Market sentiment improved early Thursday, keeping Wednesday’s optimism after Tuesday’s heavy pessimism, helped by stronger U.S. economic data, easing shutdown concerns, progress in U.S.-China trade talks, and a balanced Federal Reserve (Fed) outlook.
The U.S. ADP Employment Change for October rose by 42K, above forecasts of 32K and rebounding from September’s -39K. The ISM Services PMI climbed to 52.4, beating expectations of 50.8 and the prior 50.0, marking an eight-month high. The upbeat data eased concerns about U.S. employment and activity but reduced expectations for a December Fed rate cut, lifting the U.S. Dollar and Treasury yields.
Following the data, the implied odds of a December Fed cut fell to 60% from 68%. The USD/JPY rebounded from 152.97 to 154.10, while stocks recovered as risk appetite returned after Tuesday’s selloff. The Russell 2000 rose 1.8%, with biotech, airline, chip, and Tesla shares leading gains, while Nvidia erased early advances. Bonds weakened on stronger data.
Donald Trump said he expects third-quarter GDP growth at 4.2% or higher. Fed official Miran called the ADP report “a welcome surprise.” Oil prices fell after a large U.S. crude inventory build and Trump’s comments about achieving $2 per gallon gasoline. The U.S. Energy Information Administration reported weekly crude oil inventories up by 5.202 million barrels, far above expectations of 603K.
The Supreme Court heard arguments on presidential tariff powers, where several Republican-appointed justices expressed skepticism about the legality of tariffs, boosting automaker stocks. Qualcomm was due to report earnings after the market closed.
According to the Wall Street Journal, Washington remains undecided on whether its Venezuela policy aims to remove President Nicolás Maduro or seek new concessions. Trump continues exploring military options, from tighter sanctions to direct strikes, but currently favors gradual pressure and continued operations against drug-smuggling vessels, the latest of which occurred Tuesday in the eastern Pacific.
U.S. Transportation Secretary Sean Duffy warned that the aviation system is becoming riskier amid the government shutdown, following Tuesday’s crash that killed eleven people. The U.S. will also cut flights from Friday across its 30 busiest airports due to the shutdown.
U.S. stock indices closed higher but only partly erased Tuesday’s losses.
In Asia, optimism faded after China banned foreign artificial intelligence (AI) chips in state-funded data centers to boost the domestic industry. Reuters said the ban hurts U.S. chipmakers like Nvidia while benefiting Huawei. China also supported the yuan through stronger daily midpoint fixes by the People’s Bank of China.
Axios reported that Nvidia Chief Executive Officer Jensen Huang warned that the U.S. risks losing the AI race to China due to regulatory uncertainty and urged faster investment in infrastructure, energy, and research.
Japan and the U.S. will jointly study rare earth mining near Minamitori Island, with Japan beginning test extraction next year to reduce reliance on China. Japan will also tighten foreign investment rules and establish a U.S.-style national security screening panel.
Japan Innovation Party co-leader Hidetaka Fujita said it is too early for the Bank of Japan to raise interest rates, stressing the need for policy stability amid high costs and a fragile recovery. He confirmed no tax hikes will fund the accelerated defense budget as Tokyo front-loads spending to strengthen deterrence.
Japan’s S&P Global Services PMI for October was 53.1, down slightly from 53.3, while real wages fell 1.4% year-on-year in September, marking a ninth straight decline.
In the UK, the October final Services PMI rose to 52.3 from 51.1 prelim, and the Composite PMI increased to 52.2 from 51.1. Meanwhile, TD Securities expects a narrow Bank of England (BoE) rate cut, reinforcing a cautious easing cycle and continued sterling weakness, with EURGBP and GBPUSD under pressure.
Australia’s September trade surplus came in slightly below expectations at 3.938 billion (forecast 4.000 billion), with both exports and imports higher month-on-month.
Reserve Bank of New Zealand Governor Christian Hawkesby said the recent rise in unemployment aligns with expectations and reflects the economic cycle. Addressing lawmakers after the Financial Stability Report, he noted difficult conditions but said the financial system remains resilient.
Bank of Canada Governor Tiff Macklem told parliament that monetary policy cannot address structural changes caused by U.S. tariffs.
Amid these plays, the U.S. Dollar Index (DXY) rose to the highest level since late May but retreated afterward from the 200-day SMA hurdle. This allowed the risk assets to rebound, including equities, antipodeans, and cryptocurrencies.
Firmer European and German PMI data, along with mixed European PPI figures, lifted overall market sentiment and helped EURUSD rebound from a three-month low on Wednesday. The pair held firm early Thursday as traders awaited the annual European Central Bank (ECB) Monetary Policy Conference in Frankfurt.
USDJPY stayed rangebound and slightly weaker, as mixed Japanese data and discussions about potential Bank of Japan (BoJ) rate hikes combined with the Yen’s traditional safe-haven appeal to keep the pair steady.
GBPUSD extended Wednesday’s rebound from its lowest level since early April, rising for a second straight day as cautious optimism and expectations of a no-rate-cut decision by the Bank of England (BoE) supported the pair. The recovery was also aided by upbeat UK PMI data and anticipation ahead of the November 26 annual UK budget announcement.
Positive headlines on U.S.-China trade talks, a weaker U.S. Dollar, and hopes of an early end to the U.S. government shutdown helped the antipodean currencies recover from earlier losses, with AUDUSD and NZDUSD rebounding from multi-day lows. However, softer crude oil prices and mixed comments from Bank of Canada Governor Tiff Macklem weighed on the Canadian Dollar, prompting USDCAD to retreat from a seven-month high. Meanwhile, Reserve Bank of New Zealand Governor Christian Hawkesby pushed back against a dovish outlook, helping NZDUSD hold firm amid the softer U.S. Dollar.
A softer U.S. Dollar and improved market sentiment led Gold to trim its earlier gains after breaking a three-day losing streak on Wednesday. Similarly, Crude Oil posted modest gains following two days of losses, though a surprise rise in crude inventories limited the advance as traders weighed mixed demand and supply signals.
Asia-Pacific equities followed Wall Street’s modest gains, while Bitcoin (BTC) and Ethereum (ETH) gave up the previous day’s rebound from multi-day lows as investors sought clearer signals to sustain optimism amid a lack of major data and the support of upbeat U.S. economic reports.
On Wall Street, the Dow Jones Industrial Average rose 0.48% to 47,311.00, the S&P 500 gained 0.37% to 6,796.29, and the Nasdaq climbed 0.65% to 23,499.80. Seven of eleven S&P 500 sectors ended higher, led by consumer discretionary, up 1.12%, buoyed by optimism that the Supreme Court may limit President Trump’s tariff authority.
The European Central Bank’s annual conference, the Bank of England decision, and a speech from Bank of Canada Governor Tiff Macklem are set to drive intraday market moves, likely supporting an upbeat session.
With the U.S. Dollar pulling back from its 200-day SMA and improving market sentiment, Gold, cryptocurrencies, and equities are expected to rise further amid the lack of major catalysts.
GBPUSD may continue its recent recovery unless the BoE signals caution, while EURUSD could remain firm, and USDJPY may retreat. AUDUSD, NZDUSD, and USD/CAD are expected to trade mixed, alongside crude oil.
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