Highly Volatile Financial Markets in Wake of U.S. Election Shock
November 6, 2026
Investors are groping to make sense of how the Republican Party’s broad and deep election losses might actually impact U.S. macro-economic, regulatory and foreign policies in the remaining two years of President Trump second term. It would be totally out of character for the president to capitulate, and it’s not clear that Democratic lawmakers will unite and use this opportunity wisely and effectively. A major U.S. data release, the October U.S. labor market situation release arrives within the half hour, with analysts predicting a bigger gain of jobs than seen in September but still well below 100K, as well as an unchanged jobless rate of 4.2%, and a marginally slower on-year rise in wages that undershoots the trend in prices that consumers are paying.
Stock markets around the world this Friday remain very fragile. The Japanese Nikkei and Korean Kospi each plunged 6.0% overnight. The Taiwanese market lost 4.5%. In Singapore, Hong Kong and China, share prices fell over 1.0%. Major European stock exchanges are down between 1.2% and 2.2%, and the DOW’s huge drop Thursday has been extended in futures trading by almost 1%. Exceptions to this continuing slide include a 1.5% rebound in the Nasdaq and a 2.2% advance in India’s Sensex index.
The ten-year Japanese JGB yield closed 14 basis points lower on the day at 2.62% and and over 40 basis points below early October levels. In contrast, 10-year sovereign debt yields have risen so far today by 4 bps in the U.K., 3 bps in the United States, 2 bps in France and a basis point in Germany, Italy and Spain.
Oil prices have held steady around Thursday closing levels. Gold and silver prices are a tad lower, and Bitcoin has rebounded about a percent after Thursday’s deep dive.
Safe haven demand amid the fresh policy uncertainty has lifted the dollar by 0.8-0.9% against the Australian and New Zealand currencies, 0.4% relative to the euro and sterling and 0.3% versus the yen and Canadian dollar.
European data released prior to the U.S. Labor Department’s news include
- A 0.7% monthly drop in Euroland retail sales volume that easily underperformed expectations and left sales just 0.4% above the September 2025 level. Sales in all of last year had risen about 2.4%, by comparison.
- German industrial production outpaced market expectations, rising 0.7% on month and 0.4% on year in September.
- Spanish industrial production similarly increased 0.8% in September. This lifted the 12-month rate of increase to 2.0%.
- Swiss consumer confidence tumbled nine index points to a 35-month low of -45 in October.
- The Lloyds index of British home prices was unchanged in September both compared to August and year-earlier levels.
- The French current account deficit last quarter of EUR 8.0 billion was 3.5 times wider than a year earlier in contrast to a 13% shrinkage recorded in the first half of 2026.
- October consumer price inflation rates in Cyprus (4.4%) and Estonia (4.7%) were their highest in 48 and 11 months, respectively. Austrian wholesale price inflation last month matched September’s 43-month high of 10.2%.
U.S. October labor market figures depict a less fragile picture than has been assumed. A 165k increase in nonfarm payroll employment was around 100,000 greater than the market consensus, plus the August and September revised data were revised upward by a combined 84k. As a result, the monthly average increase in August-October of 137k shows a striking improvement from the 28k average monthly rise in May-July. October’s jobless rate dipped back to 4.1% instead of remaining at September’s 4.2%. This was the third 4.1% reading, which is close to any notion of full employment, in the past four months, and labor market participation increased for a third consecutive month to 61.9% in October from 61.4% back in July. Average hourly wage growth did not dip under 3.0% as feared, but rather only by 0.1 percentage point to 3.1% and painting a steady picture of 3.1% or 3.2% over the past four reported months. The 0.4% month-on-month rise of average hourly wages was the most since January and probably will not be welcomed by Fed officials. One sign of weakness in the overall data involved the U-6 measure of combined un- and underemployment, which rose by 0.3 percentage points to 7.9%, most since July.
As surprisingly good as the U.S. jobs data turned out, Canada’s October labor market figures proved disappointing. The jobless rate there jumped 0.2 percentage points to a six-month high of 6.7% and well above the back-to-back 6.4% readings in July and August. Canadian employment, which had contracted by a combined 110k in August and September, had been widely expected to resume positive growth last month but instead fell another 4.7k to extend the declining streak to a worrisome three months. Also wage growth failed to hold steady at September’s year-on-year reading of 2.3% but instead settled back to August’s 2.0%.
Other central bank interest rate announcements since Tuesday had revealed increases in the U.K., Sweden, Australia, Armenia, Czech Republic and Moldova, as well as decisions to leave rates steady in Malaysia, Uzbekistan, Norway and Brazil. However, from the Bank of Mexico late yesterday came unexpected and contrary news of a 25-basis point reduction in the overnight interbank rate to 6.25%. This was the third cut of 2026 but the first one since the first third of the year. There had been a total of eight cuts in 2025 for a combined drop of three percentage points, and the rate level coming into yesterday’s review of 6.50% was already well down from a former cyclical peak of 11.25% prevailing for the year through March 2024. Adding to the surprise of yesterday’s 3-2 vote to cut the rate again, consumer price inflation in Mexico had been drifting higher, enough so for central bank officials to revise upward projected total and core yearend inflation to 3.7%. and to assert in today’s statement that “The balance of risks for the trajectory of inflation within the forecast horizon remains biased to the upside. The changes in economic policy by the US administration and a
possible extension of geopolitical conflicts continue adding uncertainty to the forecasts. Their effects could imply pressures on inflation on both sides of the balance.” The justification for the interest rate cut was summed up as follows:
The Governing Board judged that the disinflation process continues. It assessed that, under the prevailing
slack conditions, the pass-through of exchange rate fluctuations to consumer prices would be limited. It
estimated that no demand-side pressures are currently perceived in the Mexican economy and that the
level of monetary restriction implemented continues operating.
Copyright 2026, Larry Greenberg. All rights reserved.
Tags: Bank of Mexico, U.S. jobs data
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