Evolution of the international financial markets and evaluation of the main events and economic indicators of the previous day session. Available in English.
Widespread declines in global risk assets as investors shunned risky bets with President Trump ratcheting up tariffs. Trump announced that 25% tariffs on Canadian and Mexican goods will take effect on March 4, while Chinese imports will face an additional 10% tariff, resulting in a cumulative 20% tariff increase this year.
Markets were mixed during yesterday's session, ahead of macroeconomic data to be released on both sides of the Atlantic today and Friday. In the US, sovereign bond yields fell following news that potential US tariffs on Mexico and Canada, currently on pause, could be reinstated later than originally anticipated.
Risk-off session in financial markets following the largest monthly drop (seven points) in three years in the U.S. Conference Board Consumer Confidence Index, which fell to 98.3 (the lowest level since July 2024), while twelve-month inflation expectations surged by almost 1 percentage point.
Financial markets had a mixed session following Sunday's German national election, in which results were as expected: the conservative CDU/CSU won and a "grand coalition" with the socialdemocrats is likely. However, AfD and the Left won enough seats to block changes to the debt break.
Markets were mixed during last session as several data releases for the euro area and the US was digested by investors. In the euro area, February's flash composite PMI came slightly below expectations (50.2 vs 50.5 expected), with manufacturing PMI still in contractionary territory (47.3) and services PMI still in expansion (50.7).
In yesterday's session, investors' caution prevailed amid uncertainty over geopolitical risks, this Sunday's elections in Germany, and the trade war.
Yesterday's session was mixed across asset classes and regions. In the Eurozone, sovereign yields rose and peripheral spreads widened as countries grapple with the need for higher military spending. Separately, ECB's Schnabel argued the 2.75% rate is not undoubtedly restrictive, while ECB's Panetta argued that the consumer-led recovery is not materialising.
Investor risk appetite remained relatively high on Tuesday. In the eurozone, government bond yields were broadly unchanged. The ZEW index showed a rise in German investor sentiment in February, and ECB's Cipollone had some dovish comments on future interest rates, both of which offset news of future higher public spending on defence in the EU.
Investors started the week on a slightly positive note, with US markets closed for the President's Day holiday. In the eurozone, government bond yields rose on the likelihood of increased public spending on defence. Peripheral spreads narrowed as German bonds came under some selling pressure ahead of Sunday's general election.
Investor sentiment ended the week on a mixed note. Eurozone government bond yields rose moderately after the second reading of Q424 GDP came in slightly better than the first (0.1% QoQ vs. 0.0%), with peripheral spreads widening.
In yesterday's session, markets reacted positively to signs US reciprocal tariffs on its trade partners may be weeks from coming into effect, raising the prospect for negotiations that could make them less punitive.
Market sentiment was mixed on Wednesday. On the one hand, higher-than-expected US inflation data for January (headline: 0.5% mom, 3.0% yoy; core: 3.3% yoy) pushed back market expectations for the next Fed rate cut from early summer to the end of the year, and the probability of a second cut went down to virtually zero.