Investors ended the week by trading cautiously amid ongoing trade uncertainty, after Trump accused China of breaching a trade deal and said he expected to speak to Xi. US Treasury yields fell slightly, with some Fed officials maintaining their wait-and-see approach despite data released on Friday showed US consumer spending and PCE inflation slowed down in April.
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Financial markets remained mixed yesterday. US Treasury yields fell as data releases pointed to a higher risk of stagflation. The May's ADP survey showed job creation was much lower than expected; while May's ISM services survey showed the sector contracted slightly and prices paid by businesses rose. Attention will now turn to Friday's non-farm payrolls report.
Investors traded cautiously in a session without any major macroeconomic data releases. Attention shifted to the NATO meeting —where members agreed to increase defense spending to 5% of GDP—, ongoing trade uncertainty, the so-far upheld ceasefire between Israel and Iran, and evolving monetary policy expectations.
A downward revision of US Q1 GDP, primarily due to weaker private consumption growth (0.1% qoq vs. 0.3% previously estimated), increased market expectations that the Fed could lower interest rates as much as 75bp this year compared to the 50bp expected before.
Markets had a muted reaction to a U.S. federal appeals court which ruled 7–4 that tariffs imposed under the IEEPA exceed congressional authority, affecting general bilateral tariffs but not sector-specific ones. The tariffs remain in place until October 14 while parties may seek Supreme Court review.
Dovish remarks from Fed Governor Chris Waller and a JOLTS job report that showed US job openings fell in July to the lowest in 10 months, reniforced market expectations of a Fed rate cut in its September meeting. US Treasruy yields fell and stocks advanced, while the dollar edged lower.
Risk-off sentiment drove markets after a weaker-than-expected U.S. labor market report (nonfarm payrolls +22k in August, and June-July revised down to a cumulative +66k [prior: +87k]). Advanced-economy stock markets declined and sovereign yields dropped amid stronger market expectations over Fed cuts. The euro strengthened above $1.17 and gold rose.
Investors seemingly recovered some appetite for risk in yesterday's session. Stock markets rose moderately across advanced economies and sovereign yields increased both in the U.S. and Europe. The euro reversed Monday's gains and fluctuated close to $1.17 while commodity prices were mixed.
Global stocks advanced, with the S&P 500 and Nasdaq hitting new record highs, while sovereign bond yields rose on both sides of the Atlantic.
Stocks rose while sovereign yields and the USD were little changed and gold advanced as investors eyed a looming U.S. government shutdown (which just began this midnight). In commodity markets, the barrel of Brent declined to $67 as investors continued to brace for an OPEC+ output hike next month.
Markets kept the positive tone on Tuesday, as Fed's Miran advocated for aggressive rate cuts. Separately, a flurry of US data suggested consumer fatigue (retail sales growth decelerated in September, and the Conference Board Consumer Confidence Index fell in November below expections), lifting expectations for a December rate cut and pushing Treasury yields lower.
Investors kicked off the week on a cautious note, with attention set on upcoming monetary policy decisions. U.S. Treasury yields edged higher ahead of Wednesday’s Federal Reserve meeting, where a rate cut is widely expected (market-implied odds are near 100%) though uncertainty persists around the Fed’s forward path.
Markets ended the week lower as long-term yields surged and several Fed officials expressed their worries about inflation. Sovereign curves steepened: short-end rates eased but long and ultra-long maturities rose, after hawkish remarks from Cleveland Fed President Hammack calling for higher rates to curb inflation.
Friday’s session had a risk-on tone, with global bond yields rising after the Bank of Japan raised rates to 0.75% and signaled further tightening. European yields were additionally supported by higher ECB inflation forecasts for 2026 and plans to fund new aid to Ukraine through increased debt issuance.
Euro area sovereign bond yields continued to fall during yesterday's session, as earlier data releases that showed a lower-than-expected inflation in France and Germany were complemented with an inflation in the euro area in December of a 2% annual variation. Expectations of an ECB rate hike fell as well, as now the market does not price one until 2028.
Risk-off session as geopolitical risks remained in focus. Oil prices climbed for a fifth consecutive session, with Brent crude gaining more than 10% over the past five days to trade around $66/barrel. Gold reached fresh record highs above $4,600/ounce. On both sides of the Atlantic, sovereign yields edged lower, while equities modestly retreated.
During yesterday's session, the Japanese equity index Nikkei-225 fell nearly 2% amid concerns over a potential currency intervention. Global stocks advanced modestly, as investors traded cautiously ahead of a heavy earnings calendar, with major tech firms reporting later this week (up to 33% of the S&P 500 capitalization reports this week).
Mixed session to close off the week, with US investors reacting to President Trump’s nomination of Kevin Warsh as the next Federal Reserve Chair, while euro area markets focused on stronger-than-expected economic data, including upside surprises in GDP growth from Spain and Germany.
Rising concerns over intensifying competition in the AI sector triggered a sharp sell-off in technology stocks, weighing on broader market sentiment. Euro area equity indices mostly closed modestly lower, while US equities saw larger declines. On both sides of the Atlantic, cyclical sectors, including industrials and energy, outperformed on a relative basis.
Euro area sovereign yields edged lower, while the EURUSD cross held steady near 1.18, after the region's January inflation cooled, with headline inflation falling to 1.7% from 2.0% on lower energy prices and core easing to 2.2% as services inflation moderated. Attention now turns to today’s ECB policy meeting, where rates are expected to remain unchanged.