The Dow Jones Industrial Average (US30) rose by 0.43% on Tuesday. The S&P 500 (US500) gained 0.27%, and the tech-heavy Nasdaq (US100) finished 0.33% higher. All three major indices hit record highs despite signs of a slowing economy. Investors digested revised employment data showing that the US added 911,000 fewer jobs than previously estimated in the year ending in March, the most significant downward revision since 2002. This weaker job outlook increased expectations of a Federal Reserve rate cut next week, with debate centered mainly on the size of the reduction. Attention will now turn to the Producer Price Index (PPI) and Consumer Price Index (CPI) reports, which will be closely watched for clues about the direction of the Fed’s policy.
The Mexican peso strengthened to 18.6 per US dollar. In August, headline inflation slowed to 3.57%, while core inflation held steady at 4.23%, reinforcing expectations that the Bank of Mexico’s cautious easing cycle will continue at a moderate pace. The minutes from Banxico’s August meeting confirmed that the board approved a 25 basis point (bps) rate cut to 7.75%, with the majority favoring a slower pace of cuts and a potential additional quarter-point reduction later this year.
The Canadian dollar is under new selling pressure and is currently the second-worst performing major currency of 2025, behind only the US dollar. A combination of a deteriorating domestic economy and ongoing tariff uncertainty continues to weigh on the loonie, making traders skeptical about its near-term growth prospects. Canada’s latest GDP release confirmed sluggish growth, highlighting the impact of weak domestic activity. In response, the Bank of Canada may continue to cut rates.
European stock markets were mostly higher on Tuesday. The German DAX (DE40) fell by 0.37%, the French CAC 40 (FR40) rose by 0.19%, Spain’s IBEX35 (ES35) gained 0.14%, and the UK’s FTSE 100 (UK100) closed 0.23% higher. European equities ended slightly up on Tuesday, continuing their gains from the previous session. The French Parliament passed a vote of no-confidence in Prime Minister Bayrou as parties failed to agree on budget cuts, forcing President Macron to appoint the country’s fifth prime minister in less than two years. At the same time, bond yields traded quietly despite the turmoil, providing support for stocks ahead of the European Central Bank’s likely rate hold this week.
Russian strike drones have invaded Polish airspace, threatening cities approximately 40-50 miles from the Ukrainian border. Airports in Warsaw, Lublin, and Rzeszow were closed due to the attack. Poland has put its air defense systems on high alert and, according to preliminary reports, has shot down all the drones. On Wednesday morning local time, Polish armed forces stated that all necessary procedures were enacted to ensure the security of national airspace as Russia conducted large-scale overnight strikes on Ukraine. This is not the first time Russian drones have violated Polish airspace, forcing fighter jets to scramble, but this time, the number of drones crossing NATO’s borders was around 8-10, which does not appear to be accidental.
WTI crude oil prices rose more than 1% on Tuesday, surpassing $63 a barrel. The increase followed reports of explosions in Doha, Qatar, where Israel reportedly struck high-ranking Hamas leaders. According to eyewitnesses, Qatar, a key mediator in the Israel-Hamas conflict and a host of Hamas officials, was rattled by smoke rising over the area. This geopolitical shock added to existing bullish factors for oil. Prices were already supported by a smaller-than-expected OPEC+ output increase. Markets also anticipate that China will continue to build up its oil reserves, further tightening supply. Meanwhile, fears of new Western sanctions against Russia have heightened following its largest aerial attack on Ukraine in months.
Asian markets were mostly lower yesterday. Japan’s Nikkei 225 (JP225) fell by 0.42%, China’s FTSE China A50 (CHA50) dropped 0.35%, Hong Kong’s Hang Seng (HK50) rose by 1.19%, and Australia’s ASX 200 (AU200) had a negative result of 0.63%.
The New Zealand dollar rose to $0.594 USD on Wednesday as the US dollar strengthened ahead of key inflation reports. Traders are awaiting the release of the US PPI and CPI data this week, which could provide more clues about the Federal Reserve’s path for interest rates. Meanwhile, in China, New Zealand’s largest trading partner, data released today showed that consumer prices fell in August and factory gate deflation eased, pointing to continued deflationary pressures in an economy facing slowing growth.
