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Another session dominated by risk aversion, as investors continued to digest the hawkish rhetoric from central banks in major advanced economies and mixed signals from the ongoing conflict in Ukraine.

Investors started the week trading with a risk-off sentiment, still digesting the hawkish comments from the US Federal Reserve and ahead for March’s US CPI inflation data, to be released today.

Investors started the week with no clear direction, as traders digested mixed signals from the GDP data in China and corporate results in the US. Financial markets were closed across Europe, Australia and Hong Kong.

Financial markets started the week with mixed results, as investors weighted out positive corporate earnings results with downward revisions in the growth economic outlook and a new round of hawkish commentary by some Fed officials (Charles Evans from the Chicago Fed and James Bullard from St. Louis).

Volatility continued to rein in financial markets on Wednesday, as investors took on board hawkish comments from central bank officials and the decision by the Chinese authorities to keep the benchmark lending rates unchanged.

In yesterday's session, investors traded with an optimistic tone amid better-than-expected corporate results and despite the contraction of the US GDP in Q1 (-1.4% QoQ SAAR from 6.9% in Q4), which was affected by the change in inventories and a drag from net exports, while domestic demand remained strong. 

Investors traded with a risk-off mood in yesterday's session, fueling the demand for safe-haven assets. The main concern continues to be whether central banks will be able to tackle down inflation without triggering a recession.

Investors' sentiment improved at the end of the week amid comments from Federal Reserve president Jerome Powell signaling that 75 basis points increases are, for now, off the table.

Investors traded with a risk-on mood on Monday after Joe Biden signalled he would reconsider tariffs imposed to China by the Trump administration and Christine Lagarde offered a clear guidance on the next steps for the ECB.

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).