Today
U.S. and Canadian equity futures are mixed this morning as investors digest the unofficial start of the second-quarter earnings season, with JPMorgan, Bank of America, Citigroup, Goldman Sachs, and Wells Fargo all reporting before the open. Their results and commentary will likely be closely scrutinized for clues about the health of the U.S. economy, while investment banking and trading are expected to be bright spots as capital markets activity rebounded, helped by the blockbuster SpaceX IPO. More on the banks’ results below in company news. Also in focus is the latest U.S. CPI report which showed inflation cooling more than expected in June, with consumer prices falling -0.4% from the previous month, the first monthly decline since 2020, while core inflation was unchanged, easing concerns that the Fed would need to raise interest rates in the near term. Annual headline inflation slowed to 3.5% and core inflation eased to 2.6%, both below expectations, as lower gasoline prices and declines in goods prices, including apparel, used vehicles, and auto insurance, offset price pressures elsewhere. The softer inflation data pushed Treasury yields down and equity futures higher as investors reduced expectations for a July rate hike. While renewed U.S.-Iran tensions could reignite energy-driven inflation pressures, the report provides the Fed with more flexibility to maintain its current policy stance.
A page from Iran’s playbook. Trump announced that the U.S. will enforce a blockade of Iranian ships in the Strait of Hormuz and proposed charging a 20% fee on all cargo moving through the waterway as compensation for providing maritime security. Based on oil prices of about $80 per barrel, the levy would amount to ~$30 million for a fully loaded supertanker, versus ad hoc fees of up to $2 million per voyage reportedly charged by Iran. The U.S. proposal follows a similar playbook, but on a much larger scale, by putting a price on its role in securing one of the world’s most important shipping routes. Despite the threat, the U.S. administration has provided few details on how the proposed fee would be implemented or collected, leaving the shipping industry with more questions than answers. Iran’s foreign minister agreed that safe passage could warrant compensation but called the proposed 20% fee excessive. With the Strait carrying roughly 20% of global oil and gas flows, the plan adds another layer of cost and uncertainty to global energy markets.
Staying pat. The Bank of Canada is expected to leave its policy rate unchanged at 2.25% tomorrow as policymakers continue to balance slowing economic growth against elevated inflation risks. While inflation rose to 3.2% in May, the rise was largely due to higher energy prices stemming from renewed Middle East tensions. Policymakers see price pressures relatively contained and the central bank has indicated it is willing to look through temporary energy-driven inflation. Stronger-than-expected GDP growth and signs of stabilization in the labour market suggest the economy has regained some momentum despite ongoing trade uncertainty with the U.S. With inflation risks and growth concerns pulling policy in opposite directions, economists expect the BoC to maintain a cautious, data-dependent stance while updating its economic and inflation forecasts alongside their decision.
Clearing the path. Alberta, the federal government, and Canada’s five largest oil sands producers, Suncor, Cenovus, Canadian Natural Resources, Imperial Oil, and ConocoPhillips, have signed an agreement to advance the Pathways Carbon Capture and Storage Project. The deal links emissions reductions with plans to increase oil sands production and support a proposed new pipeline to Canada’s west coast. The project is expected to begin operating by 2035, with governments providing financial incentives, regulatory support, and carbon pricing adjustments tied to emissions reduction milestones. The agreement also commits companies to prioritize Canadian suppliers where possible, streamline project approvals, and work with Indigenous communities, with a more detailed implementation agreement expected by November 2026.
The largest U.S. tech companies have more than doubled their collective debt over the past five years as they finance the buildout of AI infrastructure, with Alphabet, Amazon, Meta, Microsoft and Oracle adding roughly $350 billion in borrowings. While strong profitability continues to support most balance sheets, investors are becoming more cautious about the pace of spending and the timeline for generating meaningful returns. Caution seems to be warranted given Oracle’s credit rating downgrade and Amazon’s negative free cash flow. The hyperscalers are expected to invest as much as $725 billion this year in AI data centers and advanced chips, signaling their confidence that long-term demand for AI services will justify the spending. As Q2 earnings begin, investors will be paying even more attention to capital spending plans and signs that AI investments are translating into sustainable revenue and cash flow growth.
Man vs. bison, guess who won? If you’re visiting any National Parks this summer, this is a good reminder not to get too close to the wildlife. A man suffered serious injuries over the weekend after being tossed into the air by a bison at Yellowstone National Park. The man broke multiple bones after attempting to flee the bison, which charged and flipped him. Luckily the park staff was close by and quickly transported him to the hospital. This is just the latest incident in a series of bison attacks at Yellowstone this year and highlights the dangers of approaching wildlife, with park officials reminding visitors to remain at least 23 meters away from bison. Bisons are responsible for the most wildlife-related injuries in Yellowstone, as they can weigh up to 900 kg and sprint at speeds of up to 56 km/h, making it far faster and more agile than most people realize. We wish him a full and speedy recovery.
Diversion: Feeling the love…sort of
