Evolution of the international financial markets and evaluation of the main events and economic indicators of the previous day session. Available in English.
Risk aversion continued to set the tone on Thursday, with sentiment hampered by fears that elevated inflation could keep central banks in a tightening cycle for longer and the increasing threat of energy rationing in Europe this winter.
Investors continued to trade with a cautious approach, still digesting the upside surprise in the US inflation data and taking on board a plan by the EU to intervene energy markets.
Risk aversion returned to the fore on Tuesday after CPI inflation surprised to the upside in the US, fueling a new upward revision in investors’ expectations about the pace of monetary policy tightening by the Federal Reserve.
Investors started the week trading with appetite for risk, taking position ahead of the CPI inflation report for August in the US, to be released today. According to the Consensus, CPI inflation is expected to have eased to 8.1% y/y (from 8.5%), which, if confirmed, could reduce some pressure on the Fed for continuing hiking policy rates aggressively.
Investors closed the week trading with a risk-on mode, recovering some of the losses of previous sessions following the hawkish rhetoric by major central banks, including the 75 bp interest rate hike by the ECB and comments by Fed Chairman Jerome Powell, who reiterated the need to act forthrightly on inflation “until the job is done”.
Investors focused yesterday on the ECB Governing Council meeting, where interest rates were raised by 75bp, and US Federal Reserve hawkish comments. Both central banks showed determination to tackle elevated inflation and to bring it back to their 2% target.
In yesterday’s session investors traded cautiously as they continued to assess the global economic global outlook, amid worse-than-expected exports data in China, and as they positioned for today’s ECB Governing Council meeting.
Investors continued to trade with caution in anticipation of further monetary tightening by the Fed, despite ISM service sector survey in August was consistent with very solid growth in Q3. In the euro zone, the surveys anticipate the ECB will hike interest rates by, at least, 50 bp on Thursday.
Financial markets started the week on a risk-off mood, as the Russian gas cut off worsened the European energy crisis and the region’s economic outlook.
Investors ended the week with mixed results, with sentiment supported by data showing employment growth in the US slowed down in August, in line with expectations, while the jobless rate rose by 0.2 p. p. to 3.7%. In the eurozone, producer prices (PPI) rose by 37.9% y/y in July, fueling concerns that inflationary pressures are building up.
Risk aversion continued to set the tone across markets on Thursday, following the imposition of lockdown measures in some big urban areas in China. In the US, new weekly jobless claims and the manufacturing ISM survey surprised positively, which, in turn, exacerbated fears among investors of more aggressive interest rate hikes.