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Markets ended the week on a negative mood, following the release of weaker than expected employment data in the US (non-farm payrolls rose by 235k in August after 1,053k in July). The disappointing figures could well postpone a decision by the Fed to taper its asset purchases for later this year.

Markets had an intense risk-off session following weaker-than-expected manufacturing data in the US, and as investors position themselves for the US jobs report on Friday, which could determine the Fed's next move. In particular, the ISM index for July came in at 47.2, slighlty higher than last month's, but still in contractionary territory.

In yesterday's session, investors' sentiment deteriorated amid the expectation of a tighter monetary policy from the Federal Reserve and the ECB and disappointing corporate results. Concerns about the Covid-19 situation in China added to the somber sentiment.

The Federal Reserve left interest rates unchanged at 5.25-5.50%, as expected, and hinted that if inflation readings continue in the right direction, a September rate cut "could be on the table." Markets reaffirmed their expectation of three 25bp interest rate cuts for the remainder of 2024. Treasury yields fell by +10bp, and US equities rallied.

During yesterday's session, investors continued to digest the implications of the US Supreme Court's ruling to strike down US emergency tariffs. While the global tariff stands at 10%, the Trump administration is reportedly working to increase it to 15%. Against this backdrop, government bond yields closed flat on both sides of the Atlantic, in a day of choppy trading.

Investors ended the week with renewed risk appetite as inflation data released during the day was broadly in line with expectations. In the US, the core PCE price index rose 0.2% month on month in June, as expected, bolstering hopes of a Fed rate cut in September. In the eurozone, 1 and 3 year inflation expectations remained at 2.8% and 2.3% respectively.

In the last session of the week, renewed concern over the coronavirus overshadowed positive economic data releases and markets retreated, reversing the gains recorded earlier in the week.

Lower-than-expected PMIs for July in the euro area (services 51.9 vs. 52.9 expected, and manufacturing 45.6 vs. 46.1 expected) sent the region's sovereign bond yields higher. Equities were mixed, ending mostly lower, while the PSI20 advanced and the Ibex-35 ended flat, boosted by the energy and utilities sectors.

In the last session of the week, investors traded with a moderately optimistic tone amid economic data releases that offered mixed signals on the monetary policy path ahead. On the one hand, the US ISM manufacturing index fell from 49.1 to 47.8 (49.5 expected), with employment and new orders subcomponents decreasing.

International investors remained cautious with no further progress in equity markets and stability for the sovereign yields after the geopolitical tensions intensified again at the beginning of the week.

Financial markets ended the week on a positive note, supported by stronger-than-expected employment data in the US (non-farm payrolls rose by 531k in October while the jobless rate edged down by 0.2 p.p. to 4.6%) and the approval by lawmakers in Washington of the $1.2tn infrastructure spending bill.

In yesterday’s session, the ECB announcements centered the stage, with a 50bp hike that pushed interest rates off the negative territory and the unveiling of the Transmission Protection Instrument (TPI).

In yesterday’s session, investors had to weigh mixed economic data indicators, as flash PMIs showed how the manufacturing sector in the euro area weakened slightly in March, deep below the 50-points threshold, while the services index managed to increase (52.9 for the euro area).

The upside surprise in the US CPI figure for May led to a sell-off session on Friday as investors reinforced their bets for additional 50bp interest rate hikes from the Federal Reserve beyond the June and July meetings. Headline inflation accelerated to 8.6% y/y while core inflation ticked down to 6.0%.

In yesterday's session, investors traded with an optimistic mood as they digested the Fed's decision to initiate the tapering of net asset purchases this month and the dovish confirmation that it will keep its policy interest rates unchanged for the foreseeable future.

Italian politics and European natural gas developments centered the stage in yesterday’s session. On the one hand, Draghi’s coalition government failed to pass the confidence vote, increasing the odds of snap elections this autumn.

In yesterday’s session, investors continued to trade with a risk aversion mood, extending recent losses across the main equity markets. In its Beige Book, the Fed noted that economic growth is downshifting due to the spread of the Delta variant, while several Asian countries are extending restrictions to control the outbreak.

In yesterday’ session, investors continued to digest this week’s US CPI report, which showed the “last mile” of bringing inflation back to target is proving to be the hardest. Markets were mixed, with sovereign bond yields advancing modestly on both sides of the Atlantic, while equities posted slight gains in the euro area and small losses in the US.

Investors traded with a positive tone in yesterday's session as March PMI data surprised on the upside in most regions, particularly in the euro area (Composite Index 52.5 vs 48.8 in February). The advance was more robust in the manufacturing sector, although the services index also increased.

European equities performed  well on Thursday after the Federal Reserve raised its growth forecast for the US, and the Eurostoxx50 rose 0.5%. Banks and automakers led the gains, as they are favored by rising market interest rates.