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.

Stock markets in advanced economies registered moderate gains in a quiet session, as exemplified by the low volatility levels in which the VIX stood.

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).

US inflation for November came in line with expectations: headline inflation ticked up to 2.7% yoy (+0.3% mom), from 2.6% in October, and core inflation remained unchanged at 3.3% yoy (+0.3% mom). After the release, expectations for a Federal Reserve 25bp interest rate cut this month rose to almost 100%. 

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.

Markets shrugged off a jump in U.S. inflation and the halt in Johnson & Johnson's COVID-19 vaccine rollout, and investors continued to favor risk assets in yesterday's session. Stocks and commodity prices advanced while the USD weakened moderately against the major currencies.

The hawkish rhetoric from central bank officials was the main driver in yesterday's session, which saw sovereign yields on the rise in the euro area and in the US. In the ECB, Pierre Wunsch said that interest rates might remain at restrictive levels for longer than previously anticipated considering the labor market strength and increasing wages.

Markets started the week in a moderately positive note and sentiment pushed European stocks mildly upwards.

As widely expected, the Fed held policy interest rates unchanged at the range of 5.00%-5.25%, although officials signalled that further hikes (of around 50bp by the end of the year) were likely to be needed, following upward revisions in their macro outlook for GDP growth, inflation and the labour market.

Investors continued to trade with a cautious approach at the start of the week, with risk appetite overshadowed by fears of persistent inflationary pressures and a global recession. UK markets remained in focus, after the pound fell near parity against the USD and bond yields surged as the government reiterated plans to cut taxes.

Investors traded in a cautious mood in the first session of the week. Volatility rose, U.S. equities declined moderately and European and EM stocks nudged up.

In the first session of the week, investor sentiment improved moderately amid mixed virus-related news.

In the last session of the week, investors traded with a risk-off mood amid fears of a escalating conflict in the Middle East. The VIX index, despite remaining at historically moderate levels, reached its highest level since March and stock indices declined across the globe.

Minutes of the Federal Reserve's May 1-2 meeting showed officials said the economic outlook warranted another interest-rate hike "soon".

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 started the week with a risk-on session, as investors shifted their focus to corporate earnings and economic indicators, taking a breath from the prospect of monetary policy tightening by the major central banks.

In yesterday's session volatility declined as investors celebrated the speech of Janet Yellen. In her confirmation hearing to become the new US Treasury Secretary, Yellen urged lawmakers to "act big" on the next fiscal package and focus initially on public health and widespread vaccinations. Today Joe Biden takes office as US president.

In yesterday’s session, investors took a mildly positive view of December’s US CPI report, which confirmed the disinflationary momentum in the US economy, even though the headline figure was higher than expected. Government bond yields fell on the news and the market's discounted probability of a Fed rate cut in March rose.

In the last session of a volatile week, financial markets operated in a positive mood.