Market Watch: February 6

Precious metals and tech pullback clash with hawkish Fed chair nomination

U.S. equities opened firm but quickly slipped as a sharp precious‑metals unwind and a hawkish Fed‑chair signal dampened sentiment, before firmer ISM manufacturing and strong earnings helped steady risk appetite. Mid‑week, markets grew choppy as AI enthusiasm flipped toward concerns over “AI disruption,” with software names hit particularly hard after the recent release by Anthropic. As investors digested the latest corporate earnings reports, particularly focusing on guidance as it pertains to CapEX plans, the technology‑led pullback extended until dip‑buyers returned Friday to lift markets. Canadian markets whipsawed daily, spurred by material exposure to resources sectors and the underlying gold and oil volatility. This steadied through the week as commodities found a floor, and Friday’s labour report reduced Bank of Canada (BoC) hike bets, helping risk tone. European stocks were relatively resilient early on, then softened into European Central Bank (ECB)/Bank of England (BoE) events; dovish BoE messaging weighed on the GBP, while the ECB stayed firmly data dependent. Asian markets were mixed as weak Chinese PMIs and EV-demand signals offset intermittent equity rebounds keeping regional risk appetite anemic as the focus turned to this weekend’s elections in Japan.

Highlights:

U.S. equities returned -0.09%1 as a hawkish Fed chair headline and a sharp metals reset set a cautious tone. Better ISM data and solid earnings briefly lifted sentiment, before AI disruption and CapEX outlook concerns drove a tech pullback, followed by a late-week “buy-the-dip” rebound.
Canadian equities returned 1.72%2, with performance driven by commodity swings as materials dragged on gold weakness before stabilizing, and the labour market report’s softer wage and participation readings eased BoC hike expectations, improving sentiment into the week’s end.
European stocks returned 0.53%3 as cooling inflation met an ECB on hold, while the BoE’s dovish stance pushed GBP lower and gilts higher, setting the stage for defensives to lead across the region.
Emerging markets rose 0.28%4 despite China’s soft PMI signals and weaker EV demand, while global AI-driven tech volatility and shifting dollar/commodity trends kept risk appetite more muted.

Sovereign curves move on soft hiring signals and central bank caution

In the U.S., bond markets opened the week steady as investors positioned for a dense labour‑data calendar, then grew more sensitive after the Bureau of Labor Statistics (BLS) delayed key releases, shifting attention to private indicators such as ISM surveys and ADP, which highlighted softening hiring momentum; later‑week jobless‑claims and Challenger data reinforced cooling labour signals and pulled yields lower before stabilizing into Friday. Canada saw modest movements early before the January labour report showed headline weakness but firmer full‑time gains, reducing BoC hike expectations and helping to steady the curve. Europe traded around central‑bank events, with the ECB and BoE holding policy steady; the BoE’s dovish tone sparked front‑end gilt rallies.

Highlights:

The 2- and 10-year U.S. Treasury yields fell 11 basis points (bps) and 5 bps, respectively. In Canada, the 2- and 10-year yields were down 3 bps and 2 bps, respectively. Bond yields and prices move inversely to one another.
Sovereign curves were driven by delayed U.S. labour data, softer ADP and jobless‑claims signals, a dovish‑leaning BoE hold, and Australia’s unexpected hike, creating uneven yield shifts across regions.
Credit markets absorbed mixed signals as rising job‑cut announcements, tech‑sector volatility, and heavy capex guidance heightened caution around earnings durability, while steadier rate expectations later in the week helped stabilize spreads.

Weekly dashboard

Canada services PMI moves lower as activity and new business decline

Activity in Canada’s services industry contracted to start the new year, extending a downturn as tariffs and broader uncertainty continue to weigh heavily. The S&P Global Canada services purchasing managers index (PMI) fell to 45.8 in January, a third successive monthly decline after hitting 46.5 in December. Aside from marginal growth seen in October, the index was below the 50 threshold, signalling an improvement and a deterioration in business activity throughout 2025.

Highlights:

New export business also deteriorated in January, with some companies reporting that tariffs made it unprofitable to trade with the neighbouring U.S., S&P Global said.
January saw another steep increase in overall input costs for service providers, and S&P Global said suppliers were reported to be raising prices, with tariffs again mentioned as a contributory factor.
The survey found confidence in the outlook remained positive at the start of 2026 amid hopes of a pickup in economic activity in the year ahead and a resolution to trade uncertainties.

U.S. private payrolls undershoot expectations in January

U.S. private payrolls increased less than expected in January according to ADP’s national employment report. The U.S. government’s official report from the Bureau of Labour Statistics, which was due for release this week, has been delayed by the partial shutdown of the federal government. In ADP’s report, private employment rose by 22,000 jobs last month, and the number would have been negative had it not been for a surge of 74,000 hires in the education and health services category. Economists had forecasted private employment advancing by 48,000.

Highlights:

Outside of the health care-related jobs, the primary driver behind employment growth was financial activities, which added 14,000 positions, while construction rose by 9,000, and both the trade, transportation and utilities and the leisure and hospitality industries contributed 4,000.
Professional and business services lost 57,000 and 13,000, respectively, and manufacturing was down 8,000. All but 1,000 net jobs came from the services sector.
Wage gains were little changed from December, with those staying in their jobs seeing growth of 4.5%.

Eurozone inflation sinks below ECB target

Eurozone inflation fell below the European Central Bank’s (ECB) target in January and is expected to remain under that 2% mark over the next two years. However, a weaker U.S. dollar and increased imports of lower-priced Chinese goods could push inflation even lower than policymakers expect. Inflation has hovered around the ECB’s 2% target over recent months, prompting its policymakers to reiterate that monetary policy remains in a “good place.” The central bank this week held its key rate at 2%, having maintained that level since June.

Highlights:

Annual inflation in January was 1.7%, down from 2.0% in December, the European Union’s statistics agency Eurostat reported, its lowest level since September 2024. Economists had expected a reading of 1.8%.
The euro rose to a more-than four-year high against the U.S dollar late last month. A higher euro reduces prices of imported goods and services, including energy, and weakens demand for eurozone exports by making them pricier overseas.
Reflecting the stronger currency, energy prices, fell more sharply in January than December, while services inflation also edged lower, the data showed. Non-energy industrial goods prices were down 2.4% in January from December.

by Scotia Wealth Management

Market Watch: February 6

This week’s highlights

Week in review

Precious metals and tech pullback clash with hawkish Fed chair nomination

Sovereign curves move on soft hiring signals and central bank caution

Weekly dashboard

Canada services PMI moves lower as activity and new business decline

U.S. private payrolls undershoot expectations in January

Eurozone inflation sinks below ECB target

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