Markets are opening the European session with a wave of optimism, continuing the upbeat tone set on Wednesday. That upbeat tone, interestingly, came in sharp contrast to a string of disappointing economic data released throughout the day. Despite clear signs of a cooling economy, especially from the U.S., stock traders chose to look past the numbers and doubled down on risk appetite.
Wednesday’s data docket was anything but encouraging. Australia reported weaker-than-expected GDP growth, coming in well below forecasts at just 0.2%. In the U.S., the ADP non-farm employment change shocked with a dismal 37,000—far beneath even the most conservative expectations. To add to the bearish narrative, the ISM Services PMI dipped below the key 50 threshold, landing at 49.9 and signaling a contraction in the services sector. These three figures alone could have been enough to trigger a broad-based correction. But the market had other plans.
Instead of retreating, stock indices climbed significantly higher, pushing toward new local highs by the end of the day. The resilience in equity markets suggests that traders are either expecting central banks to step in with more accommodative policies or simply choosing to ride the bullish momentum.
In Canada, the Bank of Canada held interest rates steady at 2.75%, a move that came as no surprise and did little to stir market volatility.
As we begin Thursday’s session, attention turns sharply to Europe. The European Central Bank is expected to cut interest rates by 25 basis points—a move that’s already priced in. The real focus, however, will be on the ECB’s accompanying statement and the press conference led by President Christine Lagarde. Any hints about the pace of future cuts or concerns about inflation persistence could stir significant movement across both equities and forex markets.
On the currency front, we continue to see weakness in traditional safe havens like the Japanese Yen and the Swiss Franc. This aligns with the ongoing risk-on sentiment, where capital flows are favoring higher-yielding or growth-oriented assets.
In the commodities space, the situation is mixed. Precious and industrial metals such as platinum, silver, and copper are all pushing higher this morning, with copper in particular bouncing strongly. Palladium is also joining the upside movement. Gold, however, remains under pressure. After being briefly bid during the Asian session, it’s now trading slightly lower, though attempting a recovery. Oil, which saw a steep drop during Wednesday’s U.S. session, is trying to claw its way back up during early European hours. Despite the recent dip, oil still carries a broadly positive sentiment for the week.
As we move deeper into Thursday’s trading, all eyes will be on Frankfurt. The ECB’s decision has the potential to recalibrate expectations and either solidify or disrupt the market’s current upbeat mood.