Market Watch — Oct. 16, 2026

• Share on Facebook
• Share on Bluesky
• Share on X
• Copy Link

Week in review

"We're all still human beings"

More Than A Number | Part 1: The man with a million dollar dream

8h ago

the final countdown

Carney: Separatism a "dangerous bluff" at "a moment of unprecedented opportunity"

17h ago

The Everything Red Deer Podcast

Exclusive: rdnewsNOW goes 1-on-1 with Prime Minister Mark Carney

22h ago

Chip selloff and hot inflation data test risk appetite

U.S. equities came under pressure early in the week as cautious comments from Broadcom on AI infrastructure spending and a large capacity expansion by Chinese memory-chip maker CXMT extended a selloff in semiconductors, overshadowing generally strong bank earnings. Sentiment weakened further on Wednesday, when hotter-than-expected September inflation revived expectations of an October Federal Reserve (Fed) hike. Firm producer prices on Thursday and signs of slowing AI revenue growth added to the pressure. Markets steadied late in the week as a flight to quality pulled Treasury yields lower and Fed Chair Warsh’s noncommittal remarks reduced near-term hike bets. Canada reopened after the Thanksgiving holiday with support from a recovery in energy names, but rising bond yields after the U.S. inflation data weighed on stocks before a rebound on Thursday. Europe proved more resilient as strong bank results offset technology weakness, while dovish Bank of England (BoE) commentary and easing French bond stress supported sentiment ahead of a late-week relief rally. China and emerging markets bore the brunt of the semiconductor rout, with steep losses in Korea and Japan and renewed Chinese tech regulation concerns; markets recovered late in the week after Chinese regulators reportedly encouraged state-backed buying.

• S. equities returned -1.94%¹ as the semiconductor selloff and stronger-than-expected inflation data raised the risk of further Fed tightening, though Warsh’s measured tone and lower Treasury yields helped markets steady by week’s end.
• Canadian equities returned 2.96%² as early gains in energy faded on rising yields after the U.S. inflation reports, before a sharp Thursday rebound helped recover some of the midweek losses.
• European equities returned 1.46%³, outperforming global peers as strong bank earnings, a dovish BoE and easing French bond stress offset technology weakness and supported a late-week relief rally.
• Emerging market equities returned 2.32%⁴ as the global chip selloff triggered sharp losses in Korea and Japan. Chinese markets faced tech regulation concerns before reported state support helped stabilize sentiment on Friday.

Inflation surprise and haven demand pull yields in both directions

U.S. Treasurys opened the week firmer as higher Saudi output pulled oil prices lower and eased inflation concerns. Yields initially rose following Wednesday’s stronger-than-expected core Consumer Price Index (CPI) report, but reversed course later in the session and ended lower. Thursday’s firm producer price data prompted a more muted rates response, while haven demand amid continued AI-related equity weakness supported a broader rally led by longer-dated bonds. Some of those gains reversed Friday as equities recovered, while Fed Chair Warsh’s noncommittal tone tempered expectations for a near-term hike. Canadian bonds followed Treasurys after reopening from Thanksgiving. In Europe, dovish BoE commentary and easing French bond stress gave way to talk of further ECB hikes and the U.S. data, before core and peripheral debt joined Thursday’s rally. Japanese government bonds tracked global moves amid reports the Bank of Japan is leaning against an October hike, while emerging market currencies softened after the U.S. CPI release.

• The 2- and 10-year U.S. Treasury yields were 4 bps and 14 bps lower, respectively. In Canada, the 2- and 10-year sovereign yields were 5 bps and 10 bps lower, respectively. Bond yields and prices move inversely to one another.
• Firmer U.S. inflation data lifted short-term yields midweek, before weakness in AI-related equities drew investors toward safe-haven assets, with long-dated Treasurys, U.K. government bonds and French government bonds leading the move.
• Equity market volatility tied to AI weighed on corporate issuance, with $2.15 billion of high-yield bonds priced this week, below dealer forecasts. Next week will show whether new issuance picks up.

