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In the last session of the week, investors focused their attention on the ECB and Fed officials’ speeches, which tried to push back against the expectation for early interest rate cuts.

In yesterday's session, investors traded without major economic references, beyond the Germany IFO which confirmed weakness in business sentiment, and amid continuing comments from central bank officials trying to push back against the expectation of the first interest rate hike (e.g.: ECB's Stournaras and Fed's Mester). 

In yesterday’s session, investors focused their attention to macroeconomic data releases. In the UK, inflation decreased by more than expected in November, from 4.6% to 3.9% the headline index and from 5.7% to 5.1% the core, reinforcing the idea that the BoE might start cutting rates in the first half of 2024.

Investors are starting the year cautiously as risk appetite seems to have eased over the holidays. As central bank officials tried to push market expectations of imminent rate cuts, although these expectations remain anchored in March for the Fed and April for the ECB, government bond yields rose across the board, particularly in the euro area.

Markets traded on a risk-off tone for a second session in a row after data showed the US labor market continues to cool, boosting expectations the Fed will cut interest rates at its next meeting. In particular, job openings in July (JOLTS) fell to the lowest level since 2021.

Risk-off mode took over financial markets on Friday, as the US employment report showed a cooling labour market. Hiring in the US is slowing down, but not falling off a cliff, so implicit interest money market rates are still discounting a 25 b.p. cut from the Fed at its September meeting.

Investors ended the week on a risk-on tone as monetary policy expectations drove sentiment during Friday's session. The likelihood of a 50 b.p. rate cut by the Fed this week rose to almost 50%.

The Federal Reserve's decision to lower interest rates by 50 bp sent global stocks soaring during yesterday's session. Equities climed more than 2% in the euro area, and in the US, the S&P 500 reached a new all-time high, as stocks priced in the soft-landing scenario.

Investors ended the week on a slight risk-off sentiment. With no major macroeconomic data releases on either side of the Atlantic, traders seemed to consolidate the gains made on Thursday following the Fed's large rate cut amid a heavy trading environment as Friday was the quarterly expiration date for several options.

Financial markets experienced a risk-on session on Friday as the US employment report for September came in better than expected, shrugging off geopolitical concerns. The strength of the labour market underlined the dynamism of the economy and eased pressure on the Fed to cut interest rates more aggressively to support the economy.

Financial markets had another mixed session on Tuesday, with little in the way of data releases to guide investors. In the money market, interbank rates moved higher on both sides of the Atlantic as investors reassessed their expectations for central banks' policy. Fed officials speaking yesterday stressed the importance of a cautious Fed in achieving its twin target.

Wednesday saw another mixed session in the financial markets ahead of today's US inflation report. Government bond yields rose slightly in the eurozone and more sharply in the US. The move in the eurozone came as some ECB officials expressed doubts about a rate cut in October, which had so far been favoured by most of the bank's officials who spoke.

Financial markets ended the week on a slightly positive note as the earnings season in the US kicked off with the big banks posting solid results. Investors also continued to digest inflation data received during the week which confirmed expectations of a 25bp rate cut instead of a 50bp cut from the Fed. 

Financial markets started the week with subdued trading, as debt and money markets in the US were closed for a Federal holiday. Eurozone sovereign bond yields were fairly flat, with peripheral spreads narrowing slightly, as investors continued to focus on Thursday's ECB meeting, for which they expect a 25bp interest rate cut.

Revised inflation figures for Spain and France reaffirmed market expectations of a 25bp interest rate cut at this week's ECB meeting. And, while industrial production for the euro block rose in August and sentiment indicators improved in Germany, the data are unlikely to prevent the central bank from delivering a cut.

Investors traded cautiously ahead of the ECB's Governing Council meeting today, for which markets are expecting a 25 bp interest rate cut. Euro area sovereign bond yields fell for a second straight session and the main equity indices in the region were mixed.

Wednesday saw a mixed session in financial markets, with no major macroeconomic data releases to guide investors. US Treasury yields rose as investors weighed election uncertainty and a Republican sweep scenario, and priced in a slower pace of Fed rate cuts. In the eurozone, however, government bond yields fell on expectations of a more dovish ECB.

Financial markets had a mixed session as traders weighed incoming macro data and corporate earnings announcements to gauge the state of the economy. The JOLTs report showed that US job vacancies fell in September, while the Conference Board consumer confidence for October surprised to the upside (as did the German Gfk sentiment index for November).

Investor risk appetite remained fairly high as the US election results were digested. The Fed cut rates by 25bps yesterday as expected (as did the BoE) noting an easing labour market and robust economic growth. Investors regarded the rise in US jobless claims last week as due to hurricane disruptions. Treasury yields fell, reversing some of the previous day's moves. 

US inflation data was in line with consensus expectations: headline inflation rose in October to 2.6% yoy from 2.4% in September, while core inflation, which excludes flood and energy, remained at 3.3%. Financial markets continue to price in 25 bp rate cut by the Fed at its upcoming December meeting (with an 85% probability).