North American equities are looking to open in positive territory after finishing lower yesterday. Equity markets declined yesterday as a selloff in tech stocks and crypto underscored growing doubts about the resilience of the AI trade, sending Nvidia and other major names lower and dragging the S&P 500 and Nasdaq down more than 1%. Skepticism over heavy data-center spending, elevated valuations, and slowing momentum fueled a rotation into other sectors, even as some strategists note that the AI theme remains sound. Despite near-term volatility, analysts mostly expect the S&P 500 to push higher through next year, helped by earnings growth and expected Fed interest rate cuts. Investors are now digesting long-awaited inflation data this morning. With the CPI print being the first since September, markets are likely to focus more on year-over-year changes vs. month-to-month moves given the gap in data. While inflation is well below its pandemic peaks, it still sits above the Fed’s 2% target, keeping pressure on cash-squeezed consumers and ensuring that leaders in Washington and policymakers face continued scrutiny over efforts to ease the cost of living.
We know someone will be taking all the credit for this. Core inflation in the U.S. eased in November to its slowest annual pace since early 2021, rising just 2.6% from a year earlier and reflecting continued disinflation momentum. Headline CPI increased 2.7% year over year, which is all we can go off of at this time with the Bureau of Labor Statistics noting that the recent federal government shutdown limited its ability to measure month-to-month changes for many categories. While the data signal steps toward easing price pressures, the incomplete survey results still leaves much of the data up to interpretations.
Canada’s population shrank in Q3, the first non-pandemic quarterly decline in decades, driven by a steep drop in non-permanent residents after government crackdowns on foreign student enrollment and tighter rules for temporary workers. While permanent immigration levels held steady, the slowdown marks a drastic shift from the rapid population rise that contributed to the strain on housing and services. Now, businesses are beginning to feel the effects, with telecom and real estate firms citing weaker demand, raising the question of how important population growth is to support Canada’s economy.
The Bank of England cut interest rates by 25 bps to 3.75%, the lowest level in nearly three years, as softer economic data paved the way for its sixth rate cut. Governor Andrew Bailey supported the decision as policymakers expected inflation to fall closer to the 2% target next spring. Markets reacted cautiously, with policymakers divided on the path forward, highlighting the balance officials need to strike between supporting growth and containing price pressures. This comes at a time when UK economic conditions are weakening, which some suggest could reinforce the case for additional rate cuts beyond what the market is currently pricing in. We have seen labour data continuing to disappoint, with payrolls declining again, unemployment edging higher, and wage pressures easing. Economic surprises have turned negative, supporting the view that the BOE can continue easing. Strategists have noted that UK gilts remain attractive within a global bond portfolio, while UK equities show signs of strain and sterling appears overvalued, especially against the USD.
Steady as it goes. The ECB on the other hand held interest rates steady for a fourth consecutive meeting, keeping the deposit rate at 2% as inflation sits near target and the eurozone economy shows signs of resilience. Updated forecasts point to stronger growth ahead and inflation returning to 2%, although that’s not until 2028. Policymakers kept their cards close to their chest following the announcement, offering no forward guidance and emphasizing a data-dependent approach. With little to go off of, analysts expect rates to remain unchanged through 2027 despite rate cuts from the Fed and Bank of England. Given improved economic momentum and improving business sentiment, some economists are even beginning to price in the possibility of an ECB rate hike as early as next year.
Buy Canada. Statscan’s latest international transactions data showed a surge in foreign demand for Canadian assets, with international investors purchasing $46.62 billion of Canadian securities in October, up from $31.3 billion in September and well above what Canada typically sees in a given month. October’s $46.6 billion in net foreign purchases ranks in the top few percent of all monthly readings over the last 15 years, a period in which flows have usually landed between $5 and $20 billion and have only rarely exceeded $35 billion. The flows were concentrated in fixed income, with about $34 billion in Canadian bonds and money market instruments and $12.63 billion in Canadian equities and investment fund shares, while Canadian investors were net sellers of foreign securities, selling $11.58 billion in total, including $6.13 billion of foreign stocks and funds.
MrBeast would be proud. The Oscars are leaving traditional TV for the first time in over 70 years, with the ceremony moving from Disney’s ABC to YouTube starting in 2029 under a deal that runs through 2033. Oscars’ viewership has fallen sharply, from a peak of 55.2 million in 1998 to 18.1 million this year, reflecting the broader decline of broadcast television and moviegoing. The show first aired on NBC in 1953 and has been on ABC continuously since 1976. While financial terms of the new YouTube deal weren’t disclosed, Disney had reportedly been paying about $75 million a year. The Oscar’s move also fits a broader trend of marquee events, such as NFL Sunday Ticket, shifting to digital platforms as audiences and advertisers follow viewers online.
Diversion: Where do you land?
