Evolution of the international financial markets and evaluation of the main events and economic indicators of the previous day session. Available in English.
On Friday, the survey of the University of Michigan showed an increase in inflation expectations for the US, which led to a rise in sovereign yields and sharp losses on US stock indices. Meanwhile, in Europe, equities managed to register moderate advances. The US dollar strengthened against most currencies and the euro fluctuated below $0.98.
Another day of rollercoaster swings across financial markets, following the negative surprise in the inflation report in the US and the upside revisions in investors’ expectations of the pace of monetary policy tightening.
Volatility and risk aversion continued to set the tone across markets on Wednesday, with investors taking position ahead of a crucial inflation report in the US later today and the kickoff of the Q3 corporate earnings season on Friday.
Investors continued to trade cautiously at the start of the week, with risk sentiment negatively affected by the escalation in the war in Ukraine, new outbreaks of COVID cases and the reimposition of some restrictions in China as well as investors’ gloomy outlook for corporate profits, ahead of the start of the Q3 earnings season later this week.
Risk aversion continued to set the tone during a highly volatile session at the end of the week, as investors read the US payrolls report as evidence that the Fed will continue tightening monetary policy.
Monetary policy tightening centered the stage again, with several US Federal Reserve members arguing that interest rates needed to be hiked further and that there were no clear signs of inflation having peaked yet. In the euro area, the accounts of the last ECB meeting revealed a broad-based concern of GC members about current inflation figures.
Investors' optimism faded away in yesterday's session as concerns about a recession mounted and central bank officials insisted on tightening monetary policy. Sovereign yields surged and equities fell in both sides of the Atlantic, while oil prices rose modestly after the OPEC+ confirmed that it plans to cut production by 2 million barrels per day.
In yesterday's session, investors maintained their appetite for riskier assets, after a drop in the number of job vacancies in the US fueled expectations of a monetary policy pivot from the Fed. In this direction, the central bank of Australia decided to hike rates by 25bp, slowing down the pace of its tightening.
In the first session of the week, investors traded with optimism, after the worse-than-expected US ISM data for September let traders to think the Fed could pursue a less aggressive monetary policy stance than previously expected. Nevertheless, NY Fed President John Williams said that there is still job to do to curb inflation.
On Friday, investors continued to weigh the hawkish monetary policy agenda of the main central banks and the upside surprises on inflation data. In the euro area, headline HICP inflation jumped from 9.1% to 10.0% and core inflation increased by 0.5pp to 4.8% yoy.