Stock markets advanced in the US, Europe and Asia while sovereign yields remained stable. In Spain, markets underperformed their peers as stocks declined and sovereign spreads rose.
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Yesterday's session was filled with economic data releases. In the US, Q2 2023 GDP revision left growth unchanged from previous estimates at 2.1% SAAR, and personal consumption had its slowest increase in a year. In Europe, September inflation in Germany eased to 4.5% y/y from 6.1% in August but ticked up in Spain to 3.5% from 2.6%.
Investors traded with a slightly higher risk appetite on Friday as several key inflation data points on both sides of the Atlantic fell and despite the risk of a US government shutdown, which was eventually averted over the weekend, rose. Eurozone inflation fell to a 2-year low, with core CPI showing positive momentum and US core PCE also moderating.
In yesterday’s session, economic sentiment data releases were the focus of investors’ attention. In both Europe and the US, better-than-expected, but still weak economic data, pushed sovereign yields down on both sides of the Atlantic amid an upward trend in previous sessions.
The week started off with a volatile session as markets await key economic data this week (PMIs for advanced economies and US 3Q GDP), 3Q euro area Bank Lending Survey, the ECB's rate decision, further 3Q earnings, and news from the Middle East.
Volatility rose during the last session of the week amid heightened tensions in the Middle East, mixed corporate earnings, and expectations of the FOMC meeting later this week. Stocks fell across the globe, with US and European stock indices entering “correction” territory after falling 10% their most recent peak in July.
In yesterday’s session markets were mixed across the globe in a day without major economic news. Sovereign bond yields rose on both sides of the Atlantic after days of declines, with euro periphery countries’ yields posting the largest increases and risk premia widening.
In yesterday’s session, investors traded cautiously amid mixed comments from central bank officials regarding interest rates’ paths ahead. In the euro area, ECB Chief economist Phillip Lane said that not enough progress has been accomplished in bringing inflation back to 2% and some other members did not rule out an additional rate hike.
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.
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.
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.
Euro area and US sovereign bond yields continued to fall during Friday's session as investors continue to expect interest rate cuts by mid-2024. Speaking last Friday, Federal Reserve chair Jerome Powell remarked that policy is "well into restrictive territoy" further fueling the rally in bond markets.
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, 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.
Market sentiment remained subdued on Tuesday as investors awaited Thursday’s US inflation report for December, which could shed some light on the Fed’s future interest rate decisions. In this context, government bond yields rose in the eurozone, despite the negative surprise from German industrial production for November, and fell slightly in the US.
Stock markets edged higher and sovereign bond yields fell modestly in the US and the euro area as investors slightly increased their risk apetite ahead central bank decisions from the ECB and the BOJ, US 4Q GDP and PCE deflator later this week, as well as further earings reports in the US market.
Investors traded cautiously in yesterday’s session as they await the ECB’s decision and US macro data in the coming days. Sovereign bond yields edged higher across the board, while stock markets were mixed, falling in the euro area and modestly rising in the US. Chinese stocks rallied on reports of a government stimulus to stabilize stock markets.
In yesterday’s session, global stock markets advanced as investors increased risk appetite following reports about a Chinese stimulus to support the local stock market, a better-than-expected earnings season in the U.S. so far, and a favorable US PMI reading. Sovereign bond yields edged lower in the euro area and slightly rose in the U.S.
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.