In the first session of the week, investors extended the positive tone seen during last Friday. In the euro area, economic data releases came in better than expected (EZ Sentix Investor Confidence rose in June to 28.0 from 21.0 and Spain's industrial production rose by 1.2% mom in April).
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In the last session of the week, investors traded with a positive mood amid robust employment data in the U.S. Non-farm payrolls rose by +559k in May (consensus expected +675k on average) and the unemployment rate dropped by 0.3 p. p. to 5.8%.
In the first session of the week, investors traded cautiously in the absence of relevant economic data releases while continuing to digest last week's Fed and ECB monetary policy meetings. With the US markets closed due to a holiday, attention centered to messages from ECB officials.
Investors kicked-off the week on a cautious note as they await the ECB's Governing Council meeting (on Thursday), widely expected to lower interest rates by 25bp, and US inflation figures for November (released on Wednesday), a key report for the Fed's decision next week.
Financial markets ended the week on a mixed note. In the US, November payrolls data showed that employment grew slightly more than expected (with October data revised upwards), but unemployment rose by 0.1% to 4.2% and wage growth accelerated slightly. Treasury yields fell and the probability of a -25bp cut by the Fed in December rose to 90%.
Euro area markets had a cautious session ahead of the no-confidence vote in France, approved late last night. Sovereign bond yields were mostly flat, and the region's main equity indices posted small gains. The euro was flat against its main peers, leaving its cross with the US dollar at 1.05.
Investors traded cautiously amid political tensions in France, where lawmakers are set to vote today on no-confidence motions. Euro area sovereign bond yields edged lower, and France's risk premium narrowed to 85bp after reaching 88bp in the previous session. The region's main stock indices advanced slightly, and the euro held steady at 1.05 against the dollar.
In the last session of the week, stock indices declined across the globe and sovereign yields edged lower amid continuing concerns over trade tensions between the U.S. and China and better-than-expected U.S. retail sales.
Solid US economic data released yesterday showed a still resilient economy reinforcing the the case for the Federal Reserve to keep interest rates higher for longer. September US industrial production rose to the highest level in nearly five years to 103.6 and retail sales increased 0.7%, up from 0.6% beating expectations.
In yesterday's session, investors traded with optimism as they weighed the details on the phase-one trade deal with the weaker-than-expected business sentiment data in advanced economies.
The ECB monetary policy meeting yielded, as expected, no change in the official interest rates and a communication consistent with a first rate cut in June, at the next meeting. Christine Lagarde reiterated, though, that the ECB will be data-dependent and added that it will not be Fed-dependent.
Investors continued to trade in a mixed mood in yesterday's session. Commodity prices declined across the board while the USD strengthened. Stocks were mixed, advancing in Asia and Europe but declining moderately in the U.S.
Risk appetite improved on Tuesday after US inflation surprised to the downside in June. The CPI print was driven by falling energy prioces but also softer core services, particularly shelter, overshadowing Warsh’s hawkish remarks in Congress, where he said he has "no tolerance for persistently elevated inflation". Interest rate expectations for the Fed declined, with markets now pricing a second hike over the next 12 months with a 70% probability.
In yesterday's session, investors traded cautiously as they positioned for today's conclusion of the Federal Reserve meeting (where we expect Jerome Powell to announce the beginning of a reduction in the pace of net asset purchases) and tomorrow's Bank of England monetary policy meeting.
Investors traded with a risk-on mood yesterday, after the confirmation that the Fed will begin this month to taper its net asset purchases, but that it will keep its policy interest rates unchanged for the foreseeable future, at least until the economy reaches full employment.
In yesterday's session financial markets experienced risk aversion flows. Despite the positive results presented by some companies, the increase in COVID cases around the globe led investors to move from equities tied to the economic cycle to safer assets such as sovereign bonds, gold and safe haven currencies.
In yesterday's session investors adjusted their interest rate expectations amid monetary policy and fiscal news in the euro area, while corporate profits centered the stage in the US.
Yesterday's session opened with the negative tone seen in the previous days driven by the increase in covid-19 cases around the globe.
In yesterday's session, investors traded cautiously as they continued to assess whether central banks will be able to tame inflationary pressures without causing a hard landing. Geopolitical news centered the stage too, after the G7 meeting in Germany and ahead of today's NATO summit in Madrid.
Escalating tensions in the Middle East drove a risk-off move across markets on Friday, with Brent crude rising above USD 100/barrel as concerns over energy supply disruptions intensified. Global equities declined, while the US dollar strengthened as a safe haven, pushing the EURUSD cross toward 1.14.