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In Tuesday’s session, investors continued to focus on the narrative that US growth is slowing and that the next move by major central banks will be to cut interest rates at some point next year. This extended the market’s risk-on sentiment of recent weeks, with government bond yields falling across the board and major equity indices rising.

Volatility and risk aversion continued to set the tone across markets on Wednesday, with investors taking position ahead of a crucial inflation report in the US later today and the kickoff of the Q3 corporate earnings season on Friday.

Risk aversion continued to dominate in yesterday's session, with the key themes remaining the COVID situation in China and hawkish comments by central bank officials. In the euro area, both Christine Lagarde and Joachim Nagel said that inflation will remain elevated and might not have peaked yet, justifying a tighter monetary policy stance.

On Friday, investors continued to weigh the hawkish monetary policy agenda of the main central banks and the upside surprises on inflation data. In the euro area, headline HICP inflation jumped from 9.1% to 10.0% and core inflation increased by 0.5pp to 4.8% yoy.

Markets took a pause after last week’s rally which brought the main stock indices to post their best monthly advance in years, and sovereign bond yields their largest monthly cuts in two years. Investors have now turned cautious ahead of this week’s US employment data while still pricing in the likelihood of interest rate cuts as soon as March 2024.

Investors ended the week by revising their expectations for future interest rates upwards as Friday’s US employment report for November beat expectations for job creation and a lower unemployment rate. This caused Treasury yields to rise across the board, as it should force the Fed to remain hawkish and potentially delay any interest rate cuts.

Investors started the week on a subdued note as they await key central bank meetings and data releases this week. Sovereign bond yields were little changed ahead of today's US CPI report. Yesterday, the NY Fed's 1-year inflation expectations index for November extended its decline to 3.4% showing the impact of interest rate hikes.

Risk aversion continued to set the tone during a volatile session on Tuesday, as a better-than-expected sentiment data in the US revived concerns among investors about the pace of monetary policy tightening by the Fed.

US November CPI report came mostly in line with expectations: prices grew 0.1% MoM (vs. 0.0% expected) and 3.1% YoY (as expected) down from 3.2% in October, reinforcing the view the Fed will leave rates unchanged at its meeting today. The lack of surprises left markets rather muted, with treasury yields flat and stock indices slightly advancing.

In yesterday's session financial markets continued to digest the last US Federal Reserve monetary policy decision, where interest rates were held unchanged at the 5.25%-5.50% target range and President Jerome Powell hinted that we might already be at the peak of the hiking cycle, although new rate hikes were not definitely ruled out.

Investors continued to err on the side of caution during a session with mixed results on Thursday. The key focus remained the outlook for global growth and inflation and the implications for monetary policy decisions.

Investors continued to trade with caution during the last session of the week. In the US, a stronger-than-expected rise in PPI inflation (0.3% m/m and 7.4% y/y in November) triggered a pickup in sovereign bond yields and a decline in stock indices, as investors reassessed their expectations for monetary policy ahead.

The week started off with a volatile session as markets await key economic data this week (PMIs for advanced economies and US 3Q GDP), 3Q euro area Bank Lending Survey, the ECB's rate decision, further 3Q earnings, and news from the Middle East.

In yesterday’s session, investors traded cautiously as they continued to assess the intensity and duration of the monetary policy tightening that central banks are likely to agree this week and in the coming months.

In yesterday's session investors traded with a somewhat risk-on mood as they downplayed the messages from central bank officers. From the US Federal Reserve, Raphael Bostic said that inflation will come down relatively slowly, which will not urge a fast change from the restrictive monetary policy stance.

In yesterday’s session, the lower-than-expected release of US CPI inflation pushed down the expectations of a far too tightened monetary policy in the Federal Reserve. Headline inflation moderated from 7.7% to 7.1%, confirming the downward trend but still at very elevated levels, while core inflation edged down 0.3pp to 6.0%.

In yesterday’s session, the US Federal Reserve meeting centered the stage. It raised official interest rates by 50bp up the 4.25%-4.50% target range, a slowdown in the pace of monetary policy tightening, but still a large move by historical standards. Jerome Powell signaled that ongoing interest rate hikes will be necessary to return price stability.

Market sentiment remained subdued on Tuesday as investors awaited Thursday’s US inflation report for December, which could shed some light on the Fed’s future interest rate decisions. In this context, government bond yields rose in the eurozone, despite the negative surprise from German industrial production for November, and fell slightly in the US.

During Friday’s session, markets traded with a slightly higher risk appetite to end a week without any major economic data releases. Sovereign bond yields fell across the board, most notably on the longer ends of the curves, while the main equity indices advanced slightly.

In the last session of the week, investors' sentiment improved as the odds for a 100bp hike in the next US Federal Reserve meeting decreased.