Launch Pad

Today

For what it’s worth, the Fed will get a look at the delayed PCE data, its preferred inflation gauge, this morning ahead of next week’s widely expected rate cut. Nasdaq futures are leading North American gains on those expectations, while the S&P/TSX is pointing slightly higher after another record close yesterday, supported by strong big-bank earnings and a much stronger-than-expected November jobs report. The Canadian economy added 53,600 jobs last month versus expectations for a decline of 2,500, pushing the unemployment rate down to 6.5% compared to a forecast rise to 7%. Gains were driven by part-time work, the private sector and a surge in youth employment, helping reverse summer job losses. Overseas, major indexes in Asia and Europe were mostly higher, except for Japan’s Nikkei, which slipped on rising expectations for a Bank of Japan rate hike. 

The TSX has rallied over 27% this year, its strongest gain since the post-GFC (global financial crisis) rebound in 2009, and is outperforming the S&P 500 by over 11% as investors rotate into defensive, value-oriented sectors and diversify away from U.S. tech. The TSX’s sector mix, dominated by financials, energy, and metals, has benefitted from falling interest rates and a rally in commodity prices. Strategists expect Canadian equities to continue to perform well in 2026, supported by (relatively) cheaper valuations, improving labour market and GDP data, and from Mark Carney’s “Build Canada” infrastructure push. Still, there are meaningful risks, including the fact that the TSX has rarely beaten the S&P 500 two years in a row and the potential for an unfavourable outcome in U.S.–Canada trade renegotiations. 

It’s shaping up to be a generous holiday season for Bay Street. Canada’s big banks have reserved about 15% more for bonus pools this year, supported by stronger capital-markets activity, active trading during tariff-related volatility, and solid deal flow in sectors like mining and natural resources. Scotiabank, National Bank and CIBC posted the largest increases at 17%–24%, while RBC, TD and BMO lifted their bonus pools by 13%–14%, with RBC alone earmarking nearly C$10 billion in bank-wide incentive pay. Because these figures represent reserves rather than amounts already paid, they set the stage for meaningfully higher December cheques, especially in trading and investment banking. Capital markets earnings surged roughly 29%, boosting expectations for bigger payouts and driving strong hiring demand across both senior and junior roles, even as several banks continue broader restructuring and cost-cutting efforts.  

Soccer may bring the leaders together this week, but tariffs won’t be on the pitch. Mark Carney will cross paths with Donald Trump at a FIFA 2026 World Cup draw today, but Trade Minister Dominic LeBlanc says the brief meeting is expected to focus on the tournament, not tariff talks, though a spontaneous tariff-mention from Trump can’t be ruled out. Canada has said talks can resume whenever Washington is willing, after Trump froze negotiations in October over an Ontario-backed anti-tariff ad that later prompted an apology from Carney (but not Dougie). Carney will also meet Mexican President Claudia Sheinbaum at the event, as Canada and Mexico deepen coordination ahead of the 2026 USMCA review, with LeBlanc in Mexico this week laying the groundwork for a large Canadian trade mission in February. 

You could have fooled us. While it may not always look that way from the headlines, U.S. Trade Representative Jamieson Greer says Washington is prioritizing a stable trade relationship with China rather than edging toward “full-on economic conflict.” He noted the U.S. trade deficit with China is down ~25% since Trump took office and said the focus now is on getting China to buy more higher-value US exports such as aircraft, chemicals, medical devices and agricultural products, while the US limits its purchases to non-sensitive goods like apparel, toys, and household products. Greer pointed to the recent Trump–Xi deal to extend the tariff truce and ease some export controls, though key pieces like TikTok’s US operations and rare earth export licenses remain unresolved. He added that the U.S. continues to monitor the relationship but also stressed the need to “get its own house in order,” including advancing reindustrialization and securing critical minerals. 

Even the carb-conscious may want to get in on this one. Canadians have a week left to claim their share of a $500-million settlement tied to the bread price-fixing scandal. Anyone 18 or older who bought packaged bread including loaves, buns, bagels, wraps and similar products between 2001 and 2021 (that’s not a typo) can file a claim without receipts (because who keeps their 2001 bread receipts?), but the deadline is Dec. 12. The settlement, the largest of its kind in Canada, comes after Loblaw and George Weston admitted involvement and agreed to pay a combined $404 million, with the remainder reflecting earlier gift-card compensation. Payouts are expected to range from $50 to $100, adjusted for those who previously received Loblaw gift cards, and could be distributed within six to 12 months after the deadline. 

Commodities

Oil prices are slightly lower after a two-day advance as investors weighed the outlook for a ceasefire in Ukraine, and signs of a swelling global surplus. A peace deal remains up in the air as Ukrainian negotiators head to a new round of talks in Florida, with President Putin objecting to some of the points in a U.S.-backed plan. The market is watching for progress on a settlement that could potentially ease sanctions and boost Russian oil flows, though an agreement appears distant at this stage. Oversupply is putting pressure on prices globally. Saudi Aramco will reduce the price of its flagship Arab Light crude grade to the lowest level since 2021 for January, while Canadian oil has tumbled. Energy markets are also focused on Russia-India talks after Putin arrived in New Delhi for his first state visit since the full-scale invasion of Ukraine. India, a major buyer oil Russian crude, has found itself in the middle of U.S.-led efforts to curb a trade that helps fund the war in Ukraine.  

Copper is continuing to surge and rose to a record, with a bullish price outlook from Citigroup Inc. boosting prices as traders anticipate a shortage caused by stockpiling in the U.S. In a research note, Citi analysts stated copper will average $13,000 in the second quarter as inventories build in the U.S., creating a deficit elsewhere. Copper was up as much as 2.2% to $11,705 a ton, surpassing a previous high set earlier this week. Copper, a key component in pipes, power cables and electric vehicles, has gained more than 30% on the LME this year. The rally has accelerated in recent weeks on concerns of U.S. stockpiling in anticipation of import tariffs next year, therefore draining inventories in other key locations.  

Fixed income and economics

The $1.7 trillion private credit industry is facing growing pressure as falling interest rates and competition from Wall Street banks drive loan margins lower, leaving many private credit funds with excess cash and declining returns. After dominating leveraged lending during the 2022 downturn, direct lenders are now being undercut by banks offering cheaper, lower-spread loans with fewer covenants, especially on large deals, pushing private credit firms into smaller, more crowded transactions. Average private loan spreads have dropped below 500 bps, down from 650 in early 2023, with some recent deals pricing as low as 400–450 bps. While this is still above broadly syndicated loan spreads, it is not enough to sustain private credit funds’ return targets as floating-rate income declines with expected Fed rate cuts. While strong M&A activity next year could ease the pressure, experts warn that without a rebound in deal volume, shrinking spreads may become a bigger challenge for private credit managers. 

That’s a lot of debt! The U.S. government debt in Treasuries topped $30 trillion for the first time, having more than doubled since 2018 as the pandemic-era borrowing surge continued. The combined total amount of Treasury bills, notes and bonds increased by about 0.7% in November to $30.2 trillion, according to data released Thursday. A borrowing surge in 2020 to finance pandemic-related spending and higher borrowing rates have driven up the cost of paying interest on the debt, which accounts for growing share of the federal deficit. Treasury debt is the largest component of the US national debt, which totaled $38.4 trillion in November and includes money that’s owed to the Social Security Trust Fund and holders of Savings Bonds, among others. The statutory debt limit, currently $41.1 trillion, applies to the total. 

Chart of the day

Markets

Quote of the day

Motivation will almost always beat mere talent. Norman Ralph Augustine