The three factors driving (for now) market recovery

The hope for progress in negotiations to avoid a global trade war, a keen ear for news of corporate balance sheets and also well-founded expectations of an expansionary move by the Federal Reserve. It is a combination of factors that favours a further easing of market tensions, propelling Wall Street's third consecutive rebound, but also money flows into government bonds, which see rates fall on a global scale.

Rumours of an agreement with India on duties partly offset the coolness with which China denied the alleged steps forward in negotiations with the US administration. The good start in New York was accompanied by a drop in the Vix, the 'fear' index back to the levels of the beginning of the month, and ended up pushing the European lists as well. Piazza Affari turned out to be the best (+0.96%), driven by the quarterly reports of Eni (+2.11%) Saipem (+4.36%) and also St. John's (+5.28%), but Frankfurt (+0.49%) and Paris (+0.27%) also closed positively.

In the market, there are those who are still avoiding toasting the escaped danger and are urging caution: 'Until the agreements are signed, the gains we see now remain fragile,' warns Chris Beauchamp, Chief Market Analyst at Ig, who in the run-up to Alphabet's quarterly report also points the finger at the warning signals that the accounts published by Pepsi, Merck and American Airlines are sending out on the US economy.

It is, however, also because of these that the Fed might lower rates again, not immediately but at its June meeting. This is at least what Cleveland Fed President Beth Hammack hinted at yesterday, ending up with a downward shift in interest rates not only for Treasuries, but even on a global scale. With one significant difference, however: while US yields remain anchored to the values of a month ago (4.34% yesterday for the ten-year), those of European government bonds are instead travelling at least forty cents below then.

On the contrary, German Bunds (2.45%) returned to the levels before the announcement of the maxi fiscal stimulus plan and have now cancelled out the flare-up that followed. The same was true for BTp bonds (3.55%), which were able to bring the Italy-Germany spread back down to 110 basis points thanks to the general decline in risk aversion on the markets and also to the surprise promotion received a fortnight ago from S&P.