Search results

The FOMC kept US interest rates on hold, saying it needed more confidence that inflation was moving toward 2% on a sustainable basis before cutting rates. Powell later stated that the FOMC was unlikely to have such confidence by March.

Tuesday was a mixed bag for financial markets, with macro data and earnings releases on the agenda ahead of today’s highly anticipated FOMC meeting.

Investors started the week in a mildly risk-on mood, with sovereign bond yields falling across the board. In the Eurozone, ECB officials speaking on Monday seemed confident about a future rate cut, although they remained inconclusive on the exact timing of it. US yields were weighed down by the Treasury's lower than expected Q1 borrowing forecast.

In the final session of the week, market sentiment was mixed on both sides of the Atlantic. In Europe, government bond yields remained fairly flat following Thursday’s ECB meeting, after which investors see a first rate cut in April as more plausible. Major European stock market indices rallied on this expectation, posting a week of strong gains.

The ECB governing council left interest rates unchanged and Lagarde remarked how core inflation is on a downward path and wage growth has stabilized. These remarks pushed investors to assign a 90% probability of an interest rate cut in the ECB’s next meeting in April, and pushed down sovereign bond yields.

Global financial markets were mixed in the last session of the week as investors continue to navigate through interest rate cut expectations and new economic data. US University of Michigan consumer sentiment index improved to 78.8, the highest reading since July 2021, boosting the stock market and bringing the S&P 500 to a new record high.

In yesterday’s session, investors traded with a risk-on mood as the US Senate passed a bill that averted a government shutdown. The bill still has yet to pass the House of Representatives, but if it succeeds, the Federal government will be able to fund itself until early March.

Stronger-than-expected economic data in the US and hawkish comments by ECB officials were the main drivers of a session where sovereign yields rose and equities declined across the board.

Central bank officials continued to push against the expectation of as many as six interest rates cuts in 2024. Yesterday, was Fed’s Christopher Waller turn, who suggested moving not as quickly as in previous easing cycles.

In the last session of the week, investors focused their attention on the disinflationary pressures in the US, after December PPI unexpectedly declined by 0.1% m/m (-0.1% in the previous month). In this context, yields on sovereign bonds declined on both sides of the Atlantic, particularly so in the short-end of the curve. 

In yesterday’s session, government bond yields fell slightly on both sides of the Atlantic. In the eurozone, German export data for November, which surprised to the upside on the back of strong EU demand, contributed to the move. In the US, the NY Fed’s metric of consumer’s one-year inflation expectations fell to 3.01%, the lowest level in almost three years.

Investors are starting the year cautiously as risk appetite seems to have eased over the holidays. As central bank officials tried to push market expectations of imminent rate cuts, although these expectations remain anchored in March for the Fed and April for the ECB, government bond yields rose across the board, particularly in the euro area.

In yesterday’s session, investors traded cautiously amid weaker-than-expected economic data releases in the US. In particular, Q3 GDP was revised slightly downwards from 5.2% SAAR to 4.9% while the core PCE price index edged down in Q3 to 2.0% from 2.3%.

Investors continued to trade cautiously yesterday amid messages from central banks signaling the end of the interest rates hiking cycle. Nevertheless, Christine Lagarde said that more evidence is needed to be sure that inflation returns sustainably to the 2% target.

In the last session of the week, investors continued to digest the patient approach for the monetary policy ahead expressed by ECB and US Federal Reserve officials. For example, San Francisco Fed President Mary C. Daly said that the Fed could take its time to do things right, signaling that no further rate hikes are in sight for the moment.

The week started in a subdued mood in financial markets, with investors still assessing the implications of the patient approach of central banks on monetary policy. Yesterday, ECB member de Cos followed previous comments from Wunsch and Holzmann and said that it is premature to talk about interest rate cuts.

In yesterday's session sovereign bonds took center stage once again. Yields extended their declines both in the euro area and in the US, where higher-than-expected weekly jobless claims pointed to a cooling labor market and gave investors further reasons to believe the Federal Reserve is done hiking rates.

Investors remained trading cautiously yesterday, as they still expect no further tightening of monetary policy and as economic data came in slightly better than expected. In the eurozone, the consumer sentiment indicator rose slightly from -17.8 to -16.9 in November, although it remains at quite a low level. 

In yesterday’s session, which was closed in the US due to Thanksgiving holiday, investors traded cautiously amid signs of weak economic growth in the euro area in Q4. Although the Composite euro area flash PMI rose modestly from 46.5 points to 47.1, it remained in contractionary territory.