Financial Markets Daily Report

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Investors traded with an optimistic mood on Tuesday, following news that the Russian government has started to remove some of its military troops near Ukraine after the completion of drills.

Financial markets started the week with a risk-off session, fueled by the escalation in tensions involving Ukraine. The rising geopolitical risk is adding to investors’ concerns about the persistence of inflationary pressures and the prospect of a more aggressive withdrawal of monetary policy stimuli by major central banks.

Investors closed last week trading cautiously, increasing their bets that the jump in inflation is likely to force central banks across advanced economies to deliver a more aggressive withdrawal of monetary stimuli. Financial markets are pricing in by yearend more than 150 bp hikes in the US and more than 50 bp hikes in the eurozone.

In yesterday’s session investors consolidated their bets on a tighter monetary policy in the US following January’s CPI data. Headline and core inflation rose by 0.5pp to 7.5% and 6.0%, respectively, while consensus was expecting an increase of 0.3 and 0.4pp.

In yesterday's session investors' sentiment continued to improve moderately amid mixed comments by Federal Reserve and ECB members. In the US, Cleveland Fed President Loretta Mester said that she expects inflation to ease during the course of 2022, as the Fed tightens credit conditions.

In yesterday's session, investors' sentiment remained cautiously optimistic, with the focus still on the pace of monetary policy tightening in advanced economies, corporate results (in the US, 76% of the companies that have released their profits have beaten consensus estimates) and geopolitical developments.

Investors started the week trading with caution as they continued to digest the positive figures of the January's employment report in the US and took positions ahead of Thursday's release of CPI inflation. In the euro area, ECB comments moderated financial markets expectations for a big monetary policy tightening.

In the last session of the week investors focused on the increasing bets for a tightening of monetary policy across advanced economies and the better-than-expected corporate earnings releases.

Investors traded with caution on Thursday, digesting a hawkish shift by major central banks in Europe and disappointing earnings results from some US tech giants.

Financial markets ended the day with mixed results, with investors weighting in a batch of positive earnings reports with rising inflation data and weak signals from the US labour market.

Investors continued to trade with a positive mood on Tuesday, with solid corporate earnings reports outweighing hawkish signals from central bankers and higher-than-expected inflation prints.

Financial markets started the week with a risk-on session, as investors shifted their focus to corporate earnings and economic indicators, taking a breath from the prospect of monetary policy tightening by the major central banks.