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Financial markets started the week with a subdued risk appetite. Sovereign bond yields rose across the board in developed markets. The sold off started in Japan, where it seems increasingly likely that the BoJ could rise rates in December. In both Europe and the US, November ISM and PMI data showed protracted weakness in manufacturing.

US Treasury yields dropped along the curve after the ADP survey showed an unexpected decrease of private payrolls in November, suggesting further weakness of the job market and consolidating views on a rate cut by the Fed next week. In consequence, the dollar depreciated against all its main peers.

Investors traded cautiously as they positioned themselves ahead of the Federal Reserve meeting next week. US weekly unemployment benefit claims fell to a three-year low, casting some doubts over the Fed's willingess to lower rates. In this context, US treasury yields rose, equities were mostly flat, and the dollar edged higher against most peers.

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.

Investors traded cautiously ahead of today’s Fed meeting. Yesterday’s JOLTS report showed US job openings increased in October, indicating that the labor market isn't weakening abruptly and raising the risk that the Fed may strike a hawkish tone despite the widely expected rate cut later today. In response, Treasury yields edged higher and the dollar strengthened.

During yesterday's session, Government bond yields fell on both sides of the Atlantic ahead of several central bank meetings this week. The ECB meets on Thursday, with markets pricing an almost sure decision of keeping depo rate at 2%. Other banks meeting are the BoE (expected to cut to 3.75%) and the BoJ (expected to hike to 0.75%).

Financial markets had a mixed session on Tuesday. Sovereign bond yields fell on both sides of the Atlantic after a choppy session, driven by US employment figures distorted by the recent shutdown. The data showed job growth rebounded in November, while the unemployment rate rose in October following a methodological change due to the shutdown.

Financial markets had a mixed session on Wednesday. Eurozone sovereign yields edged higher, with curves steepening and peripheral spreads widening, even as the Ifo index surprised to the downside, signaling weaker business sentiment in Germany. Final CPI figures for November came in a tenth lower in the general year-on-year rate.

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.

Markets showed limited reaction to the release of US December inflation data, which confirmed headline and core inflation unchanged at 2.7% and 2.6% yoy, respectively. US Treasury yields ended the session broadly flat, equities edged lower, and the US dollar was little changed against most major peers. Futures markets continue to price in the first Fed rate cut in June.

Risk sentiment improved during yesterday’s session. US Treasury yields edged higher after weekly unemployment benefit claims declined, reinforcing expectations that the Fed will keep interest rates on hold in January. Equities advanced, supported by renewed optimism around artificial intelligence following strong results from Taiwanese semiconductors.

European investors began the week with a risk-off tone, as US markets were closed for the Martin Luther King holiday. Sentiment deteriorated after Trump announced plans to impose new tariffs on European countries siding with Denmark in the Greenland dispute and the EU hinted at possible retaliation.

As expected, the Federal Reserve maintained its policy rate in the 3.50%-3.75% range. Fed Chair Jerome Powell struck a somewhat hawkish tone, highlighting activity strength, labor market stabilization and elevated inflation. Treasury yields ended the session flat and the dollar rebounded from its sharp decline since last Friday, gaining against the euro and the yen.

In the last session of the week, equity markets edged modestly higher, despite lingering doubts over the return on Big Tech investment in AI and questions around the robustness of corporate fundamentals, set against a backdrop of generally supportive macroeconomic data.

US inflation surprised slightly to the downside, with headline CPI easing to 2.4% yoy (vs. 2.5% expected), down from 2.7% in December. The softer reading boosted expectations of further Fed easing, with money markets now pricing a 50% probability of a third 25bp rate cut in 2026. US Treasury yields declined by around 5bp across the curve.

Risk sentiment deteriorated sharply into the end of the week, as escalating tensions in the Middle East weighed on markets. Brent crude rose to USD 112/bbl while global equities sold off, led by US indices, with the Nasdaq now down around 10% from its recent peak.

El Banco de Japón anuncia cambios en su estrategia monetaria.

Stock markets posted gains across Europe and the US, while sovereign yields moved in opposite directions as they recorded mild declines in the eurozone and moderate increases in the US.