Evolution of the international financial markets and evaluation of the main events and economic indicators of the previous day session. Available in English.
Investors traded cautiously in yesterday’s session as they await key economic releases this week, including euro area 1Q GDP (today), which is expected to show the economy grew 0.2% yoy, euro area April inflation (today) expected to stay at 2.4% yoy, and the Fed’s FOMC meeting tomorrow, where markets anticipate no changes to the Fed’s target rate.
Financial markets ended the week with a risk-on session following the release of the US PCE deflator, the Fed’s preferred inflation measure, which came mostly in line with expectations at 2.7% yoy (+0.3% mom) up from 2.5% in the previous month. Furthermore, US personal spending data beat expectations advancing 0.8% in March vs 0.6% estimated.
In yesterday’s session, US Q1 GDP data release centered the stage in financial markets as it showed that, despite the moderation in headline GDP growth (+0.4% q/q from 0.8% in Q423), the US economy remains robust. The 0.6% increase in private consumption and the acceleration of investment (1.3%) were the brighter news in GDP.
In yesterday's session investors adjusted their interest rate expectations amid monetary policy and fiscal news in the euro area, while corporate profits centered the stage in the US.
In yesterday’s session, investors had to weigh mixed economic data indicators, as flash PMIs showed how the manufacturing sector in the euro area weakened slightly in March, deep below the 50-points threshold, while the services index managed to increase (52.9 for the euro area).
Investors started the week trading cautiously as they await for key economic data releases (such as the Q1 GDP figures for the US on Thursday or today’s April flash PMIs) and for the corporate profits of 180 S&P500 companies, which represent about 40% of the index market capitalization (including five of the “Magnificent Seven”).
Investors closed the week with a risk-off mood as they continued to eye communication from central bank officials and the tensions in the Middle East. On the latter, though, the attack suffered by Iran on Thursday night had a moderate effect on the price of the barrel of Brent in a sign that the conflict escalation seems to be controlled, for the moment.
In yesterday’s session financial markets traded on the diverging outlook between the Federal Reserve and the ECB. Fed officials highlighted that inflation seems to have gotten stuck in the US and so they are in no rush to cut rates, while ECB members all pointed to June as the month they are looking at to lower interest rates.
Investors traded cautiously in yesterday's session amid geopolitical risks and a readjustment of interest rate expectations. In particular, investors’ uncertainty regarding the decision the Bank of England will make rose following the latest higher-than-expected inflation figures for March at 3.2% yoy vs. 3.1% anticipated by consensus.
Generalized risk-off sentiment in yesterday’s session as markets remained attentive to further developments in the Middle East and as expectations of interest rate cuts, especially in the US, are delayed. Sovereign bond yields rose across the board and equities sold off globally, while the US dollar ended slightly higher, and Brent held steady at $90/barrel.
Stronger-than-expected March retail sales in the US casted further doubts on the Federal Reserve’s motives to cut interest rates as soon as this summer. Markets now price a mere 20% probability of a cut in June, and 50% for July.
Markets ended the week on a risk-off tone, with sovereign bond yields falling across the board, equities selling off, and the US dollar strengthening (to $1,06 against the euro), as geopolitical tensions rose in the Middle East and investors sought safe-haven assets. Brent rose above $90/barrel as worries about potential supply disruptions mounted.
The ECB monetary policy meeting yielded, as expected, no change in the official interest rates and a communication consistent with a first rate cut in June, at the next meeting. Christine Lagarde reiterated, though, that the ECB will be data-dependent and added that it will not be Fed-dependent.