Evolution of the international financial markets and evaluation of the main events and economic indicators of the previous day session. Available in English.
Investors took a breather from the recent buying spree in government bonds during Thursday’s session, pushing yields higher on both sides of the Atlantic. Despite data releases yesterday showing inflation cooling more than expected in the Eurozone and the US, investors were cautious ahead of comments from some central bankers.
Government bond yields extended their losses across the board on Wednesday as investors continued to focus on future interest rate cuts by major central banks. These expectations were boosted by upwardly revised Q3 US GDP growth figures and better-than-expected November inflation figures in Germany and Spain.
In Tuesday’s session, investors continued to focus on the narrative that US growth is slowing and that the next move by major central banks will be to cut interest rates at some point next year. This extended the market’s risk-on sentiment of recent weeks, with government bond yields falling across the board and major equity indices rising.
Investors started the week on a downbeat note, with sovereign bond yields falling across the board on both sides of the Atlantic, as expectations grew that major central banks may be done with interest rate hikes. In the Eurozone, however, Lagarde stressed that strong wage growth does not yet allow the ECB to declare victory over inflation.
Financial markets ended the week with subdued trading volumes, as the US trading session was shortened for the Thanksgiving holiday, which reduced participants and hence liquidity.
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.
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.
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.
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 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.
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.
Yesterday markets took a pause following Tuesday’s strong rally. Investors continue to price in the end of the interest rate hiking cycle while still digesting new economic data. US October retail sales slowed in October by less than expected (-0.1% m/m vs. -0.3%), suggesting some resiliency in consumption and reinforcing the idea of a soft-landing.