Evolution of the international financial markets and evaluation of the main events and economic indicators of the previous day session. Available in English.
In the first session of the week, investors weighed somewhat better-then-expected economic data releases in the euro area with dovish comments from central bank officials on both sides of the Atlantic. On the latter, Richmond Fed president Thomas Barkin said that current interest rates are sufficient to bring inflation back to target.
In the last session of the week, investors reassessed their expectation for the Fed’s interest rate path ahead as the US April employment report showed a cooling labor market. In particular, job creation slowed from 315k to 175k, way below consensus expectations, the unemployment rate ticked up to 3.9% and wage growth decelerated to 0.2% m/m.
In yesterday's session investors continued to assess the Fed's next move regarding interest rates following Wednesday's FOMC meeting. In particular, markets seem to have taken Powell's downplay of the possibility of hiking rates given the recent inflation figures as a confirmation that the next move will be a cut.
At its meeting yesterday, the Federal Reserve kept interest rates on hold at 5.25-5.50%, as expected, and the Fed's policy statement kept its economic assessment and policy guidance without changes. Powell signaled the next move is unlikely to be an interest rate hike as the Fed is still leaning towards an eventual cut, despite needing greater confidence to do so.
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.