Launch Pad

The big U.S. banks delivered stronger third-quarter results yesterday, but investors were less impressed. JPMorgan, Goldman Sachs, Citigroup and Wells Fargo reported combined profits of $32 billion, up 14% from a year earlier, while revenues rose 9% to $115 billion. Strong equity trading, AI-related financing and resilient consumer spending helped drive results, although higher yields weighed on bond trading and investment banking activity. Equity trading revenues jumped an average of 39% across the four banks, led by a 72% increase at Goldman Sachs. Consumer spending also remained healthy, with credit and debit card spending at JPMorgan up 10% from a year earlier, and few signs of deterioration in credit quality. However, executives cautioned that higher interest rates could eventually weaken loan demand, raise deposit costs and put pressure on borrowers. Bank stocks extended their decline yesterday despite stronger earnings, continuing to trail the broader market as investors weigh the risks of higher interest rates.  

Ottawa clears the runway. Vancouver International Airport (YVR) could be the first of Canada’s major airports open to private investment under Ottawa’s plan to attract institutional capital. According to a report by The Globe and Mail, citing sources familiar with the process, the federal government is preparing to sell a long-term lease on YVR’s operations, with Indigenous investors potentially taking a stake of up to 20% and institutional investors, including Canadian pension funds, holding majority control. Calgary, Toronto and Montreal airports are also being considered, with Ottawa retaining ownership of the underlying land and assets. The initiative could generate tens of billions in proceeds for the federal government, although concerns remain about higher fees for airlines and travellers. A University of Calgary report estimates the four airports could be worth between $12 billion and $29 billion, depending on how much flexibility private operators are given to raise fees, with tighter regulation potentially limiting valuations but protecting airlines and travellers from higher costs. The process remains in its early stages, with investment structures and timelines yet to be finalized. 

The IMF expects global economic growth to accelerate to 3.4% next year from 3.1% in 2026, helped by continued AI investment, although the improvement is expected to remain below the 3.5% average recorded over the last two years. The AI investment boom has provided a boost to economic activity, particularly in Asia, but its benefits remain concentrated, with Taiwan and South Korea supplying nearly two-thirds of computing hardware trade and the U.S. and China accounting for more than 75% of net AI-related imports. Experts estimate that 32 economies are now responsible for 95% of the expansion, compared with 54 economies six months ago. At the same time, prolonged disruptions from the Iran war which have depleted energy inventories, increased inflationary pressures and contributed to rising bond yields, prompting the IMF to call on governments to reduce fiscal deficits and rebuild financial buffers. The report also expects global inflation to moderate to 4.1% in 2027 from 4.7% in 2026, while U.S. growth is forecast at 2.3%, China at 4.0% and advanced economies collectively at 1.8%, with France the exception at just 0.7%. 

The housing market in the U.S. took a hit in September as mortgage rates climbed above 7%, pushing pending home sales to their lowest level in nearly 12 years, excluding the first few months of the pandemic. Pending sales declined 4% month-over-month, the largest drop in more than three years, with contract signings falling across all 50 major metropolitan areas. The average 30-year mortgage rate rose to 7.4% last week from 6.66% in late August, reducing affordability and weakening demand at a time when housing prices remain high. Rising borrowing costs have also increased pressure on sellers, with nearly 20% reducing their asking prices and a record 14.5% of purchase agreements falling through, while available housing inventory reached its highest level since March 2020. The recent mortgage-rate shock highlights the housing market’s sensitivity to elevated Treasury yields and tighter financial conditions, raising concerns about further weakness in residential investment, household confidence, and overall economic activity. 

Different strokes for different folks. China appears to be pursuing a different AI strategy from the U.S., emphasizing lower-cost, open-source models and widespread adoption rather than relying on expensive proprietary models. This approach extends to data center construction, where standardized designs, prefab components, and industrialized manufacturing processes reduces costs and development timelines. Alibaba’s 100-Day Datacenter model demonstrates how facilities can move from a completed shell to server deployment in only three months. These advantages could allow China to scale AI infrastructure quickly and deliver affordable AI capabilities across its economy, challenging the economics of the more capital-intensive method used in the U.S. 

Money can’t buy everything, at least not in October. The LA Dodgers are down 0-2 to the Milwaukee Brewers in the NLCS, with Milwaukee looking to take a commanding 3-0 series lead tonight. The matchup is once again putting baseball’s longstanding debate over money and competitive balance back in the spotlight. According to Cot’s Contracts, the Dodgers’ $522.7 million in payroll and luxury tax penalties exceeds the combined payrolls of the other three teams in MLB’s final four: Milwaukee ($144.5 million), Tampa Bay ($96 million) and Cleveland ($74.8 million), or $315.3 million altogether. The Dodgers’ estimated $183 million luxury tax bill alone is more than Milwaukee’s entire payroll. Let that one marinate. The differences go beyond payroll. While the Dodgers have assembled a star-studded lineup mostly by acquiring established talent at premium prices, the other three clubs have taken a more old-fashioned approach, relying on scouting, drafting, player development and savvy trades to build competitive teams. Critics say such spending disparities undermine competition, while others point to the success of smaller-market clubs as proof that money isn’t everything. With MLB’s collective bargaining agreement expiring in December and owners pushing for a salary cap, the debate is about to get louder, regardless of how this series ends. For now, baseball has its own David and Goliath story, and Goliath is two losses away from an early exit. Go Dodgers! Said no Jays fan ever. 

Corn is near the lowest level in two months as a bumper harvest in China helped tame domestic prices, curbing demand for imports. Record production and cheap local supplies are clouding China’s import outlook, even as Beijing prepares to cut tariffs on U.S. agricultural products including corn and wheat under an agreement reached during the September summit between the country’s two leaders. China’s corn prices are near an 11-month low as production is forecast to reach a record 306 mln tons which has reduced the incentive to seek overseas supplies, with U.S. corn remaining uneconomic for Chinese buyers even at lower tariffs. Just recently, the USDA unexpectedly raised its yield and production forecasts, triggering a selloff. Still, prices are up 9% this year as weather and war-related disruptions tightened supplies. 

Rising developed-market bond yields, government spending and political uncertainty are adding to concerns about European financial markets, particularly in France. The country’s budget deficit is projected at 5.4% of GDP in 2026, with government debt reaching 119% of GDP and 10-year borrowing costs approaching 5%, well above nominal economic growth of 3%. Political gridlock, social unrest and the possibility of a more expansionary fiscal policy following next year’s presidential election could put further pressure on French bond spreads. Elsewhere in Europe, higher energy costs, additional ECB tightening and geopolitical tensions could also add to sovereign borrowing costs.