Evolution of the international financial markets and evaluation of the main events and economic indicators of the previous day session. Available in English.
Investors' risk appetite rebounded slightly yesterday following Trump's comments late Tuesday on the strength of the US economy. Eurozone government bond yields fell slightly amid the ongoing negotiations to lift the German debt brake. US Treasury yields rose and the curve flattened as trade concerns offset the optimism from the strong February CPI print.
Risk-off sentiment dominated investors for most of yesterday's session. In the Eurozone, peripheral spreads narrowed and the German Bund yield curve steepened as talks between political parties over new spending plans continued. US Treasuries rose as well after the JOLTS report showed an increase in job openings in January.
The week started with a strong risk-off move, particularly in the US. In the eurozone, the Sentix index of investor confidence for March hit its highest level since 2021, while German industrial production for January came in above expectations. Sovereign yield curves flattened as the short end declined, while the long end and spreads were broadly flat.
Investors remained cautious on Friday in an uncertain global political environment. Eurozone government bond yields were flat, although peripheral spreads widened slightly. US Treasury yields were also slightly higher, with curves flattening, after the Fed's Powell said that tariffs could fuel inflation but that the economy was fine so the Fed should remain cautious.
In yesterday's session, German bonds extended their decline, with the 10-year bund yield reaching 2.83%, and the euro appreciated against the dollar as the ECB cut interest rates by 25 basis points to 2.5%. President Christine Lagarde did not pre-commit to setting rates in any direction in the upcoming meetings, and warned of the uncertainty surrounding the effects of the trade war and increased defense spending.
Euro area sovereign bond yields rose significantly after Merz, expected to become Germany's next chancellor, announced a political deal to raise hundreds of millions of euros for defense and infrastructure, claiming, "the rule for our defense has to be 'whatever it takes'". Germany's 10-year sovereign yield saw its largest single-day gain since 1990 (+30bp).
Generalized risk-off session as trade tensions intensified. Following the new round of US tariffs on Canadian, Mexican, and Chinese imports, China imposed a 10-15% tariff on US agricultural products, Canada announced 25% tariffs on C$30 billion worth of U.S. imports, and Mexico stated it would announce tariffs over the weekend.
Markets were mixed across the globe during yesterday's session. In the euro area, renewed talks on increasing defense spending and finding a peace deal for Ukraine drove positive sentiment, while in the US, President Trump's announcement that 25% tariffs to Canada and Mexico would be reinstated on March 4th sent markets into a risk-off trading session.
Mixed sentiment in financial markets as the week came to a close amid political uncertainty in Germany (where Merz has started coalition talks), tariff threats from the Trump Administration (tariffs on Canadian and Mexican imports are expected to be reinstated this week) and inflation data on both sides of the Atlantic.
Widespread declines in global risk assets as investors shunned risky bets with President Trump ratcheting up tariffs. Trump announced that 25% tariffs on Canadian and Mexican goods will take effect on March 4, while Chinese imports will face an additional 10% tariff, resulting in a cumulative 20% tariff increase this year.
Markets were mixed during yesterday's session, ahead of macroeconomic data to be released on both sides of the Atlantic today and Friday. In the US, sovereign bond yields fell following news that potential US tariffs on Mexico and Canada, currently on pause, could be reinstated later than originally anticipated.
Risk-off session in financial markets following the largest monthly drop (seven points) in three years in the U.S. Conference Board Consumer Confidence Index, which fell to 98.3 (the lowest level since July 2024), while twelve-month inflation expectations surged by almost 1 percentage point.