Today
An Axios report yesterday suggesting U.S. and Iranian negotiators had reached a framework for a 60-day ceasefire extension helped lift the S&P 500, Nasdaq, and Dow to fresh highs, with that optimism carrying into futures trading this morning. The reported memorandum of understanding would extend the current ceasefire and create a window for negotiations on Iran’s nuclear programs, while also paving the way for the reopening of the Strait of Hormuz. The proposal has not yet been finalized, however, Trump is reportedly reviewing the terms. The prospect of a diplomatic breakthrough was enough to send global equities higher. U.S. stocks are set to finish the month on a strong note, led by the Nasdaq, which is up ~8% month-to-date. The index has gained approximately 23% since the end of March, putting it on track for its strongest two-month advance since 2009. The prospect of a settlement also boosted overseas markets, especially in Asia, where technology shares led gains. Japan and Taiwan both rose +2.5%, while South Korea advanced +3.5%. In Canada, the TSX has posted a more modest gain and is on track to finish the month up about 1.6%. Meanwhile, Canadian GDP data released this morning disappointed expectations, with the economy contracting –0.1% in March and first quarter GDP declining at an annualized pace of -0.1%. The figures provide a reminder that households and businesses continue to grapple with trade uncertainty and slowing domestic demand.
Canadian banks continue to benefit from a strong capital markets environment with trading activity, equity issuance, and investment banking pipelines supporting results. The Big Six banks reported an average 27% y/y increase in capital markets profits, generating nearly $4.5 billion collectively. RBC and CIBC, also announced dividend increases and share buybacks. This week’s results suggest that volatility tied to inflation, energy markets, and global geopolitics supported trading revenues without materially impacting deal activity, at least not yet, especially in sectors linked to energy, infrastructure, and AI-related investment. Still, concerns remain around rising consumer credit losses, slower domestic banking growth, and the sustainability of capital markets earnings if economic conditions weaken.
Watch for the cracks. The Bank of Canada said Canada’s financial system has remained resilient through recent geopolitical and market shocks, but warned that higher asset valuations, concentrated AI-related equity exposure, and growing hedge fund activity in debt markets may raise the risk of a sharper market correction. The central bank noted that major stock indexes have become dependent on a small group of mega-cap AI-linked tech names, which means any negative shock to the sector could have an outsized impact on broader markets. The Bank also flagged vulnerabilities tied to hedge funds’ growing role in government bond and overnight funding markets, saying that a sudden pullback in activity could impair market liquidity and create broader financial stress. For households and businesses, the main risk remains a geopolitical or economic shock that triggers a deep recession and rising unemployment, though the Bank noted mortgage renewal risks have eased and large Canadian banks remain well capitalized with healthy profitability and loan-loss reserves.
Neighbourly proposal. Mark Carney used a speech in New York to push for deeper economic cooperation between Canada and the U.S., saying that closer integration across aluminum, autos, energy, and critical minerals would strengthen both countries competitively. Carney called for a new partnership, noting that “Canada Strong will help make America great again” adding to his “Fortress North America” remarks in other public engagements that focused on competing collectively against other global economic blocs. He highlighted Canada’s hydro-powered aluminum production, integrated North American auto manufacturing, and large reserves of potash, nickel, copper, and uranium as strategic advantages for the U.S., particularly as energy demand tied to AI infrastructure accelerates. The remarks are timely given Canada’s desire to re-engage in trade discussions ahead of a potential USMCA review.
Fast track to a trillion? Staying on the topic of valuations, reaching a near-trillion dollar valuation has historically taken companies years, sometimes decades. But in today’s AI-driven market, the timeline is compressing. Micron recently doubled from $500 billion to $1 trillion in just 48 trading days, and now AI startup Anthropic has raised $65 billion in fresh funding at a $965 billion valuation, surpassing rival OpenAI for the first time. Sequoia Capital, Blackstone, and Altimeter Capital backed the round, which reportedly came together within weeks amid intense demand for AI exposure. Anthropic, founded in 2021 by former OpenAI employees, expects second-quarter revenue of about $10.9 billion and says its annualized revenue run rate could exceed $50 billion by next month, a remarkable jump from roughly $4 billion last summer. The funding round shows how investors continue to assign massive valuations to companies positioned at the center of the AI infrastructure and software buildout, even as questions around competition, and monetization remain unresolved.
Amateur detectives. Astute online observers are using publicly visible blockchain data to flag suspicious activity on prediction markets like Polymarket, and posting their findings on social media long before authorities step in. In the latest case, U.S. prosecutors charged a Google software engineer with fraud and money laundering after allegedly used internal data to place profitable bets tied to future Google search trends. The trader was first identified publicly months earlier by a Meta engineer who noticed the suspiciously accurate bets and posted a tweet that was eventually viewed over 6 million times. The engineer accused “a Google insider” of profiting from unusually accurate wagers that generated more than $1 million. Authorities say the Google insider was identified after moving funds through regulated crypto platforms tied to his real identity. This case highlights both the transparency and risks of blockchain-based betting platforms, where transactions remain publicly traceable even when users attempt (and apparently fail) to obscure their identities through crypto wallets and privacy tools.
Diversion: How’d you get there?
