Good morning. The Bank of Canada and the Fed announce key lending-rate decisions, tech giants report earnings that will test the weight of the AI trade, and the U.S. and China are edging toward a new framework that could reset global supply lines. Today, we present a viewer’s guide to “Wicked Wednesday” – a phrase we hope catches on – and look forward to at least one more World Series game at home.
Up first
In the news
Trade: The American ambassador to Canada delivered an expletive-filled dressing-down to Ontario’s representative in Washington during a prestigious event in Ottawa this week, The Globe is reporting.
Deals: U.S. reactor vendor Westinghouse Electric Co. and its Canadian owners, Brookfield Asset Management and Cameco Corp., have signed an agreement with the United States government intended to spur construction of as many as eight large nuclear reactors.
Economy: In the run-up to what is expected to be a big-spending federal budget, a growing number of economists are predicting that the Liberals won’t live up to a central promise of shrinking the debt relative to the size of the economy.
Open this photo in gallery:
In focus
Three shows to watch on Wicked Wednesday
Game of Loans
Markets are almost unanimous in expecting a 25-basis-point cut from both the Bank of Canada (announcing at 9:45 a.m. ET) and the U.S. Federal Reserve (2 p.m. ET).
Storylines
- The Bank of Canada is managing a fragile economy shaped by soft exports, slow growth and renewed friction with the United States. Inflation has edged higher to 2.4 per cent while business confidence remains low.
- Governor Tiff Macklem has said monetary policy can only help at the margins as Canada adjusts to the breakdown of continental free trade. A 2.25-per-cent policy rate would sit at the lower bound of the Bank’s neutral range, underscoring how little room remains to cut without fuelling price rises.
- In the U.S., a month-long government shutdown has halted the release of official data on employment and inflation, leaving policymakers dependent on private-sector estimates and regional surveys. Inflation appears to be moderating, but labour conditions are murky. Federal Reserve Chair Jerome Powell has called this a period with “no risk-free path” – cut too little and growth may stall, cut too much and inflation could rebound.
- In September, markets dropped when Powell said “equity prices are fairly highly valued,“ – a warning that sharpens attention on this week’s tech earnings.
The AI Team
Microsoft, Meta and Google-parent Alphabet release results today, followed by Apple and Amazon tomorrow. Together, “MAGMA” represents about US$15-trillion in market value, or roughly a quarter of the S&P 500.
For scale, here’s how those trillion-dollar companies compare with the market cap of the Toronto Stock Exchange:
Storylines
- Their results will test whether the AI boom is still lifting profits or merely inflating expectations. Carrying so much of the S&P 500’s weight, even one miss can shift global sentiment. Each company is deep in a capital race to expand data-centre and chip capacity, and any change to those spending plans will signal how confident they remain in the durability of the AI trade.
- OpenAI, which announced yesterday it was restructuring its ownership structure, said it has signed a new agreement with Microsoft that gives the software giant a roughly 27-per-cent stake in OpenAI’s new for-profit corporation.
The East Wing
The U.S. and China appear to have reached a trade framework ahead of this week’s meeting between Donald Trump and Xi Jinping. The arrangement would see Washington roll back parts of its fentanyl-related tariffs, the Wall Street Journal reported, while Beijing delays new export controls on rare earths.
Storylines
- The framework could remove the immediate threat of 100 per cent tariffs on Chinese goods and give both sides room to recalibrate. China still dominates the rare-earth market, producing about 60 per cent of global supply and 90 per cent of magnets used in high-tech manufacturing. The U.S., meanwhile, continues to use tariffs to pressure Beijing over synthetic-opioid exports and industrial policy. Any breakdown in talks could reignite volatility in commodity and manufacturing supply chains already strained by overlapping trade actions in Asia.
- Prime Minister Mark Carney has been in Asia since last week, travelling to Malaysia and Singapore, and is headed to South Korea this week to attend the APEC Economic Leaders’ Meeting.
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The TD logo has adorned the Blue Jays’ jersey for years.Fred Lum/The Globe and Mail
In sight
A rough patch, then a payoff
Toronto-Dominion Bank’s patience is paying off. After two decades and multiple team rebuilds, the lender’s partnership with the Toronto Blue Jays is delivering a return many marketing departments can only dream of.
And hey! Not only a win last night, but one in considerably less than 6 hours and 39 minutes. The World Series is now tied up at 2, meaning at least one more game in Toronto. I wrote a story about how the SkyDome was built, if you have a little time.
What are your series predictions? Email me: [email protected]
Up next
Also on our radar
At the bell: Domestic earnings today include Agnico Eagle Mines, Ivanhoe Mines, Alamos Gold and Gildan Activewear. You can find our full calendar of economic earnings and events this week here.
On the ball: Film editor Barry Hertz shares his list of the best – and the worst – baseball movies to watch between World Series games. He has forgotten Major League, Rookie of the Year and Angels in the Outfield, though it’s possible my memory is doing more heavy lifting than the films deserve.
Going up: How much longer can Celestica’s ascent continue?
Morning update
Global markets searched for direction as investors braced for a busy day headlined by the U.S. Federal Reserve’s interest-rate decision and earnings from technology heavyweights.
Wall Street futures were mixed after U.S. stock indexes closed at fresh record highs yesterday, while TSX futures were flat ahead of the Bank of Canada interest-rate announcement.
Overseas, the pan-European STOXX 600 was up 0.11 per cent in morning trading. Britain’s FTSE 100 rose 0.46 per cent, Germany’s DAX inched down 0.04 per cent and France’s CAC 40 gave back 0.07 per cent.
In Asia, Japan’s Nikkei closed 2.17 per cent higher, while Hong Kong’s Hang Seng declined 0.33 per cent.
The Canadian dollar traded at 71.72 U.S. cents.
