Today
Global equity markets were relatively muted overnight, with London’s FTSE and France’s CAC 40 down -0.31% and -0.37%, respectively, while Germany’s DAX was little changed at the time of writing. In Asia, Japan’s Nikkei rose 0.28%, while markets in China and Hong Kong were closed for the Dragon Boat Festival. U.S. markets are also closed today for a public holiday. In Canada, TSX futures are pointing to a modestly lower open as investors continue to monitor fragile negotiations between U.S. and Iran. Optimism surrounding a deal took a modest hit overnight after talks scheduled to begin Friday in Switzerland were postponed following renewed fighting in southern Lebanon between Israel and Hezbollah. Iran reportedly declined to send a delegation, insisting that a ceasefire in Lebanon is a prerequisite for moving forward. While the delay raises fresh questions about the durability of this week’s memorandum of understanding, markets have so far taken the setback in stride, with oil prices little changed and the Strait of Hormuz remaining open. The latest developments are a reminder that the path from ceasefire to a permanent agreement on Iran’s nuclear program remains far from straightforward.
One year later, same trade questions. A year after Mark Carney expressed optimism that a Canada-U.S. trade agreement could be reached following the 2025 G7 summit, investors are still waiting. Speaking in Paris after this year’s gathering, Trump delivered another round of mixed messages on the future of the Canada- U.S.-Mexico agreement, saying he would prefer to terminate the pact while also suggesting he may ultimately support its continuation. The comments come as Canada, the U.S., and Mexico prepare for the agreement’s July 1 review, with officials expected to hold a virtual negotiating session before meeting in Mexico City on July 20 for more substantive discussions. Uncertainty matters. The U.S. remains Canada’s largest trading partner by a wide margin, accounting for roughly 75% of Canadian merchandise exports, while deeply integrated supply chains across manufacturing, energy, agriculture, and autos depend on a stable trading framework. While markets and businesses have become relatively accustomed to shifting trade rhetoric, greater clarity and predictability would be welcomed by companies making long-term investment and hiring decisions.
The cost of crossing the border. The Canadian dollar finished beyond 1.41 per U.S. dollar, for its lowest close yesterday since April 2025 as investors reacted to the Fed’s hawkish stance. With markets now pricing in the possibility of higher U.S. interest rates, the yield advantage of U.S. bonds over Canadian bonds has widened, making U.S. assets relatively more attractive and supporting the greenback. Softer oil prices have added to the pressure, but the primary driver has been the growing divergence between U.S. and Canadian interest rate expectations. For Canadians, a weaker loonie is a mixed blessing. It can support exporters and increase the value of U.S. investments when translated back into C$, but it also raises the cost of imported goods, cross-border travel, and purchases priced in U.S. dollars. As long as U.S. rates remain higher than Canadian rates, the currency is likely to remain under pressure.
Canada’s population has declined for three consecutive quarters, the first sustained contraction since the 1950s, as the federal government reins in immigration after the post-pandemic population rise. While headline GDP has contracted for two straight quarters, economists say the economy is healthier than it appears because GDP per capita has returned to growth, suggesting living standards are improving even as the overall economy shrinks. Slower population growth is also reshaping the labour market, with fewer new jobs needed to keep unemployment stable, making flat employment figures less concerning than they would have been only a few years ago. Weaker population growth is expected to ease inflation by reducing housing demand and rental pressures, supporting the view that the BoC is unlikely to shift toward higher interest rates anytime soon despite ongoing trade uncertainty.
Redirecting capital. The AI infrastructure race is changing Big Tech’s capital allocation, with massive spending on data centers and computing capacity replacing share buybacks that have supported stock prices for years. Alphabet, Meta and Amazon halted buybacks in the first quarter, while Microsoft’s repurchases fell to their lowest level in nearly a decade, and both Alphabet and Meta are considering large equity issuances to help fund AI investments. This shift reflects a move away from the capital-light business models that once generated ample free cash flow, forcing investors to focus more on returns from AI spending. While markets have so far rewarded the strategy, continued support will depend on whether these companies can generate attractive returns on their huge AI investments.
We need more power… The U.S. is taking steps to accelerate access to electricity, a big bottleneck facing the AI buildout. The Federal Energy Regulatory Commission (FERC) approved new measures designed to shorten data centre grid connection timelines from years to as little as 90 days, helping to support power demand from AI infrastructure. The trade-off is that large tech companies may be required to fund grid upgrades, bring their own generation capacity, or reduce consumption during periods of system stress. Regulators also want to protect consumers from rising electricity costs by requiring regional grid operators to review how charges are allocated to large power users. These changes highlight a reality of the AI race. Success will depend not only on chips and software, but also on the ability to secure sufficient power. For investors, it reinforces the long-term tailwinds supporting utilities, power generation, transmission infrastructure and data centre development.
First one, and (hopefully) not done. Canada earned its first World Cup victory in emphatic fashion, defeating Qatar 6-0 in Vancouver to remain atop Group B alongside Switzerland. With the Swiss having already secured three points earlier in the day, Canada needed a strong result to maintain control of the group, and they delivered in front of an electric home crowd. The evening, however, will be remembered for more than just the score. Following the devastating injury to Ismaël Koné, players were visibly shaken after seeing a teammate stretchered from the pitch. To their credit, they regrouped, refocused, and delivered a performance for the ages, with Jonathan David leading the way with a hat trick. Attention now turns to Wednesday’s group finale against the favoured Swiss, again in Vancouver. Anything but a loss would secure top spot in the group, a full week of rest, and a Round of 32 match in Canada against a third-place finisher. A defeat would likely mean a second-place finish, just three days of rest, and a more difficult knockout-round path beginning in Los Angeles. Canada has put itself in an enviable position, but there is still important work left to do. Go Canada!
Diversion: What a save… 
