Today
Equities rebounded this morning with futures in North America pointing higher following reports that Trump may look to end the Iran conflict, even if key oil routes remain disrupted. Despite the bounce, markets remain under pressure, with the S&P 500 down nearly 8% for March and on track for its worst month since 2022. Elevated oil prices and geopolitical uncertainty continue to pose risks to inflation and broader market stability after the monthlong war disrupted a key global energy chokepoint, pushing crude higher and fueling inflation concerns. While investors are cautiously optimistic about a potential de-escalation, uncertainty around the Strait of Hormuz and ongoing geopolitical risks continue to cloud the outlook. Strategists note that even if tensions ease, the shock to energy markets and inflation dynamics is unlikely to fully reverse quickly.
Canada’s economy showed modest momentum at the start of the year, with GDP rising 0.1% in January and an estimated 0.2% in February, driven mostly by gains in goods-producing sectors such as oil and gas. The expansion comes after a softer end to 2025, with manufacturing (particularly auto production) acting as a drag due to extended shutdowns. While first-quarter growth is tracking around 1.5%, economists expect the Iran-driven oil shock to weigh on the outlook through higher inflation, weaker consumer spending, and rising unemployment. Elevated energy prices may benefit Canada’s resource sector, but broader economic impacts point toward stagflation risks. The BoC has indicated it will look through short-term inflation effects while focusing on downside growth risks, highlighting the fragile economic backdrop we find ourselves in at this time.
Correction territory. Equities in the U.S. extended their selloff yesterday, with the S&P 500 nearing correction territory and the Nasdaq and Dow already in one, as tensions in the Iran conflict and higher oil prices weigh on growth expectations. Jerome Powell offered limited clarity on the Fed’s policy path, with markets pulling back from rate hike expectations even as inflation risks remain (more on that below). Treasuries moved higher on growth concerns, while energy stocks continued a historic run, highlighting a widening divergence across sectors. Despite the weakness, some strategists suggest the selloff may be entering later stages, with positioning less stretched and valuations, particularly in tech, appearing more reasonable relative to recent levels. In Canada, the TSX was relatively flat in yesterday’s session and is holding on to modest year-to-date gains heading into the final business day of the month.
Jerome Powell believes longer-term inflation expectations remain anchored despite uncertainty tied to the Iran conflict, giving the Fed room to hold rates steady for now. While higher oil prices could create inflationary pressure and weigh on growth, Powell emphasized the Fed continues to be in a wait-and-see position and will not react immediately. He noted policymakers are closely monitoring inflation expectations, as supply shocks can become more problematic if they begin to shift. Powell also addressed volatility in private credit markets, acknowledging a correction is underway but saying there is no current evidence of spillover risk to the banking system. Overall, the Fed appears cautious but not ready to adjust policy as it evaluates geopolitical and financial risks.
Not out of the woods yet. China’s largest banks, including Industrial and Commercial Bank of China and China Construction Bank, reported nearly flat profits last year as the country’s economy continues to struggle with a property sector crisis and broader slowdown. Net income growth was under 1% for ICBC and CCB, while Bank of Communications posted a modest 2.2% increase. Asset quality showed mixed signals, with slight improvements in some non-performing loan ratios but deterioration in others, highlighting uneven stress across balance sheets. The results point to a banking sector that is absorbing, rather than offsetting, economic weakness, limiting its ability to support growth. External pressures may add to this backdrop as higher oil prices and geopolitical risks raise funding costs and weigh on borrower resilience. While margins are expected to tighten further, lenders may benefit from the repricing of roughly 50 trillion yuan in maturing deposits at lower rates, helping offset some pressure.
Who could have predicted this? Euro-area inflation rose to 2.5% in March, marking its biggest increase since 2022 as higher energy costs tied to the Iran conflict fed through to prices, reinforcing expectations of rate hikes by the ECB. While headline inflation accelerated, underlying pressures were more mixed, with core inflation and services both easing, suggesting limited second-round effects so far. Markets are pricing in two to three ECB rate increases this year, with policymakers signaling readiness to act if energy-driven inflation continues. At the same time, rising inflation expectations among consumers and businesses are becoming a key concern for officials with growth forecasts now being revised lower as higher energy costs weigh on demand and economic activity.
Iconic UConn-ic comeback. UConn’s path to the Final Four has had a bit of everything, but nothing topped the comeback against No. 1 Duke on Sunday. Down 19, they chipped away, then stole it late, literally, capitalizing on a Duke turnover with six seconds left. Down 72–70, freshman Braylon Mullins stepped into the pressure-filled moment and buried a near half-court buzzer-beater with 0.3 seconds on the clock. It was the kind of shot that instantly earns a place in March Madness lore. On the other side, a tough break for Duke’s Cayden Boozer, whose late turnover turned the game around. He didn’t shy away from it after, putting it on himself in the post-game. That’s the harsh reality of this tournament, or any competitive sport; one play can define a season, but it’s often the losses that shape what comes next. And for those hiding under a rock who haven’t seen Mullins’ shot, here is the last five min of the game for your (re)enjoyment (skip to the 3 min mark if you only care to see the shot).
Diversion: Good lookout
