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In the last session of the week, investors' sentiment improved as the odds for a 100bp hike in the next US Federal Reserve meeting decreased.

In yesterday's session, investors traded with a risk-off mood following the downward revision of the European Commission forecasts. While 2022 GDP for the euro are was barely revised to 2.6%, 2023's changed from 2.3% to 1.4%. The EC revised its inflation forecasts from 6.1% and 2.7% to 7.6% and 4.0% for 2022 and 2023, respectively.

A shocking inflation release in the US centered the stage yesterday in financial markets. Headline CPI rose in June by 9.1% y/y and 1.3 m/m, reinforcing the Federal Reserve intention to raise rates by 75bp again at its July meeting. Additionally, investors have started to price in a 100bp hike, in line with yesterday's decision of the Bank of Canada.

In yesterday’s session, investors’ concerns of a decelerating economy spiked after worse-than-expected sentiment data in Germany and the euro area and comments from Richmond Federal Reserve President Thomas Barkin.

In the first session of the week, investors searched for catalysts as they positioned ahead of a key CPI data in the US on Wednesday and the start of the earnings season.

In the last session of the week, the stronger-than-expected US labor market indicators for June eased investors' recession fears. Non-farm payrolls increased by 372k (from 384k in May), the unemployment rate stood at 3.6% and wages rose by 5.1% y/y, which all together fuels the Fed's intention to raise rates by 75bp at its next meeting.

Risk appetite extended across markets on Thursday, as fears about inflation and monetary tightening eased following soft labour data in the US (weekly jobless claims rose to the highest level since January). Meanwhile, news reported that China’s government is considering more fiscal support by raising by $220bn the issuance of special bonds.

Investors continued to trade with cautious on Wednesday, taking on board mixed economic data and the hawkish signals in the minutes of the last meeting by the Federal Reserve. European natural gas prices continued to edge higher, despite the intervention by Norway’s government to end an energy workers’ strike.

Risk aversion returned to the fore during a volatile session on Tuesday, as investors reassessed the risk of a global recession amid ongoing disruptions in gas supply in Europe and reports of new COVID cases in some regions in China.

Investors started the week with mixed results, taking on board hawkish commentaries by some ECB officials and news reporting that the US government may announce a decision to lift certain tariffs on Chinese imports.

Fears of an economic recession with persistent inflationary pressures continued to weight on investors’ sentiment on Friday, following somewhat feeble economic survey data in the US (the ISM manufacturing slowed down from 56.1 to 53.0 in June) and another increase in eurozone HICP inflation (from 8.1% y/y to 8.6% y/y in June).

In yesterday's session, investors traded with a risk-off mood as recessionary concerns spread across financial markets,  following the release of the decrease in US real personal spending (from a downward revised +0.3% to -0.4% in May).