Rate Cut Hopes Drive Market Higher: Market Analysis for Nov 26th, 2025

Canadian equity markets climbed again, setting a fresh all-time high as rising gold prices and growing optimism around potential monetary policy easing provided a strong tailwind. The rally in precious metals driven by expectations of lower global interest rates, boosted the resource-heavy TSX, reinforcing Canada’s ongoing market momentum.  Canada’s central bank and major financial institutions expect moderate GDP growth of about 0.5% for Q3, but several economists argue this may be overly optimistic given recent economic weakness. The country reported a -1.6% GDP contraction in Q2 2025, largely driven by international trade disruptions that sharply reduced exports. If GDP also contracts in Q3, Canada would technically meet the Bank of Canada’s rule-of-thumb definition of a recession, which is two consecutive quarters of negative growth.

American Markets

U.S. markets also advanced for a second consecutive session, supported by renewed hopes for Federal Reserve rate cuts. This came even as U.S. Treasury yields moved higher on Wednesday, reflecting investor repositioning ahead of upcoming economic data releases and continued speculation surrounding the Federal Reserve’s next chair. Adding to the positive sentiment, the latest report from the Bureau of Labor Statistics showed that core wholesale prices rose less than expected in September, suggesting a possible cooling of pipeline inflation pressures and reducing concerns about persistent cost increases.

European Markets

European shares moved substantially higher, also buoyed by expectations of a possible Fed rate cut, with financial and construction stocks leading the gains. The ECB warned that heightened currency volatility, from President Donald Trump’s trade policies and public pressure on the Federal Reserve could pose risks for banks reliant on dollar funding. Recent trade data showed that Europe also continues to grapple with a widening trade imbalance as imports from China surge, a trend the ECB flagged as a potential forward-looking risk to regional economic stability.

UK stocks rose despite the government’s budget revealing that investors across many asset classes may face higher taxes as the government works to close the fiscal gap. The tax burden is expected to reach its highest level on record, yet markets remained resilient. Meanwhile, new projections from the Office for Budget Responsibility showed that British consumer price inflation is expected to average 2.5% in 2026. This is higher than the 2.1% forecast issued in March during finance minister Rachel Reeves’ half-yearly budget update, and moderately above the Bank of England’s 2% inflation target—indicating some lingering price pressures ahead.

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