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In the last session of the week, financial markets were very volatile after the upside surprise in the US labor market report for January. Non-farm payrolls rose by 517k, well above consensus expectations (+188k) and the upwardly revised monthly average in 2022 (401k). The unemployment rate ticked down to 3.4%, a level not seen since 1969.

Yesterday investors continued to digest the messages from central bank officials, who, in general, have toughened the stance against inflation and show a more hawkish tone. In this context, yields on sovereign bonds rose further in the eurozone, more notably in the periphery, while remaining broadly unchanged in the US.

Yesterday's session began with news that the US was extending the ceasefire until Iran retakes the negotiations, lowering market volatility. Despite this, the blockade of the Strait of Hormuz and the Iranian coast persists, as Iran seized two vessels, thus driving Brent prices back above $100/barrel, and opening today's session nearly at $103.

On yesterday's session, markets kept a positive tone, as the US-Iran peace talks progressed and the US Treasury allowed Iranian oil sales, easing supply risks. Oil prices fell more than 3%, the dollar rose slightly, while the pound edged up higher on the announcement of PM's Keir Starmer resignation and the prospect of an orderly leadership transition.

In the last session of the week, investors digested the hawkish comments offered by key central bank officials in the US Federal Reserve and ECB. In the former, Michelle Bowmen and Thomas Barkin signaled that interest rates will need to raise further but warned against reading too much into January’s retail sales and employment data.

Central bank communication continued to center the stage on Wednesday. The release of the minutes of the last Fed meeting showed that almost all FOMC members favored a 25bp rate hike, while just a few would have opted for keeping the 50bp pace. They noted that, despite remaining elevated, inflationary pressures had begun to moderate.

Investors’ risk appetite soured yesterday. Sovereign bond yields rose across the board on both sides of the Atlantic. In the Eurozone, peripheral spreads widened a tad as French finance minister acknowledged the country's budget deficit could come in above 6% this year, leaving the 10-year French reference on par with the Spanish counterpart.

With no major developments in the peace talks from the Middle East, Friday's session was driven by an increase in risk sentiment, with investors rotating from fixed income to the stock market in the euro area and falling volatility. In the US, markets were closed due to a bank holiday.

Speaking in the second day in Congress, Fed President Powell clarified that no decision had yet been made about the pace of monetary policy tightening, noting that the FOMC would consider higher rate hikes only if the totality of the data pointed in that direction. Before the next meeting, February inflation and employment data will be released.

Risk appetite returned to the fore on Tuesday, as investors reassessed the outlook for monetary policy across major central banks in the aftermath of the turmoil generated by the collapse of two regional banks in the US.

Risk aversion extended across financial markets during a volatile session on Wednesday, fueled by concerns about the health of the banking sector in Europe, in the aftermath of the collapse of some regional banks in the US and renewed concerns about the financial position of Swiss lender Credit Suisse.

Markets traded cautiously in yesterday's session as investors digested earnings releases and the Fed's and the ECB's on-hold meetings. Sovereign yields declined across the board while stocks were mixed (rising in Europe but declining in the U.S., dragged down by AI concerns). The dollar eased modestly against the major currencies, and Brent oil held near $115.

The continued repricing of the Federal Reserve's interest rate decision later this week was the main driver of financial markets during yesterday's session. The probability of a 50bp rate cut in the upcoming meeting rose to 70% from 50% last week, and the total amount of cuts in 2024 is now expected to be 120 bp, up from 100 bp.

Monetary policy decisions remained the key focus for investors on Thursday. The Bank of England and the Swiss National Bank raised rates by 25bp and 50bp to 4.25% and 1.5%, respectively, following the move by the Fed on Wednesday to hike rates by 25bp and to signal that there could be additional increases if financial turmoil recedes.

In the last session of the week, investors continued to trade with a risk-off mood amid continuing turmoil in the financial system. Doubts about the health of the banking sector led traders to think that central banks will have to stop hiking rates and start cutting them soon.

Financial markets started the week in a quiet mood as investors awaited the beginning of the earnings' season, the ECB meeting and more clues on the trade negotiations between the U.S. and China.

Economic data releases centered the stage on Tuesday, in particular the JOLTS survey, which showed job openings in the US fell to 9.9 million in February, down from 10.6 million vacancies in the previous month. This level, the lowest since May 2021, pushed down the vacancies for unemployed ratio from 1.9 to 1.7, still above historical average.

Investors ended the week with a mixed session as the US government shutdown, which prevented the release of the employment report, clouded sentiment. Sovereign yields edged lower in the euro area and stocks mostly advanced, while US Treasury yields ended higher, and equities were mostly flat weighed down by the underperformance of tech stocks.

In the first session of the week, investors operated with caution as they continued to digest the Fed's dovish message and the implications for the economic outlook of an inverted yield curve.

Investors traded cautiously ahead of today’s Fed meeting. Yesterday’s JOLTS report showed US job openings increased in October, indicating that the labor market isn't weakening abruptly and raising the risk that the Fed may strike a hawkish tone despite the widely expected rate cut later today. In response, Treasury yields edged higher and the dollar strengthened.