Canadian activity holds up unevenly as inflation risks persist

This week’s Canadian data showed an economy that is still holding up, though unevenly. Manufacturing rebounded in August, but wholesale activity softened. Housing was also split: new construction stayed strong, while resale activity weakened as higher borrowing costs kept buyers on the sidelines. Scotiabank Economics updated its forecasts, revising Canadian growth slightly higher. It expects inflation to stay above target until early 2028 as elevated energy and diesel prices feed into broader prices, and it sees the Bank of Canada withdrawing stimulus and moving into restrictive territory.

Highlights:

• Manufacturing sales rose 1.5% month over month in August, above the 1.1% consensus, while wholesale sales fell 1.6%, led by lower motor vehicle and parts sales.
• Housing starts rose to an annualized 248,000 units in September, above the 232,500 consensus. Home sales fell 2.3% month over month, and the benchmark price declined 0.4% to $652,800.
• Scotiabank Economics expects headline CPI to stay above 3% for the next few quarters and projects 100 basis points of Bank of Canada increases. That would take the policy rate to 3.25% in the second quarter of 2027, where it would stay well into 2028.

U.S. inflation rebounds as energy surge lifts consumer, producer prices

U.S. inflation accelerated in September, with both consumer and producer price data pointing to renewed price pressures that could complicate the U.S. Federal Reserve’s (Fed) policy outlook. The U.S. Consumer Price Index (CPI) rose 0.6% in September, following a 0.4% increase in August, according to data released Wednesday by the U.S. Labor Department’s Bureau of Labor Statistics. Additional inflation concerns emerged Thursday as the Producer Price Index (PPI) posted its largest monthly gain in more than four years. Producer prices increased 1.3% in September, following gains of 0.5% in August and 0.2% in July. On a year-over-year basis, producer inflation accelerated to 6.3%, the strongest reading since December 2022.

Highlights:

• Consumer inflation accelerated to 3.7% year over year in September from 3.4% in August, led by a 9.1% surge in gasoline prices and a 5.2% rise in energy costs. Core CPI increased 0.3% for a second consecutive month and was up 2.6% annually. Food prices were flat, while shelter costs continued to edge higher, rising 0.4%.
• Producer prices were lifted by a 10.8% increase in energy costs, led by a 20.3% surge in gasoline. Goods prices climbed 2.6%, their strongest gain since 2009, while services prices rose 0.8%. Core producer prices, excluding food, energy and trade services, advanced 0.5% in September and 5.0% from a year earlier.
• The latest inflation data suggest price pressures are broadening beyond energy markets. Elevated oil prices remain a key driver, but rising shelter costs and firm prices across goods and services signal inflation remains above the Fed’s 2% target.

Eurozone inflation accelerates as industrial output weakens

Eurozone inflation accelerated sharply in September while industrial production extended its downturn, underscoring the European Central Bank’s (ECB) challenge of balancing persistent price pressures against a sluggish manufacturing sector. Data released by Eurostat showed consumer prices in the 20-member currency bloc rose 3.8% year-over-year in September, up from 3.2% in August and marking the highest inflation rate in more than a year. Among the bloc’s largest economies, inflation reached 3.3% in Germany, 3.4% in France, 4.2% in Italy and 5.0% in Spain. Romania recorded the highest rate in the European Union at 6.5%.

Highlights:

• Energy remained the main inflation driver, with prices rising 18.8% year-over-year, up from 14.3% in August. Services inflation edged up to 3.2% from 3.0%, while food, alcohol and tobacco prices increased 1.4%. Excluding energy, inflation was 2.3%, while core inflation, which excludes energy and food, rose to 2.5%.
• The inflation report followed Thursday’s release showing eurozone industrial production fell 0.5% in August from July, the third consecutive monthly decline. Output was 1.1% lower than a year earlier, highlighting ongoing weakness in the region’s manufacturing sector.
• The monthly decline was led by a 2.7% drop in non-durable consumer goods production and a 0.8% decline in intermediate goods, while energy output fell 0.6%. Capital goods production, however, increased 0.4%.