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In yesterday’s session, investors focused their attention to the release of the last FOMC meeting minutes, which reinforced previous communication that Fed members still expect inflation to return to 2% over the medium term, while acknowledging that it will take longer than previously anticipated.

During a volatile session, financial markets closed the day with no clear direction, with investors taking position ahead of the crucial ECB meeting on Thursday and the release of the US CPI inflation on Friday.

Investors started the week with a risk-on mood, with sentiment supported by easing COVID restrictions in China, including reports that Chinese regulators are relaxing some rules against some tech giants. Data also showed the decline in the Chinese services sector eased in May (the services PMI rose from 36.2 to 41.4).

Investors continued to adjust their expectations for future interest rate cuts following strong PMIs, higher-than-expected wage growth in the euro area, and some hawkish remarks from central bank officials. Markets are now pricing in just two cuts from the ECB this year and one cut from the Fed, down from three and two, respectively, last week.

A risk-on session across financial markets on Thursday, with sentiment boosted by the recent decision by the OPEC to ramp up plans to increase its oil supply (+650k barrels a day in both July and August) and solid economic data (eg the decline in new weekly jobless claims in the US).

Investors continued to trade with a risk-on mood on Thursday, lifting demand for “buying the dip” and after the release of positive economic data (e.g. the decline in weekly jobless claims in the US).

Sentiment in sovereign bond markets during yesterday's session turned more positive following the revision of US GDP Q1, which showed the economy grew somewhat less than previously estimated (0.33% vs 0.42% q/q), giving the Federal Reserve more room to lower interest rates this year. Yields on sovereign bonds fell across the board.

As expected, the ECB lowered interest rates by 25 bp, taking the depo and refi rates to 3.75% and 4.25%, respectively. As for its next steps, the ECB once again remarked future decisions will be “data-dependent”, noting that the inflation path will not be exempt from surprises.

The week ended on a ‘higher for longer’ note, which weighed on assets. US non-farm payrolls for May showed a greater-than-expected job creation and an acceleration in average hourly earnings growth, while euro area compensation per employee also surprised on the upside, sending sovereign yields higher across the board on both sides of the Atlantic.

Sentiment deteriorated across financial markets on Wednesday, as investors digested the hawkish narrative in the accounts of the Fed’s latest meeting and the likely new imposition of sanctions against Russia.

During yesterday's session, investors continued to assess the results of the French elections last weekend which left the country with a fragmented National Assembly. Financial markets seemed to value the situation negatively and adopted a risk-averse tone, sending euro area sovereign bond yields higher and equities sharply lower, particularly in France.

Economic data releases on Friday boosted investors' sentiment and allowed sovereign yields to edge down and equities to advance. Price pressures continue to moderate but remain elevated, according to the ISM prices paid index in the US (which fell from 67.8 to 65.6) and the PPI in the euro area (which declined from 24.5% to 15.0% y/y).

Yesterday’s session centered around the June inflation report from the US: inflation cooled to 3.0% in June (from 3.3% in May) and core inflation fell to 3.3% from 3.4% last month. On a monthly basis, prices fell –0.1%, the first negative rate in four years. Markets are discounting two interest rate cut from the Fed in 2024, and a 40% probability of a third cut.

Financial markets started the week with all eyes on the ECB’s Governing Council meeting on Thursday.  The ECB is expected to leave interest rates unchanged and stick to its "data dependency" approach. European sovereign bond yields fell and peripheral spreads tightened yesterday ahead of the meeting and today's Q2 Bank Lending Survey.

Markets on both sides of the Atlantic saw mixed results yesterday. In the eurozone, where all eyes are on tomorrow’s ECB meeting, sovereign bond yields fell while peripheral spreads remained flat after the ZEW survey showed German business sentiment at its lowest in four months in July and despite the Q2 BLS showing an increase in credit demand.

Financial markets started the week with cautious optimism as headlines on the war in Ukraine continued to weigh on investors' sentiment. Today, Russian and Ukrainian delegates are holding meetings in Turkey, with the Ukrainian authorities reportedly willing to discuss neutrality and other conditions.

In the last session of the week, investors traded cautiously in absence of key macroeconomic data releases and as they waited for monetary policy meetings this week in the main central banks.

Markets had a muted reaction to President Biden’s decision to drop out of the presidential race and endorse Vice President Harris as the Democratic candidate. Sovereign bond yields were mostly unchanged on both sides of the Atlantic and the US dollar was flat against its main counterparts.

In yesterday's session, economic data releases continued to center the stage. In the US, Q2 GDP figures were revised downwards from 2.4% q/q SAAR to 2.1%, while, in the euro area, country members' inflation figures failed to prove a decisive trend towards the 2%. Euro area aggregate data will be released today.

Investors’ attention during Friday’s session focused on the worldwide cyber outage that affected banks, airlines, and telecommunications companies. The software glitch unnerved investors and dragged down overall sentiment, affecting mostly equity markets which ended the session lower across the globe.