Global financial markets faced another intense session as investors digested a powerful combination of heavy equity market turbulence, a blockbuster US employment report, and diverging economic indicators across North America and Europe. While Wall Street’s historic sell-off reverberated across international exchanges, traders scrambled to reprice interest rate expectations against a backdrop of resilient labor demand and shifting commodity prices.
Markets
European equity markets found themselves playing catch-up with Wall Street’s violent sell-off from the previous session, resulting in a sharp 1.6% daily decline across regional indices. The technology-heavy Nasdaq attempted a tentative recovery, aiming to claw back about 1% following its steepest single-day drop since the pandemic, which saw the index plunge 5.5%.
Despite the bounce, market sentiment remained deeply unsettled. The jury remains very much out on whether yesterday’s panic selling truly marked the market bottom, and today’s attempted rebound looks fragile to say the least. This fragility was underscored by the performance of the Dow Jones Industrial Average, which failed to participate in the tech-led recovery and extended its losses by an additional percentage point.
The dramatic equity rout earlier in the week had an immediate impact on monetary policy expectations. Implied probabilities for Federal Reserve tightening in December plummeted from near 100% down to less than 70%. However, a stellar US payrolls report provided a dramatic counterweight, delivering a consensus beat across every single metric.
Non-farm payrolls growth surged to 165,000, more than double the expected 70,000 gain. When accounting for an impressive 84,000 upward revision for the two previous months combined, actual job creation came in at more than three times initial forecasts, easily surpassing the highest estimate recorded in the Bloomberg survey, which had capped optimism at 131,000.
The largest contributions to job growth came from professional and business-related services, which added 70,000 positions, alongside the health sector, which contributed 42,000 jobs. Wage pressures also remained robust, with hourly earnings printing at a hotter-than-expected 0.4% on a month-over-month basis and 3.1% year-over-year. Meanwhile, the unemployment rate unexpectedly ticked down to 4.1%, matching a 1.5-year low, even as the labor force participation rate climbed to 61.9%.
The combination of a lower unemployment rate and a higher participation rate signals a significant influx of active job seekers entering an economy that evidently possesses enough underlying strength to absorb them. Today’s numbers all but confirm the Federal Reserve’s ongoing view that its employment mandate is securely covered, leaving policymakers entirely free to keep their primary focus fixed on tamping down stubbornly high inflation.
Attention now turns to next week’s October Consumer Price Index (CPI) print. While the upcoming release unfortunately will not feature the standard year-over-year calculation due to last year’s government shutdown-related data gap, the expected 0.3% monthly reading is, in any case, above the pace considered consistent with a sustainable return to the central bank’s 2% inflation target, which economists estimate requires monthly prints between 0.15% and 0.2%. The core CPI gauge is widely anticipated to rise by 0.2%.
The powerful labor market report triggered an immediate knee-jerk bear flattening of the US Treasury yield curve, coming hard on the heels of an aggressive bull steepening movement the day before. Yields on two-year US Treasuries rose by about 7 basis points, while the long end of the curve added 2 to 3 basis points. Consequently, money market pricing swiftly repriced the implied probability for a December rate hike back up past 75%, a figure that may well still understate the ultimate policy trajectory.
In foreign exchange markets, the US dollar extended its earlier gains, pushing the EUR/USD exchange rate down to 1.114 as the key 1.11 support area edged closer into view. The single currency demonstrated broad-based weakness, which was particularly evident in the EUR/CHF cross. The euro slid quietly against the Swiss franc, drifting toward its lowest levels since early June at 0.914. Financial analysts widely consider EUR/CHF to be the most adequate gauge for European Union-specific risk-off sentiment. Meanwhile, the trade-weighted US dollar rallied past the 102 threshold, entirely wiping out the losses it had accumulated over the previous six consecutive trading sessions.
News & Views
Beyond the turmoil in equities and foreign exchange, global commodity markets presented a mixed picture as tracked by international indices. The Food and Agriculture Organization (FAO) Food Price Index averaged 133.9 points in October 2026, marking a decline of 1.6 points, or 1.2%, from its revised September level.
The monthly decrease was driven by lower price indices across most major commodity groups, which more than offset a sharp, weather-driven surge in sugar and a marginal increase in vegetable oils. Despite this latest monthly pullback, the overall index remained 5.9% above its value from a year earlier, though it still sat 16.4% below its historic peak reached in March 2022.
A breakdown of the sub-indices revealed widespread downward pressure. The FAO Cereal Price Index fell by 4.5% month-over-month, weighed down largely by subdued international demand and an improving global production outlook, particularly in Argentina. The FAO Dairy Price Index declined 1.1% over the month, reflecting softer international quotations for butter and cheese. Similarly, the FAO Meat Price Index dropped 1.2% month-over-month.
Conversely, the FAO Vegetable Oil Price Index increased marginally by 0.3%, as higher soybean and sunflower oil quotations managed to more than offset lower rapeseed oil prices. Standing in stark contrast to the broader downward trend, the FAO Sugar Price Index reached its highest level since December 2024 after surging 6.6% on the month and 28.8% year-over-year. The sharp rally was primarily driven by heavy rainfall that disrupted sugarcane harvesting and crushing operations in Brazil’s key Centre-South producing region, alongside growing concerns regarding adverse production prospects in India, the European Union, and Thailand for the 2026/27 season.
Meanwhile, economic developments in North America highlighted a stark divergence between the United States and Canada. Canadian payrolls surprised significantly on the downside in October, dropping by 4,700 jobs instead of posting the anticipated 15,000 expansion.
A granular look at the employment data revealed troubling details, including a third consecutive month of full-time employment layoffs, which shed 18,100 positions. A modest 13,400 advance in part-time employment proved insufficient to compensate for the full-time losses.
As a result, Canada’s unemployment rate unexpectedly rose from 4.5% to 4.7%, reaching its highest level since April, even as the labor force participation rate stabilized at 64.8% and the pool of active job seekers expanded by 33,000, or 2.2%.
The Canadian dollar suffered a significant setback as the disappointing domestic employment figures printed simultaneously with the blowout US payroll report. The USD/CAD exchange rate surged by nearly a full big figure, pushing trading activity firmly north of the 1.41 level. In response, the Canadian sovereign yield curve bull steepened, with yields sliding by up to 3.5 basis points at the front end of the curve as markets recalibrated expectations for the domestic economic outlook.
