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Friday saw a mixed session across asset classes. Energy prices rose amid elevated geopolitical risks in Hormuz and Ukraine, keeping short-term inflation expectations under pressure, particularly in the US.

Thursday's session carried a cautious tone. Market concerns over the sustainability of AI investments weighed on chipmakers and technology equities, but the main U.S. stock market benchmarks ended higher while European indices were mixed. Brent oil and TTF natural gas prices nudged down.

Moderate risk-off sentiment prevailed across markets following the upside surprise in U.S. inflation, while oil prices remained elevated amid ongoing tensions in the Middle East. The CPI data came in slightly higher than expected, standing at 3.7% YoY, driven primarily by energy prices, particularly gasoline.

World stocks fell, led by chipmakers and concerns over AI spending. Wall Street closed lower (the Nasdaq 100 dragged by semiconductors) and Asian shares hit a two-month low before steadying as the selloff eased. In Europe, the STOXX 600 touched a one-week high on softer oil and yields. US big-bank earnings (JPMorgan, Goldman Sachs, Wells Fargo) kicked off to mixed reviews.

Investors traded cautiously in yesterday’s session as they await key economic releases this week, including euro area 1Q GDP (today), which is expected to show the economy grew 0.2% yoy, euro area April inflation (today) expected to stay at 2.4% yoy, and the Fed’s FOMC meeting tomorrow, where markets anticipate no changes to the Fed’s target rate.

The ECB monetary policy meeting yielded, as expected, no change in the official interest rates and a communication consistent with a first rate cut in June, at the next meeting. Christine Lagarde reiterated, though, that the ECB will be data-dependent and added that it will not be Fed-dependent.

Markets ended the week on a risk-off tone, with sovereign bond yields falling across the board, equities selling off, and the US dollar strengthening (to $1,06 against the euro), as geopolitical tensions rose in the Middle East and investors sought safe-haven assets. Brent rose above $90/barrel as worries about potential supply disruptions mounted.

Stronger-than-expected March retail sales in the US casted further doubts on the Federal Reserve’s motives to cut interest rates as soon as this summer. Markets now price a mere 20% probability of a cut in June, and 50% for July.

Generalized risk-off sentiment in yesterday’s session as markets remained attentive to further developments in the Middle East and as expectations of interest rate cuts, especially in the US, are delayed. Sovereign bond yields rose across the board and equities sold off globally, while the US dollar ended slightly higher, and Brent held steady at $90/barrel.

Investors traded cautiously in yesterday's session amid geopolitical risks and a readjustment of interest rate expectations. In particular, investors’ uncertainty regarding the decision the Bank of England will make rose following the latest higher-than-expected inflation figures for March at 3.2% yoy vs. 3.1% anticipated by consensus. 

In yesterday’s session financial markets traded on the diverging outlook between the Federal Reserve and the ECB. Fed officials highlighted that inflation seems to have gotten stuck in the US and so they are in no rush to cut rates, while ECB members all pointed to June as the month they are looking at to lower interest rates.

Investors closed the week with a risk-off mood as they continued to eye communication from central bank officials and the tensions in the Middle East. On the latter, though, the attack suffered by Iran on Thursday night had a moderate effect on the price of the barrel of Brent in a sign that the conflict escalation seems to be controlled, for the moment.

Investors started the week trading cautiously as they await for key economic data releases (such as the Q1 GDP figures for the US on Thursday or today’s April flash PMIs) and for the corporate profits of 180 S&P500 companies, which represent about 40% of the index market capitalization (including five of the “Magnificent Seven”).

In yesterday’s session, investors had to weigh mixed economic data indicators, as flash PMIs showed how the manufacturing sector in the euro area weakened slightly in March, deep below the 50-points threshold, while the services index managed to increase (52.9 for the euro area).

In yesterday's session investors adjusted their interest rate expectations amid monetary policy and fiscal news in the euro area, while corporate profits centered the stage in the US.

In yesterday’s session, US Q1 GDP data release centered the stage in financial markets as it showed that, despite the moderation in headline GDP growth (+0.4% q/q from 0.8% in Q423), the US economy remains robust. The 0.6% increase in private consumption and the acceleration of investment (1.3%) were the brighter news in GDP.

Financial markets ended the week with a risk-on session following the release of the US PCE deflator, the Fed’s preferred inflation measure, which came mostly in line with expectations at 2.7% yoy (+0.3% mom) up from 2.5% in the previous month. Furthermore, US personal spending data beat expectations advancing 0.8% in March vs 0.6% estimated.

uIn yesterday's session, investors weighed a higher-than-expected US Producer's Price Index for April and comments from Fed chair Jerome Powell, who remarked it is unlikely that the Fed will need to raise interest rates any further, despite having lower confidence that the 2% inflation target will be achieved soon.

Investors ended the week on a cautious note following a weaker-than-expected consumer confidence index in the US, combined with higher short-term inflation expectations at 3.5%, and hawkish remarks from certain Fed officials. Meanwhile, comments from ECB's Elderson once more pointed to a 25 bp cut in June.

In yesterday’s session investors traded cautiously ahead of tomorrow’s release of US April inflation data, which will be key for the Federal Reserve’s policy decisions. In this context, sovereign bond yields were mostly unchanged on both sides of the Atlantic, while equities were flat in the US and modestly lower in the euro area.