Market Watch — May 8, 2026

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U.S. equities, as is becoming a familiar trend, initially faced some intraday pressure from surging oil prices and Middle East escalation fears, before stabilizing midweek as hopes for a U.S.–Iran deal drove energy sharply lower and supported a strong rebound led by technology and AI-related earnings upside. While hostilities between the U.S. and Iran did reignite late week, investors largely looked through the developments with muted reactions from energy prices and main indices, though trade policy uncertainty resurfaced as discussions about the upcoming CUSMA review and potential auto-related tariffs re-entered focus. Canada broadly tracked U.S. risk sentiment, with equities buffeted early by geopolitical-driven commodity volatility, then supported as easing oil prices, resilient corporate results, and improving risk appetite lifted domestic cyclicals, despite lingering sensitivity to U.S. trade negotiations given the economy’s exposure to autos and cross-border supply chains.

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Europe rallied sharply midweek as energy costs retreated, and corporate earnings surprised positively, though gains faded into Friday amid renewed trade uncertainty tied to potential U.S. tariff threats toward the EU and European Central Bank (ECB) policy caution. China and broader Emerging Markets saw improving sentiment midweek on reduced geopolitical tail risks and stronger Asian equity momentum, but China underperformed late in the week as regional risk aversion returned and global trade concerns resurfaced.

Highlights:

• U.S. equities returned 2.34%1 after shaking off early geopolitical and energy-driven pressure as falling oil prices and strong tech earnings underpinned risk sentiment, with markets largely shrugging off renewed late‑week Middle East headlines.
• Canadian equities returned 0.54%2, largely tracking U.S. markets, moving from early commodity volatility toward a steadier tone as oil prices eased and investors discounted ongoing trade and CUSMA-related uncertainty.
• European stocks returned 0.97%3 amid lower energy costs and earnings strength, but momentum faded as renewed U.S. tariff threats and unresolved ECB policy risks reintroduced caution.
• Emerging markets rose 0.39%4 seeing a brief midweek lift from easing geopolitical risk, before China lagged again as trade concerns and global risk aversion resurfaced.

Rates reprice geopolitical risk as energy volatility partly unwinds

U.S. rates moved sharply with swings in geopolitical headline risk, as early week escalation in the Middle East and surging oil prices pushed yields higher on inflation concerns, before a midweek rally took hold with de‑escalation hopes driving energy lower and encouraged an unwind of risk premia, reinforced by steady labour data that did little to alter Fed expectations.

Canada followed U.S. moves, with yields rising early alongside energy prices before easing as oil retraced, and bond market pricing reflected a more balanced domestic growth and policy outlook. Europe saw heightened volatility, initially pressured by hawkish ECB rhetoric before participating in the midweek rally as falling energy prices tempered inflation risks, though gains moderated later amid trade-related uncertainty.

Highlights:

• The 2- and 10-year U.S. Treasury yields were up 4 basis points (bps) and 2 bps, respectively. In Canada, the 2- and 10-year yields were both down 2 bps. Bond yields and prices move inversely to one another.
• Developed-market sovereign bonds swung with geopolitical headlines, selling off early as oil surged, and inflation risk rose before rallying midweek on de-escalation hopes, falling energy prices, and economic data that left policy expectations largely intact.
• Investment grade and high yield credit weathered early volatility from energy and geopolitical shocks, then improved midweek as risk appetite recovered, oil retreated, and equity strength helped stabilize spreads despite lingering macro uncertainty.

Weekly dashboard

Canada’s unemployment rate rises as full-time jobs drop

Canada’s labour market weakened in April, according to the latest Statistics Canada (StatCan) report, which showed employment falling by about 18,000 jobs and the national unemployment rate climbing to 6.9%. The increase reflects more Canadians actively searching for work, even as job creation remains sluggish. The decline was driven almost entirely by full‑time employment, which dropped by approximately 47,000 positions. Part‑time work provided a modest offset, rising by about 29,000 jobs. Over the first four months of 2026, full‑time employment fell by 111,000.

Highlights:

• The unemployment rate for Canadians aged 15 to 24 rose to 14.3 %, roughly double the national average and near highs last seen in late 2025. Core‑aged men (25 to 54) also saw unemployment rise to 6.1%, while rates for women in the same age group held steady at 5.9%.
• Quebec experienced the largest employment drop, losing 43,000 jobs, followed by declines in Newfoundland and Labrador, Saskatchewan, and New Brunswick. Ontario, however, added 42,000 jobs, largely in health care and social assistance.
• Wage growth remained solid despite the labour market softening. Average hourly wages rose 4.5% year‑over‑year, continuing a trend of elevated pay increases that the Bank of Canada monitors closely for inflation pressures.

U.S. labour market shows resiliency as unemployment rate holds steady at 4.3%

The latest U.S. nonfarm payrolls report showed that employers added 115,000 jobs in April, a notable slowdown from March’s revised 185,000 gain but still well above economists’ expectations of roughly 55-65,000. The unemployment rate remained unchanged at 4.3%. Despite the slowdown, analysts say the report reflects a labour market that remains stable but cooling, providing the U.S. Federal Reserve with room to keep interest rates steady as it weighs risks from elevated energy prices and geopolitical tensions.

Highlights:

• Hiring was concentrated in health care, which added 37,000 positions, continuing its role as the dominant engine of U.S. job growth over the past two years. Transportation and warehousing contributed another 30,000 jobs, driven largely by gains in couriers and messengers. Retail trade added 22,000 jobs.
• Several sectors continued to contract. Federal government employment fell by 9,000, while the information sector shed 13,000 jobs. Manufacturing also slipped slightly, losing 2,000 positions.
• Wage growth cooled, with average hourly earnings rising just 0.2% in April and 3.6% year‑over‑year, both slightly below expectations and an encouraging sign for policymakers monitoring inflation pressures.

Eurozone manufacturing PMI strengthened in April

Eurozone factories saw a renewed upswing in April as the manufacturing Purchasing Manager’s Index (PMI) climbed to 52.2, up from 51.6 in March, marking the strongest reading since mid‑2022. The rebound placed all eight surveyed eurozone economies above the 50‑point expansion threshold for the first time since June 2022, underscoring a broad-based improvement across the region. The recovery was driven largely by front‑loading of orders and stockpiling, as firms sought to shield themselves from anticipated supply disruptions and rising input costs linked to the ongoing conflict in the Middle East.

Highlights:

• Surveyed companies reported that customers accelerated purchases ahead of expected price increases, boosting both production volumes and new orders. New export orders also rose for the first time in more than four years, reflecting a short-term surge in overseas demand.
• Despite the upbeat headline figure, underlying data pointed to persistent vulnerabilities. Input price inflation surged, approaching a four‑year high, while supply chains came under renewed strain.
• Manufacturers cited logistical disruptions, reduced raw material availability, and high order volumes as key factors behind the worst supplier delivery delays since July 2022. These pressures contributed to a cautious outlook among firms, many of which continued to reduce headcount despite rising order books.

1  S&P 500 Index USD

2 S&P/TSX Composite Index USD

3 Bloomberg Developed Markets ex N. America Large & Mid Cap Price Return Index USD

4 Bloomberg EM Large & Mid Cap Price Return Index USD

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