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Inflation and monetary policy continued to center financial markets’ stage in yesterday’s session. Euro area HICP surprised again to the upside and reinforced the views of those in the ECB Governing Council pushing for a 50bp interest rate hike in July.

Monetary policy and recession fears centered, again, the stage in financial markets. While investors focused on risks of an upcoming recession in the US, central banks continued tightening their monetary policy stance.

Risk aversion returned to the fore during a volatile session on Wednesday, as concerns about the health of the global economy, high inflation and monetary policy tightening resurfaced amid hawkish comments by central bank officials.

In the last session of the week, investors' sentiment improved amid optimistic comments by central banks' officials and a revision in US inflation expectations data by the University of Michigan.

Investors continued to trade with caution amid comments from central bank officials which reinforced their intention to tame elevated inflation. In particular, Fed President Powell said in a panel discussion with ECB and BoE presidents that the objective is to bring down inflation, even if this process could put economic growth at risk.

Fears of an economic recession with persistent inflationary pressures continued to weight on investors’ sentiment on Friday, following somewhat feeble economic survey data in the US (the ISM manufacturing slowed down from 56.1 to 53.0 in June) and another increase in eurozone HICP inflation (from 8.1% y/y to 8.6% y/y in June).

Risk appetite extended across markets on Thursday, as fears about inflation and monetary tightening eased following soft labour data in the US (weekly jobless claims rose to the highest level since January). Meanwhile, news reported that China’s government is considering more fiscal support by raising by $220bn the issuance of special bonds.

Investors' sentiment continued to improve yesterday following reports that Russia is willing to restart natural gas exports tomorrow, after the maintenance break. On monetary policy, a report suggesting that the ECB might consider a 50bp hike on Thursday pushed interest rates higher in the euro area.

Demand for riskier assets dominated investors mood on Wednesday, following a widely expected interest rate increase by the Federal Reserve and positive signals from various corporate earnings result in both Europe and the US. Adding to the positive sentiment, orders placed with US factories unexpectedly rose in June.

Volatility and risk aversion continued to dominate across markets during the last session of the week, following hawkish signals from central bank officials in Jackson Hole and a further increase in natural gas prices in Europe. 

Investors continued to trade with a risk-off mode, taking on board new hawkish comments from central bank officials and data showing job openings in the US unexpectedly rose in July. In addition, the flash HICP readings for both Spain and Germany showed inflation remained elevated in August (the eurozone aggregate will be released today).

In yesterday’s session investors traded cautiously as they continued to assess the global economic global outlook, amid worse-than-expected exports data in China, and as they positioned for today’s ECB Governing Council meeting.

Investors continued to trade with a cautious approach, still digesting the upside surprise in the US inflation data and taking on board a plan by the EU to intervene energy markets.

Yesterday financial markets recorded a highly volatile session after Russia announced a plan to hold a referendum in the occupied regions in Ukraine this weekend. Investors also dialed up their expectations of tighter monetary policy from central banks, after the Swedish Riksbank surprised with a 100bp hike.

Risk aversion continued to set the tone during a volatile session on Thursday, with the focus turning to the risk of persistency of inflationary pressures and a new round of hawkish commentary from various central bank officials.

In yesterday's session, investors continued to trade with an upbeat tone amid better-than-expected corporate profits releases and macroeconomic data. In particular, the US industrial production in September rose by 0.4% m/m and the Zew survey expectations index for Germany and the euro area edged up modestly in October.

In yesterday's session, investors traded with a cautious mood, despite the good news in the earnings season, as they continued to assess a complicated macroeconomic scenario.

In yesterday’s session, financial markets' expectation of a much more tightened monetary policy stance eased, as producer price data in the US increased by less than expected in October (0.2% and 0.0% m/m the overall and core indices). Also, speeches from ECB and Fed members favored slowing down the pace of rate hikes.

In yesterday's session, monetary policy took center stage again as US Federal Reserve comments pointed to a higher terminal interest rate than anticipated by financial markets. Investors priced in these comments and yields on sovereign bonds rose in the euro area and, especially, in the US.

Investors turned more positive during a risk-on session on Tuesday. The key themes remained the potential moderation of interest rate hikes by central banks, COVID outbreaks in China and volatility in energy markets.