Stronger-than-expected retail sales and industrial production data in the US renewed expectations of a soft-landing for the economy, just as the Fed is expected to lower interest rates today. Rate futures are reflecting a 65% probability of a 50 bp rate cut and a total of -116 bp over the remaining three meetings this year.

Lower-than-expected inflation data on both sides of the Atlantic drove financial markets' sentiment. Preliminary figures from Spain and France showed headline inflation below 2%, at 1.5% and 1.2% respectively. In the US, the PCE price index fell to 2.2% from 2.5%, making solid progress towards the Fed's target.

Risk-off session in financial markets as the conflict in the Middle East intensified with an Iranian missile attack on Israel. Global stocks closed the session with losses of around 1%, while sovereign bonds, the US dollar and gold all rose as investors turned to safe assets. Brent oil prices rose by more than 2% close to $74/barrel.

Risk-off sentiment continued to dominate financial markets as tensions mounted in the Middle East. Oil prices rose 5%, with the Brent reference closing around $77/barrel, and the dollar strengthened.

Thursday's trading was driven by two US data points: September inflation, which came in slightly higher than expected, and weekly jobless claims, which came in higher than expected, indicating some weakness in the labour market. The debate on the Fed's next move was further fueled by Fed's Barkin words saying it was too soon to declare victory over inflation.

Investors started the week in a risk-off mood, albeit with no clear trigger or catalyst, suggesting that it was mostly about locking in profits. Sovereign bond yields rose across the board on both sides of the Atlantic, with steepening curves. In the eurozone, peripheral spreads widened despite Fitch's confirmation of Italy's rating and improved outlook late on Friday.

Markets were mixed as investors continued to fully digest the US presidential election results and monetary policy decisions from various central banks. In the euro area, equities fell on fears of the negative implications of a potential trade conflict, and were further pushed lower by falling sovereign bond yields which dragged down financial sector stocks.

Investors kicked off the week with a higher risk appetite. In the euro area, the initial negative reaction to Trump's victory began to fade, with equity indices rising across the region and sovereign bond yields falling. Peripheral speads narrowed only slightly and Fitch upgraded Spain's debt outlook from "stable" to "positive", and affirmed its A- rating.

Market sentiment was dampened by weak investor confidence data in Germany (ZEW index dropped to 7.4 from 13.1 in the previous month), where also Chancellor Scholtz announced elections will be held in February after the ruling coalition collapsed last week. Sentiment was further dampened by caution ahead of today's inflation report in the US.

Investors' risk appetite waned yesterday amid renewed tensions in the war in Ukraine. Government bond yields rose in the Eurozone, where data released yesterday showed that negotiated wage growth accelerated to 5.4% in Q3 from 4.6% in Q2, which could cause the ECB to reconsider its dovishness if this feeds through to inflation in the coming months.

Investors traded cautiously amid political tensions in France, where lawmakers are set to vote today on no-confidence motions. Euro area sovereign bond yields edged lower, and France's risk premium narrowed to 85bp after reaching 88bp in the previous session. The region's main stock indices advanced slightly, and the euro held steady at 1.05 against the dollar.

Euro area markets had a cautious session ahead of the no-confidence vote in France, approved late last night. Sovereign bond yields were mostly flat, and the region's main equity indices posted small gains. The euro was flat against its main peers, leaving its cross with the US dollar at 1.05.

Financial markets ended the week on a mixed note. In the US, November payrolls data showed that employment grew slightly more than expected (with October data revised upwards), but unemployment rose by 0.1% to 4.2% and wage growth accelerated slightly. Treasury yields fell and the probability of a -25bp cut by the Fed in December rose to 90%.

Investors kicked-off the week on a cautious note as they await the ECB's Governing Council meeting (on Thursday), widely expected to lower interest rates by 25bp, and US inflation figures for November (released on Wednesday), a key report for the Fed's decision next week.

Financial markets had a mixed performance on Wednesday. US Treasury yields were flat as the Fed kept rates unchanged and Powell said the Fed was in no rush to cut rates and will wait to see the impact of Trump's policies on the economy.

A strong US jobs report for January, with the unemployment rate falling 0.1 p.p. to 4.0% (the lowest since May) and wage growth accelerating to 4.1% yoy from 3.9% in December, reaffirmed expectations of a cautious Fed this year. Expectations for the next interest rate cut were delayed to July/September, and the probability of a second rate cut fell below 50%.

Investors started the week on a slightly positive note, with US markets closed for the President's Day holiday. In the eurozone, government bond yields rose on the likelihood of increased public spending on defence. Peripheral spreads narrowed as German bonds came under some selling pressure ahead of Sunday's general election.

Yesterday's session was mixed across asset classes and regions. In the Eurozone, sovereign yields rose and peripheral spreads widened as countries grapple with the need for higher military spending. Separately, ECB's Schnabel argued the 2.75% rate is not undoubtedly restrictive, while ECB's Panetta argued that the consumer-led recovery is not materialising.

Financial markets had a mixed session following Sunday's German national election, in which results were as expected: the conservative CDU/CSU won and a "grand coalition" with the socialdemocrats is likely. However, AfD and the Left won enough seats to block changes to the debt break.