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After suffering repeated convulsions in the past few weeks, global financial markets are on the rise once more. Most major bourses are sitting at elevated levels after evidence that the US employment market continues to accelerate in a stable fashion, and an improvement in European and Chinese purchasing manager indices  helped to brighten the investment mood.

With the bears caged once more, the dollar benefited from a slight uptick in treasury yields over the last two trading cycles, while falling demand caused the safe-haven Japanese yen descend once again.

The euro remains rock-steady, holding the middle of its trading range as traders await the results of the European Union’s bank stress tests. The tests, designed to assess balance sheet strength and ability to withstand unfavourable economic conditions, are scheduled to be released across the continent on Sunday. Roughly 150 major lenders were evaluated, with 20 smaller institutions expected to fail at some level, suggesting that capital raising activities are likely to continue – but that the overall impact should be muted.

Canadian dollar trading also remains tightly rangebound, remaining on the defensive after Wednesday’s disappointingly soft retail sales number, and ongoing weakness in the oil market. The Bank of Canada’s shift out of neutral is helping to support the currency, but traders are still looking for clarity on what the rate announcement’s language means for the yield curve – and we suspect that the move was far less meaningful than the markets initially believed.

Most of these are trends with benefits, but there are reasons to suspect that the momentum won’t continue into the weekend. Gains are now being erased as market participants worry about the impact that a spreading Ebola virus might have on travel and trade. After a New York City doctor was admitted to hospital with Ebola-esque symptoms (which have now been confirmed), Asian equities slipped slightly and North American futures dipped ahead of the opening bell. Corporate earnings are still coming in, with negative surprises from Germany’s BASF and posting to a softer session overall.

Tragic though they are, given that the number of American Ebola cases still wouldn’t fill a small elevator, we don’t expect major market disruption stemming from the virus. As such, commercial hedgers and other market participants may benefit from positioning for short-term volatility triggered by media hyperbole, while keeping an eye on broader fundamentals that are likely to have a more prolonged effect. As Jon Stewart once put it – “The press is our immune system. If it overreacts to everything, we get sicker”.

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