The risk-on mood triggered by trade negotiations continued to support markets but lost some steam in yesterday's session.Sovereign yields rose on the back of a hawkish reading of the ECB's meeting, while euro area and U.S. stocks postedmoderate gains with a mixed sectorial performance (European banks rallied on favorable earnings and higher rates).
The ECB left rates unchanged at its July meeting. While presenting a favorable picture in terms of inflation and activity data,the ECB reiterated that the outlook is clouded by exceptional uncertainty warranting a data dependent, wait and seeapproach. Market odds for a September rate cut dropped to 20% (from 45%).
On the data front, the euro area's composite PMI rose to 51.0 points in July, driven by an improvement in the services sector(51.2) and relative stability in manufacturing (49.8). In the U.S., the composite PMI jumped to 54.6 points on the back ofservices (55.2), while manufacturing's decline to 49.5 points was attributed to tariffs, higher prices and uncertainty.
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