Financial markets extended the gains on Tuesday, with investors' sentiment boosted by dovish comments on inflation and monetary policy from some key Fed officials. As a result, stocks in the US fluctuated around record highs while the decline in US treasury yields stabilized. In Asia, equity indexes advanced further on Wednesday.
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Treasury yields fell as Federal Reserve Chairman Powell testified before Congress that rising inflation is likely to be transitory and that the central bank would continue to support the economy. The Bank of Japan left its 10-year bond yield target unchanged at about 0% after concluding its meeting and also kept the policy-balance rate at -0.1%.
Investors traded in an apparent risk-on mood in yesterday's session, with both stocks and sovereign yields rising across the board. Commodity prices also increased across energy, metals and agriculture products. In FX markets the USD wavered and the EUR traded close to $1.18. Market sentiment benefited from the announcement of a U.S.-Vietnam trade deal.
Investors extended their risk apetite amid positive global manufacturing PMI releases. In August, factory activity remained strong in most economies, but several surveys continued to signal disrupted supply chains and labour shortages as the main risks. In the U.S., the input price index fell from 85.7 points towards 79.4.
Yesterday, global financial markets were marked by heightened investor caution amid rising fiscal uncertainty and underwhelming macroeconomic indicators. In the US, the House of Representatives narrowly approved a sweeping tax and spending package projected to inflate the national debt by approximately $3.8 trillion over the next decade.
Investors' sentiment continued to deteriorate amid escalating trade tensions and Russia's initial refusal to agree to a truce in Ukraine. Equity markets ended lower, particularly in the US, and Treasury yields fell as investors increased their demand for safe-haven US government debt. Oil prices declined as markets weighed the risk that the tariff war could dampen global energy demand.
Investors traded cautiously amid heightened tariff uncertainty, fresh rounds of talks between Russia and Ukraine, and mixed macro data. In the US, the Conference Board Consumer Confidence index fell to its lowest level since 2021, while the German Ifo business climate index rose, as companies' expectations about the future improved.
Markets ended the week in a mixed mood as investors pondered over the Fed's plans for stimuli withdrawal, risks from China's Evergrande and the announcement that Chinese authorities will ban all transactions and mining related to cryptocurrencies. Global stocks declined or closed flat while the USD rose against most AE and EM currencies.
Improved sentiment during yesterday's session was driven by optimism on trade talks between the EU and the US, and macroeconomic developments. US consumer confidence strongly rebounded, with the Conference Board index jumping to 98.0 in May from 85.7, and in France, inflation rose 0.6% yoy in May vs. 0.9% expected, and down from 0.9% in April.
Investors started the week on a positive mood, favoring risky assets amid supportive economic releases. Volatility declined, stock markets rallied across advanced and emerging economies, most currencies strengthened against the USD and commodity prices rebounded on the back of positive market sentiment.
Yesterday, global financial markets delivered a mixed performance, shaped by judicial developments in the United States and uneven economic data. In the US, an initial court ruling blocked most of President Trump’s tariffs, only for a federal appeals court to later reinstate them, injecting renewed uncertainty into ongoing trade negotiations.
Investors ended the day with positive results, after strong sentiment data in Europe (Germany’s Ifo business climate index rose to the highest level in two years) and labour statistics in the US (new jobless claims fell to 411,000 weekly). In addition, President Biden announced a deal in the Senate on an infrastructure package worth USD 1.2 trillion.
In yesterday's session, investors' sentiment improved and recovered from Monday’s lows amid upbeat corporate results. Stock indices in the euro area and in the US rose as traders bought the dip (the S&P 500 registered its biggest daily increase since March).
A strong US jobs report for January, with the unemployment rate falling 0.1 p.p. to 4.0% (the lowest since May) and wage growth accelerating to 4.1% yoy from 3.9% in December, reaffirmed expectations of a cautious Fed this year. Expectations for the next interest rate cut were delayed to July/September, and the probability of a second rate cut fell below 50%.
US headline inflation rose to 2.7% (2.4% in May) and core inflation rose 0.1pp to 2.9%. A detailed breakdown showed prices have begun to rise in some goods categories, suggesting tariffs are beginning to impact. Investors pushed expectations of the first rate cut from September to October, and Treasury yields rose along the curve. The dollar slightly strengthened.
Markets rebounded on Monday as geopolitical fears eased amid signs that Iran was seeking to end hostilities with Israel. Sovereign yields fell modestly across the eurozone with peripheral spreads narrowing slightly, as news that the EU would be willing to accept a broad 10% tariff on EU goods from the US were dismissed by the European Commission.
Yesterday's session was mixed across asset classes and regions. In the Eurozone, sovereign yields rose and peripheral spreads widened as countries grapple with the need for higher military spending. Separately, ECB's Schnabel argued the 2.75% rate is not undoubtedly restrictive, while ECB's Panetta argued that the consumer-led recovery is not materialising.
Yesterday, global markets ended the session on a cautious footing as mounting tensions in the Middle East and renewed trade uncertainty weighed on investor sentiment. European equities edged lower amid broad risk-off flows, while U.S. markets remained shut in observance of Juneteenth. In fixed income, eurozone sovereign yields rose, particularly at the long end of the curve, while peripheral spreads widened.
Financial markets had a mixed performance on Wednesday. US Treasury yields were flat as the Fed kept rates unchanged and Powell said the Fed was in no rush to cut rates and will wait to see the impact of Trump's policies on the economy.
Investors started the week on a slightly positive note, with US markets closed for the President's Day holiday. In the eurozone, government bond yields rose on the likelihood of increased public spending on defence. Peripheral spreads narrowed as German bonds came under some selling pressure ahead of Sunday's general election.