26 juny 2023
Investors closed the week with yet another risk-off session, as recession fears returned to the fore following weaker-than-expected economic survey data across advanced economies.
Evolution of the international financial markets and evaluation of the main events and economic indicators of the previous day session. Available in English.
Investors closed the week with yet another risk-off session, as recession fears returned to the fore following weaker-than-expected economic survey data across advanced economies.
The hawkish stance of central banks in advanced economies continued to center the stage in yesterday’s session. On the one hand, the Bank of England surprised with a 50 bp hike (25bp were expected by the consensus) to set the official interest rate at 5%, the highest level since 2008.
Yesterday’s session was marked by speeches from several central bankers. In the US, Fed Chairman Jerome Powell noted in his speech to Congress that he would not characterize last week’s decision as a pause, noting that additional 50 bp rate increases are a good guess of where monetary policy is headed, in line with the updated Dot-Plot.
In yesterday’s session, investors continued to err on the side of caution amid hawkish rhetoric from ECB officials and mixed economic data.
In the first session of the week, investors traded cautiously in the absence of relevant economic data releases while continuing to digest last week's Fed and ECB monetary policy meetings. With the US markets closed due to a holiday, attention centered to messages from ECB officials.
In the last session of the week, investors weighed better-than-expected economic data releases in the US with a hawkish tone from Federal Reserve officials. In particular, Christopher Waller and Thomas Barkin highlighted that inflation remains too high and stubbornly persistent, which might prompt a 25bp rate hike at the July meeting.
Yesterday’s session was dominated by the ECB’s 25bp hike, which brought the deposit facility rate to 3.5%, and by a hawkish tone from President Lagarde. She strongly hinted at a further 25bps hike in July, stating that the bank still had some ground to cover and was not considering a pause.
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.
A larger-than-expected decline in US inflation in May, from 4.9% yoy to 4.0%, increased the odds investors attach to a pause in the Federal Reserve interest rate hikes at today’s meeting. Nevertheless, core inflation declined by less than expected, from 5.5% yoy to 5.3%, pushing the Fed to, at the very least, maintain a hawkish tone.
In the first session of the week, investors traded cautiously ahead of today's key inflation data release in the US and the upcoming central bank meetings in the US (where we expect the Fed to pause its aggressive rate hike cycle) and the euro area (where the ECB will most likely hike rates by 0.25pp).
Last week ended on a subdued note. Equity indexes were mixed, mostly lower in Europe but with some gains in the US, especially in the interest rate sensitive Nasdaq. Long-dated government bond yields were broadly lower, while shorter-dated yields rose, particularly in the US. Oil and commodities were lower following weak Chinese economic data.