Sunset Market Commentary

Markets

European equity markets still had to catch up with Wall Street’s violent sell-off yesterday, resulting in a 1.6% daily decline. The tech-heavy Nasdaq, however, aims to recover about 1% from yesterday’s largest single-day drop since the pandemic (-5.5%). The jury remains very much out whether yesterday’s panic move indeed marked the bottom. The rebound today looks fragile, to say the least. We’re not seeing it, for example, in the Dow, which extends losses by another percent. The equity rout yesterday in any case pressured Fed December tightening bets from near 100% implied probability to less than 70%. Stellar payrolls are putting in some counterweight today with a consensus beat on every account. Payrolls growth amounted to 165k, more than double the expected 70k – or more than triple when considering the 84k upward revision for the two previous months. It also easily surpassed the highest estimate in the Bloomberg survey (+131k). The largest contributions came from professional and business-related services (+70k) and the health sector (+42k). Hourly earnings came in at a hotter-than-expected 0.4% m/m and 3.1% y/y while the unemployment rate unexpectedly fell to 4.1%, matching a 1.5 year low. The participation rate climbed to 61.9%. The combination with a lower unemployment rate means there’s an influx of job seekers entering an economy that apparently has enough work to offer. Today’s numbers all but confirm the Fed’s view that its employment mandate is covered, allowing it to keep the focus on tamping down too-high inflation. Next week’s October CPI print unfortunately won’t feature the y/y print due to last year’s shut-down related gap, but the expected 0.3% monthly reading in any case is above what is considered consistent with a return to the 2% target (ie 0.15%-0.2%). The core gauge is anticipated at 0.2%. The labor market report today triggered some kneejerk bear flattening of the US yield curve, coming on the heels of an aggressive bull steepening yesterday. US 2-yr yields rise about 7 bps with the long-end of the curve adding 2-3 bps. Money market implied probability for a December hike increases to 75%+. That may well be an underestimation still. The US dollar extends earlier gains, pushing EUR/USD to 1.114 with the key 1.11 area edging closer. The euro is showing some weakness as well. That’s particularly obvious in EUR/CHF, which is quietly sliding towards the lowest levels since early June (0.914). We consider EUR/CHF as the most adequate gauge for EU-specific risk-off. The trade-weighted USD rallies beyond 102 in a move that wipes out losses incurred over the previous six trading days.

News & Views

The FAO Food Price Index averaged 133.9 points in October 2026, down 1.6 points (1.2%) from its revised September level, as lower price indices across most commodity groups more than offset a sharp rise in sugar and a marginal increase in vegetable oils. Despite the monthly decline, the index stood 5.9% above its level a year earlier but remained 16.4% below its March 2022 peak. The FAO Cereal Price Index fell 4.5% M/M. World wheat prices declined largely reflecting subdued international demand and an improving production outlook, particularly in Argentina. The FAO Dairy Price Index was down 1.1% M/M, with the October decrease reflecting declines in international butter and cheese quotations. The FAO Meat Price Index fell 1.2% M/M. The FAO Vegetable Oil Price Index increased marginally by 0.3% M/M, as higher soybean and sunflower oil quotations more than offset lower rapeseed oil prices. The FAO Sugar Price Index reached its highest level since December 2024 after rising 6.6% M/M and 28.8% Y/Y. The rise was mainly driven by rainfall-related disruptions to sugarcane harvesting and crushing operations in Brazil’s key Centre-South producing region as well as concerns over production prospects in India, the EU and Thailand in the 2026/27 season.

Canadian payrolls surprised on the downside in October, dropping by 4.7k instead of the hoped-for 15k advance. Details showed a third consecutive month of full-time employment lay-offs (-18.1k). A 13.4k advance in part-time employment failed to compensate. The unemployment rate unexpectedly rose from 4.5% to 4.7% (highest since April) even as the participation rate stabilized at 64.8%. More people searched for work (+33k; +2.2%). The Canadian dollar faced a significant setback as weaker Canadian payrolls printed together with blowout US payrolls. USD/CAD almost gained a full big figure, currently changing hands north of 1.41. The Canadian sovereign yield curve bull steepens with yields sliding up to 3.5 bps at the front end of the curve.