It is a relatively quiet start to the week for North American equity futures, leaving much of the action overseas. In Europe, France’s CAC 40 is leading major indexes lower, down about – 0.6% at the time of writing, as the country’s fiscal health remains in focus. French government bond yields climbed to their highest levels since 2002 last week, while figures showed the country’s public debt continuing to swell. The euro has weakened on those concerns, helping push the U.S. dollar higher against a basket of major currencies and close to an 18-month high. Brazilian stocks are poised to open higher after Flávio Bolsonaro’s stronger-than-expected showing in Sunday’s first-round presidential election set up an October 25 runoff against President Lula. In Asia, Japan’s Nikkei jumped 2.4%, while mainland Chinese markets remain closed for the National Day holiday through October 7. Oil has eased this morning, although Brent remains above $100 a barrel, while the U.S. 10-year Treasury yield is holding above 5.2% following Friday’s weaker payroll report.
North American equities rallied on Friday after a weak September U.S. employment report lowered expectations for further near-term Fed tightening, with the S&P 500 gaining 0.7%, the TSX rising 1%, and the Nasdaq up 1.2% and closing in on its record high. Nonfarm payrolls increased just 29,000, prior months were revised lower, and wage growth softened, while unemployment rose to 4.2%, reinforcing evidence that hiring is cooling. Markets reduced the probability of an October Fed hike to less than 25%, although Treasury yields eventually reversed their initial decline. Lower oil prices also helped improve sentiment, with WTI falling 1.5% to $91.48 as G7 countries signaled potential releases of emergency crude and diesel supplies, which could help ease inflation pressures. The market reaction revived the “bad news is good news” dynamic, although a more significant decline in employment would likely become a risk to consumer spending and corporate earnings.
Fall hike plans getting cancelled? The urgency for additional near-term tightening is extending beyond the Fed, with expectations for ECB and BoC hikes also falling. In Europe, rate hike expectations are declining due to growing stress in sovereign bond markets, even as inflation remains elevated. September inflation accelerated more than expected, driven by higher energy costs. Still, instability in French bonds (more in Fixed Income below) and signs of contagion elsewhere have reduced expectations for another ECB increase this month. Investors this week will watch German industrial data, European inflation releases, and Canadian unemployment and trade figures for evidence of how higher rates, energy costs, and trade tensions are impacting economic activity.
The TSX ended September on a weaker note but still recorded its ninth consecutive quarterly gain, the longest streak on record, despite pressure from rising global bond yields, a Fed rate hike, and escalating Canada-U.S. trade tensions. Although October has a reputation for market crashes (see 1929, 1987 and the 2008 financial crisis), history suggests the month isn’t consistently negative. From 2001 until 2025, the TSX gained in 68% of Octobers and averaged a 0.4% return, while the S&P 500 averaged 1.6%. Volatility does tend to run higher, with the VIX historically averaging 21.8 in October, higher than in any other month, helping explain why investors often consider it a risky month. Strategists note that October’s reputation may reflect availability bias, with huge crashes remaining much more memorable than the many Octobers where markets saw positive returns. After nine quarters of TSX gains, however, recent strength is no guarantee the streak continues, especially with elevated bond yields and trade uncertainty still unresolved.
Germany’s economy could grow 1% in 2026, doubling the central bank’s June forecast of 0.5%, as stronger-than-expected exports and government spending support a recovery after three years of near-stagnation. Officials at the Bundesbank said economic activity has been surprisingly resilient despite the drag from higher energy costs related to the Iran war, although Germany’s longer-term potential growth remains weak. A major source of support is the federal government’s debt-financed fiscal package, which is directing additional spending towards defence, infrastructure, and climate-related investment, while strong foreign demand is providing another boost. Germany’s improved performance is also contributing to upward revisions to euro-area growth forecasts, with the group now expected to expand at or above its 1% potential growth rate this year. Stronger activity, however, is creating additional challenges for the ECB because euro-area inflation is already running close to twice its 2% target and could pick up even further.
Equity markets have remained unusually calm relative to bond volatility, with the VIX-to-MOVE ratio near a two-year low. Strategists are turning to cross-asset hedges as rising Treasury yields contrast with relatively contained volatility in equities, oil, and gold, despite elevated geopolitical and political risks. The divergence has made conventional hedging less attractive, creating more interest in options that combine outcomes across multiple markets and can provide protection at a lower cost than traditional options. Positioning currently reflects expectations for lower Treasury yields alongside continued strength in U.S. equities, while European trades are more defensive, including strategies combining declines in bank stocks or the CAC 40 with euro weakness amid concerns surrounding France. Strategists also see an asymmetric relationship between equities and rates, with stocks responding more positively to falling Treasury yields than negatively to increases, potentially providing support if bond yields retreat.
Wingman or over-step? Singapore’s government is experimenting with a new approach to online dating through a pilot program that matches single public-sector employees aged 21 to 35 using a mathematical matching method associated with Nobel Prize-winning research. Rather than offering endless profiles to swipe through, participants receive one potential match at a time and have 72 hours to decide whether to connect, with matches based on questionnaires covering interests, habits, preferences, and values. Singapore faces demographic challenges, with its fertility rate falling to 0.87 births per woman last year and the median age of first marriage continuing to rise. While some have said that government ID verification could be an advantage by reducing concerns about scams or fraudulent profiles, the experiment has drawn criticism over the government’s involvement in citizens’ personal lives and its restriction to younger public employees. This isn’t the government’s first attempt at playing matchmaker either, with the country having a long history of government-backed matchmaking initiatives dating to the 1980s.
Diversion: Think he’s done this before
