Following Wednesday’s celebration of a fresh all-time high, Canada’s stock market futures decided to hit the pause button Thursday morning, trading sideways as investors digested what comes next.
The benchmark index had just scaled to an unprecedented 30,107.67 the day before—a climb fueled by an unexpected catalyst: disappointing factory data that’s got traders betting the Bank of Canada will keep slashing rates.
Here’s the twist: bad economic news became good market news. Canada’s manufacturing sector continued its downward spiral in September, with activity contracting for the eighth month running. The purchasing managers’ index slipped to 47.7 from August’s 48.3, reflecting what industry watchers are calling an “uncertain trading environment” that’s hammering both production schedules and order books.
The loonie felt the pressure too, drifting toward its weakest position in four months as the manufacturing weakness reinforced expectations that Canadian policymakers have more rate-cutting ammunition to deploy.
Meanwhile, across the border, similarly soft employment figures from the US private sector added fuel to speculation that the Federal Reserve might also be preparing to ease up on borrowing costs. Thursday’s closely-watched jobless claims report—typically a reliable pulse-check on labor market health—faced delays due to the government shutdown that kicked off Wednesday, leaving traders with one less data point to analyze.
The pre-market calm suggests investors are playing it safe after Wednesday’s euphoric run, waiting to see whether central bank stimulus can outweigh the economic weakness that’s making those rate cuts necessary in the first place.
