Today
Global equity markets are higher today, building on yesterday’s tech-led rally that took the Nasdaq to another record close. U.S. futures are pointing to further gains this morning, putting a record for the S&P 500 within reach after the index closed just shy of its August high yesterday. Some of the recent pressure on markets has eased, with Brent crude back below $100 a barrel and the U.S. 10-year Treasury yield below 5.30%. In Canada, it has been a busy news cycle. Emera announced an all-stock merger with Canadian Utilities, creating a combined company with approximately $72 bln in enterprise value, which includes debt and equity (see Company News below for more details). In Quebec, the Parti Québécois won Monday’s election but fell short of a majority, taking 59 of 127 seats. The minority result means the PQ would need support from other parties or members of the National Assembly to move ahead with its proposed independence referendum.
The euro has fallen to a 17-month low near $1.116 per USD as concerns over France’s fiscal outlook spill into currency markets. The spread between French and German 10-year government bonds has widened to 152 bps, its highest since 2011, as investors question France’s ability to stabilize its deficit and debt burden amid political divisions ahead of next year’s election. Political risk elsewhere is also in focus after Spain called a snap election for November, while rising borrowing costs are drawing attention to heavily indebted countries including Italy and Belgium. Investors have been adding bearish euro positions, with the currency also weakening against traditional safe havens such as the Swiss franc and yen. Expectations for additional Fed rate hikes are providing another tailwind for the U.S. dollar. For now, German bunds are benefiting from safe-haven demand rather than joining the selloff, helping contain the stress largely to the more vulnerable parts of the euro-area bond market.
Japanese investors are rotating away from foreign bonds towards equities and domestic assets, potentially adding pressure to France’s already fragile sovereign debt market. Japan is a key source of financing for France, holding 5.2% of its government debt, but some Japanese asset managers have eliminated their French bond positions in favour of German bunds and short-term Japanese government securities. The shift reflects both rising concerns about France where government debt has reached 119% of GDP and borrowing costs now exceed Italy’s and improving opportunities at home as Japanese investors can earn around 3% on lower-risk domestic assets. France is vulnerable because foreign investors own close to 60% of its sovereign debt, meaning continued capital outflows could push the spread over German bunds even wider. The ECB, however, may be reluctant to intervene unless French stress leads to broader euro-area contagion.
Clean up time. China is consolidating its banking system, closing a record 670 mostly small and rural lenders last year, or roughly one-quarter of the country’s banks, as it looks to create fewer, larger and better-capitalized institutions. Rural banks remain the weakest part of the financial system, with Fitch highlighting deteriorating asset quality, limited capital buffers, and governance problems, especially in less-developed regions. Their return on assets fell to 0.45% in the first half of 2026 from 0.56% in 2021, while nonperforming loans reached 2.8%, nearly double the 1.5% sector average, reflecting more exposure to struggling small businesses, property developers, and local-government financing vehicles. The consolidation strategy is intended to improve oversight and transparency. Rating agencies see limited risk of broader financial contagion because these banks operate mostly locally and have relatively little exposure to the wider interbank system. Still, the cleanup highlights growing strains in China’s slowing economy, with Q2 GDP growth easing to 4.3%, its weakest since 2022, and industrial profit growth slowing to 4.2% in August.
U.S.-listed ETFs are on track for a record year, with over $1.54 tln of inflows through September, already beating the last year’s record of $1.52 tln. Inflows could reach $2.3 tln by the end of the year, according to experts, highlighitng the continued shift towards ETFs. Equity ETFs have dominated, attracting more than $1 tln, while fixed-income ETFs have gathered over $469 bln despite recent volatility and rising yields. Within equities, U.S. products received $655 bln, compared with $150 bln for international developed-market funds, while technology led sector flows with over $59 bln as enthusiasm around AI and strong corporate earnings continues to attract capital. Financial-sector ETFs have been the exception, seeing nearly $4 bln of outflows. The flows suggest investors are not yet responding to higher yields and geopolitical uncertainty by moving to the sidelines. Instead, capital continues to move into both equities and fixed income, with the strongest conviction still in U.S. assets.
Geopolitics and fiscal concerns remain in focus this month, with tensions in Iran and upcoming trade deadlines among the issues to watch. Further attacks on energy infrastructure or Red Sea shipping could keep oil prices higher and add pressure on global yields. Fiscal concerns are also in focus across developed markets, particularly in France, where a difficult budget debate, the risk of a Moody’s downgrade and political uncertainty are weighing on sovereign bonds. With the U.S. 10-year already above 5%, how well equity valuations can absorb higher yields remains a key question. Russia is another potential source of volatility as its military campaign continues and the U.S. Graham Act allows for new tariffs and sanctions against buyers of Russian energy beginning October 18. India has been identified as a potential target, while the implications for China are less clear. U.S.-China tensions have been relatively contained following the extension of the trade truce.
Just in time for bulking season. A recent whey protein shortage is creating opportunities for alternative-protein producers as demand for high-protein foods outpaces dairy production and pushes prices higher. In Canada, the squeeze is becoming more obvious, with some businesses reporting that whey costs have doubled over the past few years and limited domestic supply has forced them to source more expensive U.S. products. Demand is also being fueled by protein’s expansion into mainstream foods and beverages and growing GLP-1 use, as users look to consume more protein to help preserve muscle mass. Alternative suppliers are benefiting, with Leaft Foods reporting a 600% increase in sales and fermentation-based producer Every selling out its entire 2026 capacity, while major companies are investing in egg, pea, and other alternative proteins. With traditional dairy producers unable to quickly increase supply, many expect protein supplies to remain constrained for several years.
Diversion:
Epic shot 
