Global Market Trends
Global equities traded cautiously early in the week as investors awaited dual rate decisions from the Fed and BoC. With limited U.S. data, positioning was largely set ahead of Wednesday’s announcements. The Fed delivered a 25 basis points (bps) cut while the BoC held, sparking a brief tech-led rally before profit-taking drove a rotation into defensive stocks amid concerns over outsized AI spending and future monetization.
Market Performance
U.S. equities returned -0.61% as traders awaited the Fed’s final rate decision for the year, with a widely anticipated 25 bps cut sparking a brief tech rally before profit-taking set in, reflecting concerns over ever-growing AI spending. Canadian equities edged higher for the week returning 0.75%, with the bulk of net gains occurring on Thursday following the Fed cut and BoC hold. European stocks rose 0.88%, mirroring North American trends. Emerging markets were -0.52% lower as sentiment in China remained subdued amid property-sector strain and weak domestic demand which overshadowed robust export growth and a record trade surplus.
Key Highlights
- U.S. equities returned -0.61% as traders awaited the Fed’s final rate decision for the year.
- Canadian equities edged higher for the week returning 0.75%.
- European stocks rose 0.88%, mirroring North American trends.
- Emerging markets were -0.52% lower as sentiment in China remained subdued.
Fed’s Measured Tone and BoC Hold
The Fed’s move, alongside steady employment and sticky inflation, suggests a slower easing path ahead. U.S. Treasury markets started the week under modest pressure as mixed labour signals and anticipation of the Fed’s decision drove yields higher. Rates rallied midweek after the Fed delivered a 25 bps cut and the BoC held, with markets still pricing in two cuts for 2026 despite Powell’s cautious tone and a divided dot plot.
Bond Market Trends
- The 2- and 10-year U.S. Treasury yields fell 6 basis points (bps) and 9 bps, respectively.
- Government curves saw early-week bear steepening as markets priced in a slower global easing cycle, before Fed’s cautious tone and BoC’s hold tempered moves, leaving yields flat or lower on the front end.
- Investment-grade spreads tightened briefly on Fed-driven risk appetite, but heavy tech capex guidance and lingering macro uncertainty reversed momentum.
Central Bank Decisions
The Bank of Canada (BoC) held its benchmark interest rate steady, moving back to the sidelines for what financial markets expect to be an extended pause. The U.S. Federal Reserve (Fed) reduced its key interest rate by a quarter-point for the third time in a row but signalled that it may leave rates unchanged in the coming months.
BoC Decision
- The BoC kept its policy rate at 2.25%, following cuts in September and October.
- Bank of Canada Governor Tiff Macklem said that the policy rate was at “about the right level to keep inflation close to 2% while helping the economy through this period of structural adjustment.”
Fed Decision
- The Fed reduced its key interest rate by a quarter-point for the third time in a row.
- Fed officials signalled they expect to lower rates just once next year.
- Three Fed officials dissented from the move, the most dissents in six years and a sign of deep divisions on a committee that traditionally works by consensus.
Eurozone Economy
The eurozone economy grew at a faster pace than previously estimated in the three months through September, aided by a rebound in investment spending. Figures recently released by the European Union’s statistics agency showed gross domestic product (GDP) in the currency area was 0.3% higher than in the three months through June, and 1.4% up on a year earlier.
Eurozone Growth
- The revision partly reflected faster growth in Italy, Austria and Lithuania than was previously estimated.
- The pickup in growth from the previous quarter was driven by investment spending, which rose by 0.9%, having dropped by 1.7% in the three months through June.
Conclusion
In conclusion, the global market trends were cautious early in the week as investors awaited dual rate decisions from the Fed and BoC. The Fed delivered a 25 basis points (bps) cut while the BoC held, sparking a brief tech-led rally before profit-taking drove a rotation into defensive stocks. The central bank decisions and economic growth in the eurozone suggest a slower easing path ahead, with investors awaiting further developments in the coming months.
