Evolution of the international financial markets and evaluation of the main events and economic indicators of the previous day session. Available in English.
The hawkish tone set by central bank officials continued to center the stage in financial markets at the start of the week. In particular, ECB chief economist Phillip Lane signaled that further interest rate hikes beyond next week's meeting will be appropriate to ease inflationary pressures.
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).
Precaution and volatility continued to set the tone across financial markets on Thursday. Eurozone HICP inflation surprised on the upside (headline: 8.5% y/y in February after 8.6%; core: 5.6% after 5.3%) while, in the US, data showed unit labour cost accelerated in Q4 and new weekly jobless claims fell further last week.
Inflationary pressures and monetary policy actions remained the focus on Wednesday, following higher-than-expected HICP data in Germany (headline inflation rose to 9.3% y/y in February after 9.2% in January), ahead of the release of the data for the eurozone aggregate this morning. The ECB also releases the accounts of the last meeting.
Investors continued to trade with caution on Tuesday, taking on board the upside surprise in February HICP inflation in both France (7.2% y/y) and Spain (6.1%) and dialing up its expectations for policy interest rates hikes (money markets price the depo rate could near 4% by year end). Today, the German HICP data is released.
Stock markets rebounded at the start of the week, as investors digested a new batch of mixed economic indicators and took advantage of attractive valuations, following the sharp decline in stock indices in recent weeks. Sovereign bond yields ticked down in the US and continued to edge higher across Europe.
Investors continued to err on the side of caution during the last session of the week, with sentiment impaired by data releases pointing to lingering inflationary pressures and the likely need for further monetary policy tightening.
Investors traded cautiously in yesterday’s session following revisions of some key economic indicators. In the euro area, headline and core inflation for January were revised by +0.1pp to 8.6% and 5.3%, respectively, and, in the US, 4Q GDP growth was revised by –0.2pp to 2.7% q/q SAAR, mainly due to a softer private consumption.
Central bank communication continued to center the stage on Wednesday. The release of the minutes of the last Fed meeting showed that almost all FOMC members favored a 25bp rate hike, while just a few would have opted for keeping the 50bp pace. They noted that, despite remaining elevated, inflationary pressures had begun to moderate.
On Tuesday, the better-than-expected release of February PMIs fueled an increase in investors’ expectations for the path of official interest rates, which, in turn, pushed sovereign bond yields up in the euro area and in the US.
In a quiet session due to the President's Day holiday in the US, traders continued to weigh incoming economic data (eg consumer confidence in the eurozone rose to -19 from -20.7) with the hawkish tone from central bank officials. In this context, yields on sovereign bonds ticked up in the euro area, nearing year-to-date highs.
In the last session of the week, investors digested the hawkish comments offered by key central bank officials in the US Federal Reserve and ECB. In the former, Michelle Bowmen and Thomas Barkin signaled that interest rates will need to raise further but warned against reading too much into January’s retail sales and employment data.