Investors turned cautious again on Tuesday as the Israel-Iran conflict continued. US Treasury yields fell ahead of the FOMC meeting, where the Fed is expected to leave rates unchanged as it seeks more clarity on the impact of tariffs. Yesterday's data releases showed a softening US economy in May: retail sales dropped by more than expected (although so-called "core" retail sales increased); import prices remained stable, surprising to the upside; and industrial production fell slightly.
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Financial markets ended the day with negative results, following the release of disappointing survey sentiment data in both the US (the services ISM fell to 60.1 in June from 64.0 in May) and in Germany (the ZEW sentiment indicator dropped from 79.8 to 63.3). In addition, industrial orders in Germany plummeted in May (-4% m/m).
Financial markets closed the week with a sell-off session amid concerns of a new coronavirus variant identified in South Africa. The main concerns are the speed at which this variant can spread and whether it will be immune to the vaccines. Volatility rose and demand for safe assets increased.
Markets started the week in a mixed mood as investors eye trade negotiations and the central bank meetings in Sintra. Market confidence in Fed rate cuts drove U.S. sovereign yields down, while euro area sovereign yields were little changed. The euro strengthened against the dollar and edged towards $1.18 (a 5-year high).
Investors traded cautiously in yesterday's session and, in the euro area, the major stock indices declined and sovereign yields edged lower. In a panel of central banks in Sintra, Fed's Powell acknowledged that the Fed would have already cut rates this year absent Trump's tariffs, while the ECB's Lagarde stated that inflation is at target in the euro area.
In a volatile session, investors’ sentiment was clouded by disappointing labour data in the US (new jobless claims unexpectedly rose to 373k during the first week of July) and uncertainty about the evolution of the pandemic. In Europe, the ECB confirmed a decision to modify its inflation target to a symmetric 2%.
Investors traded cautiously during yesterday's session ahead of the FOMC meeting today, in which the Fed is expected to lower interest rates by 25bp (see our take here). US Treasury yields edged down, euro area sovereign yields were flat, and stocks fell on both sides of the Atlantic. The euro rose against the dollar to its highest in 4 years, close to 1.187.
Investors kicked off the week with a risk-on session driven by optimism that China and the U.S. will announce a trade deal as Trump and Xi Jinping are set to meet at a summit in South Korea. Global stocks advanced, with the S&P 500 hitting a new all-time high, and the Ibex-35 surpassing its 2007 record. The dollar weakened and gold prices fell below $4,100/ounce.
Yesterday's session was dominated by the news that the Trump administration will impose harsh sanctions on two large oil companies in Russia, in an attempt to pressure Moscow into negotiations over the war in Ukraine. As a consequence, Brent prices rose +5% to $66/barrel and sovereign yields advanced globally, especially on the long side of the curve.
On Friday, equity markets on both sides of the Atlantic opened with losses as investors weighed concerns about credit quality in the US after two US regional lenders disclosed loan issues. However, during the day those concerns eased, allowing the US indices to close with gains and the Europeans to partially recover.
Wednesday saw another mixed session in financial markets. Eurozone sovereign bond yields fell, with curves flattening slightly, as August industrial production data in the eurozone surprised to the upside (though still contracted). The French spread also narrowed and sat below the Italian one, as Lecornu’s new government cemented its chances of survival.
Investor sentiment improved at the start of the week as President Trump softened Friday’s rhetoric on China and both sides signaled openness to resuming trade talks. Risk appetite also benefited from the de-escalation in the Middle East. Global equity indices advanced, led by the technology sector, while volatility declined sharply.
Financial markets started the week with a risk-on session, as fears about the risk that the spread of the omicron variant could lead to more severe restrictions eased. In addition, China's central bank said it would cut the amount of cash that banks must hold in reserve, releasing 1.2 trillion yuan in long-term liquidity.
Markets were mixed in yesterday's session as the U.S. government shutdown clouded data releases. Technology equities drove the U.S.' Nasdaq to record highs, while the S&P 500 was barely changed and euro area stocks were mixed. Sovereign yields nudged down and the USD inched higher. Brent oil prices continued to fall ahead of the weekend's OPEC+ meeting.
Stock markets posted gains in the last session of the week. In the U.S., the S&P 500 advanced by +0.1 percent after swinging back from early-trading losses, while in Europe the main indices registered more solid gains.
With little macro news to trade on, markets had a somewhat quiet session. Sovereign yields were mostly flat around the largest economies, with the exception of the US, where an increase in supply of government bonds drove long-term yields slightly higher. The dollar strengthened, following Fed's chair Powell cautious comments regarding future easing.
Investors traded with a risk-on mode during the first session of the year, extending recent gains while shrugging off a further deterioration in the number of COVID daily infections across the world.
Markets ended the week in a cautious mood. Stocks were mixed, with European indices suffering moderate losses while the S&P 500 ended largely unchanged after having dipped earlier in the session. The earnings season kicked off with mostly solid results. Bitcoin closed "Crypto week" little changed (Trump signed the GENIUS Act on Friday).
On Tuesday investors traded with a risk-off mood as they took position ahead of the release of key reports for the Q4 earning season this week and the first monetary policy meeting by the Fed on 25-26 January.
Investors traded with caution in the first session of the week. Looming trade negotiation deadlines and the EU's possible retaliatory measures triggered safe-haven flows and a rally in global bonds, with sharp declines in 10-year euro area sovereign yields and narrower peripheral spreads. Gold rose and the EUR strengthened towards $1.17.