Global investors opened the day buoyed by growing odds of Federal Reserve easing and a dearth of fresh U.S. employment data. A surprise drop in private payrolls and the start of a U.S. government shutdown combined to remove an important anchor from markets. With official payrolls and weekly jobless claims likely to be delayed this week, traders have leaned into expectations for multiple rate cuts later in the year and repositioned across sectors and regions.
On the heels of an ADP report showing private payrolls fell by 32,000 in September and an August revision lower, interest rate markets priced in a 95 percent chance that the Fed will deliver another 50 basis points of easing by year end. That repricing left short dated Treasury yields near two week lows, the dollar softer, and crude oil trading at four month lows. Precious metals provided a counterpoint as gold hovered near record highs and Bitcoin climbed to its best level in almost two months.
Equities took the repricing as an invitation to extend gains. All three major U.S. indexes finished higher on Wednesday and futures were firmer ahead of the next session. The session�s leadership reflected both policy expectations and idiosyncratic news. The healthcare sector led the advance after a high profile announcement on drug pricing and tariff relief set off sector rotation. Pharma names were the obvious beneficiaries, seen as catching up after a period of underperformance versus technology and artificial intelligence related trades.
Chipmakers also extended gains on a supply chain development that traders interpreted as positive for demand. South Korea�s Kospi jumped nearly 3 percent after Samsung and SK Hynix signed letters to supply memory chips for OpenAI data centres. Japan�s Nikkei reversed several down days and rose almost 1 percent on a chip driven rebound. With China on Golden Week holiday, other Asian markets were more responsive to these tech cues than to domestic activity in Beijing.
Europe saw another day of strength. Euro zone stock indexes hit fresh record highs, helped by the pharma rally and the first signs of Germany�s fiscal boost for the quarter. Year to date gains in the euro zone amount to roughly 33 percent in dollar terms. That is more than twice the advance of the S&P 500 over the same period, underscoring a divergence in regional performance that has been punctuated by sector specific moves and policy optimism.
Rotation was visible beneath headline indices. Utilities outperformed after AES shares surged on reports of a potential $38 billion takeover by Global Infrastructure Partners. Materials lagged broadly, but lithium names bucked the trend. Lithium Americas and Albemarle rallied following news that the U.S. Department of Energy took equity stakes in Lithium Americas and its joint venture with General Motors. That development provided a policy backed bid for a select group of miners and battery related names.
The absence of scheduled, authoritative U.S. employment releases this week has made other gauges and calendar events more important. With the Bureau of Labor Statistics likely to postpone the nonfarm payrolls report, market participants will focus on Challenger�s September layoffs report and other data such as August factory goods orders. Those releases will carry extra weight in setting near term expectations for growth and policy.
Central bank behavior continued to be a market story in its own right. The Swiss National Bank renewed active intervention in foreign exchange markets to weaken the franc after inflation slipped back into negative territory. The SNB�s April to June intervention included purchases of 5.06 billion Swiss francs of foreign currency, the biggest quarterly FX action in over three years, and appears to have been concentrated in euros. That pattern is notable given the SNB�s $1.1 trillion in reserve assets and the broader question of how reserve managers are allocating currency holdings as global conditions evolve.
Forward looking investors will watch a slate of events that could refine the narrative. Challenger�s layoffs figures arrive early in the session and could provide a granular view of employment pressure that is not captured by ADP. Factory goods orders for August will give fresh information on manufacturing demand. A number of central bankers will be speaking, including Dallas Fed President Lorie Logan and European Central Bank Vice President Luis De Guindos. Their remarks may be parsed for clues on the pace and scale of policy moves in the months ahead.
Market positioning is reflecting a simple risk reward calculation. With policy easing priced more aggressively, risk assets have room to rally on positive sector stories and corporate specific developments. At the same time the absence of key headline employment figures raises the odds of sudden re-pricing if delayed data returns weaker or stronger than expectations once the shutdown is resolved. Traders have been quick to rotate capital into areas with explicit catalysts, such as healthcare after the drug pricing announcement and selected industrial and materials names tied to government support for green technologies.
Macro cross currents will be important to monitor. Energy prices drifting lower reduce one inflationary impulse, which could reinforce expectations for easier policy. A softer dollar enhances returns for international investors in European and Asian equities, helping to explain some of the regional divergence in performance this year. Conversely, the SNB�s large euro purchases highlight that currency moves can still surprise and require active management by both central banks and private reserve managers.
For the coming session traders will likely keep an eye on liquidity conditions that can amplify moves given fewer scheduled top tier U.S. data points. Sector headlines and corporate developments may continue to set intra day direction. At the same time, a focus on alternative labour metrics and the latest central banker commentary will remain essential to understanding how policy expectations are evolving as markets price in a more accommodative path for interest rates before the end of the year.
