Evolution of the international financial markets and evaluation of the main events and economic indicators of the previous day session. Available in English.
The week started with a very quiet session, as there were no macroeconomic data releases and the US financial markets were closed due to the President’s day festivity. All eyes will remain attentive to the release of the Fed and ECB last meeting minutes (Wed. and Thu., respectively) and the flash PMIs for the main advanced economies (Thu.).
In the last session of the week, higher-than-expected US PPI inflation data in January (0.3% m/m from -0.1% in the previous month) pushed back the expectations of interest rate cuts from the Federal Reserve and favored an increase in sovereign bond yields on both sides of the Atlantic.
In yesterday's session, mixed macroeconomic data releases were the main drivers in financial markets. On the one hand, Q4 GDP figures showed that Japan and the UK are in technical recession (with -0.1% and -0.3% q/q growth rates) and US retail sales and industrial production fell by 0.8% and -0.1% m/m, respectively.
Financial markets reversed part of the large movements from the previous session following the US January CPI report. Sovereign bond yields fell on both sides of the Atlantic, while equity markets recovered most notably in the US. The VIX volatility index fell below 15 once again.
US January CPI report surprised markets by showing an increase in prices of 3.1% y/y vs 3.0% expected, down from 3.4% last month, with core inflation unchanged at 3.9%. The news shook markets, sending global government bond yields higher and equity markets sharply lower, while pushing back the expectation of the Fed’s first cut from May to June.
Markets kicked off the week in a rather calmed tone as investors await key economic data this week which will provide them further clues regarding future interest rate cuts. On the data front, NY Fed’s January Consumer Expectations Survey found that respondents expect 1-year inflation to remain at 3%, the lowest reading in three years.
The week ended with markets trading without a clear direction as investors continued to monitor central bank officials' speeches to adjust their expectations of the timing of the first interest rate cuts, and as they awaited key economic data to be released this week.
In a session without any major economic news, investors traded cautiously as they continued to assess the probability of future interest rate cuts given the current inflation and activity dynamics.
In yesterday’s session investors took note of the different central bank speeches offered by Fed and ECB officials. In general, policymakers would like to see more evidence that inflation is decisively in the route to reach 2% before easing the monetary policy stance.
In a session with no big economic data releases, except for the -1.1% m/m December retail sales in the euro area, investors reassessed their expectation on the upcoming central bank interest rate cuts.
In the first session of the week, investors continued to reassess their expectations on the upcoming easing of the ECB and Fed’s monetary policy stance. The January PMI and ISM data releases showed a stronger-than-expected start of 2024 that decreased further the probabilities of seeing the first rate cut in April and May for both central banks.
In the last session of the week, investors traded with a risk-on mood as their economic optimism outweighed concerns of a tighter monetary policy stance by the US Federal Reserve. The release of January employment report in the US showed that its labor market remains tight, with 353k more payrolls and the unemployment rate still at 3.7%.