Evolution of the international financial markets and evaluation of the main events and economic indicators of the previous day session. Available in English.
Yesterday, global financial markets were marked by heightened investor caution amid rising fiscal uncertainty and underwhelming macroeconomic indicators. In the US, the House of Representatives narrowly approved a sweeping tax and spending package projected to inflate the national debt by approximately $3.8 trillion over the next decade.
Concerns over the US fiscal stance and debt burden—intensified by recent credit rating downgrades and ongoing tax bill negotiations in Washington—weighed on US financial assets. US Treasury yields rose, particularly on the longer end of the curve, while US stocks fell by more than 1.5%. The US dollar weakened, trading around 1.13 against the euro.
Investors traded cautiously during yesterday's session. Concerns over the US debt rating downgrade continued to weigh on US assets, driving long term Treasury yields higher and US stocks lower, with the S&P 500 ending six straight sessions of gains. Hawkish remarks from Fed officials further dampened sentiment.
Investors kicked off the week on a cautious note after Moody's downgraded the US credit rating from Aaa to Aa1, citing concerns about the country's fiscal trajectory, rising debt burden and high interest costs. With this downgrade, the US lost its only remaining triple A credit rating.
Financial markets ended the week on a slightly positive note. News from early in the week of US-China trade negotiations helped sustain sentiment in equity markets, despite survey data showing a sharp deterioration in US consumer sentiment and an uptick in inflation expectations.
In yesterday's session, global financial markets delivered a mixed performance, shaped by the release of subdued economic data and growing expectations of potential interest rate cuts in the US. Investors also remained cautious amid ongoing speculation over possible peace talks between Russia and Ukraine.
Mixed session amid little macro data and a lack of trade negotiations news to trade on. Sovereign bond yields edged slightly higher on both sides of the Atlantic, with US yields receiving a boost by hawkish remarks from Fed officials warning of the potential impacts of tariffs on prices. The 2-year Treasury yield closed above 4% for the time since late March.
Risk appetite remained relatively high in the market yesterday as US inflation figures for April came in slightly below expectations at 2.3% YoY, with core inflation holding at 2.8%. Separately, the NFIB survey showed that small business optimism fell moderately in April. Against this backdrop, US Treasury yields were broadly unchanged.
Yesterday's announcement of a temporary truce in the trade war between the US and China lifted investors' mood, particularly in US assets. Both countries agreed that for the next 90 days the US will reduce the tariffs it imposed on Chinese imports last month from 145% to 30%, and that Chinese tariffs on US imports will fall from 125% to 10%.
Investors ended the week on a cautious, yet slightly positive note. All eyes were on the trade talks between China and the US that took place over the weekend. Trump floated in social media an alternative tariff level of 80% on Friday (compared to the current 145%). Both sides have touted progress in the talks, but have offered few details so far.
Positive session across markets, fuelled by optimism surrounding the trade agreement reached between the Trump administration and the UK government, which has helped ease tensions and is seen as a potential blueprint for ongoing negotiations with other countries. Additionally, the Bank of England cut interest rates by 25 basis points to 4.25%, citing increased uncertainty in the economic outlook. In contrast, Norges Bank and the Riksbank held rates steady at 4.5% and 2.25%, respectively.
The Federal Reserve kept the federal funds rate unchanged at the 4.25%-4.50% range and highlighted that the risks of higher inflation and higher unemployment have risen. The decision had been widely discounted by markets and had little impact on financial assets. Markets still expect three cuts in 2025, starting in July, and Treasury yields ended the session mostly flat.