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A shocking inflation release in the US centered the stage yesterday in financial markets. Headline CPI rose in June by 9.1% y/y and 1.3 m/m, reinforcing the Federal Reserve intention to raise rates by 75bp again at its July meeting. Additionally, investors have started to price in a 100bp hike, in line with yesterday's decision of the Bank of Canada.

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.

In yesterday’s session, the ECB announcements centered the stage, with a 50bp hike that pushed interest rates off the negative territory and the unveiling of the Transmission Protection Instrument (TPI).

Risk aversion continued to set the tone across financial markets on Tuesday as investors took position ahead of the Federal Reserve’s policy meeting today, with money markets pricing another 75 bp hike in the policy rate.

Investors continued to trade with caution at the start of the week, still digesting the hawkish rhetoric at Jackson Hole conference last weekend and taking on board mixed signals from ECB officials, after chief economist Philip Lane cautioned against outsized interest rate hikes, calling instead for a "steady pace" until the end of its hiking cycle.

During a volatile session, financial markets closed with mixed results, balancing out another upside surprise in HICP inflation data in the eurozone (up by 9.1% y/y in August) with signs that job creation in the US may have moderated in August (according to the ADP survey). 

Risk aversion continued to set the tone across markets on Thursday, following the imposition of lockdown measures in some big urban areas in China. In the US, new weekly jobless claims and the manufacturing ISM survey surprised positively, which, in turn, exacerbated fears among investors of more aggressive interest rate hikes.

Investors ended the week with mixed results, with sentiment supported by data showing employment growth in the US slowed down in August, in line with expectations, while the jobless rate rose by 0.2 p. p. to 3.7%. In the eurozone, producer prices (PPI) rose by 37.9% y/y in July, fueling concerns that inflationary pressures are building up.

Investors continued to trade with caution in anticipation of further monetary tightening by the Fed, despite ISM service sector survey in August was consistent with very solid growth in Q3. In the euro zone, the surveys anticipate the ECB will hike interest rates by, at least, 50 bp on Thursday.

Investors focused yesterday on the ECB Governing Council meeting, where interest rates were raised by 75bp, and US Federal Reserve hawkish comments. Both central banks showed determination to tackle elevated inflation and to bring it back to their 2% target.

Investors started the week trading with appetite for risk, taking position ahead of the CPI inflation report for August in the US, to be released today. According to the Consensus, CPI inflation is expected to have eased to 8.1% y/y (from 8.5%), which, if confirmed, could reduce some pressure on the Fed for continuing hiking policy rates aggressively.

Yesterday, investors continued to digest the hawkish tone of the main central banks. The Bank of England and the Swiss National Bank decided yesterday to hike interest rate by 50 bp and 75bp to 2.25% and 0.50%, respectively. In the UK the central bank also decided, unanimously, to gradually reduce the size of its balance sheet.

Investors continued to trade with a cautious approach at the start of the week, with risk appetite overshadowed by fears of persistent inflationary pressures and a global recession. UK markets remained in focus, after the pound fell near parity against the USD and bond yields surged as the government reiterated plans to cut taxes.

In yesterday's session, investors maintained their appetite for riskier assets, after a drop in the number of job vacancies in the US fueled expectations of a monetary policy pivot from the Fed. In this direction, the central bank of Australia decided to hike rates by 25bp, slowing down the pace of its tightening.

Monetary policy tightening centered the stage again, with several US Federal Reserve members arguing that interest rates needed to be hiked further and that there were no clear signs of inflation having peaked yet. In the euro area, the accounts of the last ECB meeting revealed a broad-based concern of GC members about current inflation figures.

Investors continued to trade cautiously at the start of the week, with risk sentiment negatively affected by the escalation in the war in Ukraine, new outbreaks of COVID cases and the reimposition of some restrictions in China as well as investors’ gloomy outlook for corporate profits, ahead of the start of the Q3 earnings season later this week.

Volatility and risk aversion continued to set the tone across markets on Wednesday, with investors taking position ahead of a crucial inflation report in the US later today and the kickoff of the Q3 corporate earnings season on Friday.

On Friday, the survey of the University of Michigan showed an increase in inflation expectations for the US, which led to a rise in sovereign yields and sharp losses on US stock indices. Meanwhile, in Europe, equities managed to register moderate advances. The US dollar strengthened against most currencies and the euro fluctuated below $0.98.

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.

Risk appetite extended gains across markets on Tuesday, as investors took on board positive signals from corporate earnings, a further softening in US sentiment and housing indicators and a decline in gas prices across the globe.