U.S. stock futures are lower this morning, led by Nasdaq contracts, as weakness in tech stocks weighs on global equity markets to start the week. Asian tech shares were hit hard, with Alibaba falling -8.5% after announcing plans to raise $10 billion through a share sale to fund its AI expansion. Samsung shares fell around -5.2% after its record shareholder return plan failed to live up to lofty expectations. The company plans to return roughly $65 billion to $79 billion to shareholders in 2026, about five times its previous record, but investors had been looking for up to $100 billion. Lower oil prices are providing some relief for bond yields this morning, ahead of another potential geopolitical catalyst. Treasury Secretary Scott Bessent is expected to hold a presser at 2 pm ET to announce a new round of sanctions on Iran, part of what he has dubbed an “economic D-Day” aimed at severing the country’s remaining economic lifelines. Bessent has promised the “toughest sanctions in history,” with measures expected to extend beyond Iran to countries and companies that continue to support its economy. Closer to home, TSX futures are bucking the global trend and edging higher ahead of Canadian bank earnings this week, despite a challenging trade backdrop. Canada reportedly sees little chance of restarting stalled U.S. trade talks before the midterms and may ride out the remainder of Trump’s term, while the loonie has weakened after the introduction of new 50% U.S. tariffs on hundreds of Canadian goods.
It will be a busy week for markets with investors awaiting Nvidia earnings, U.S. inflation data, and the Fed’s Jackson Hole symposium, following a volatile stretch of rising bond yields and Treasury intervention. Nvidia reports Wednesday in a test of the AI trade, with expectations high and leaving its shares vulnerable if results or guidance fall short. Also Wednesday, the Fed’s preferred PCE inflation gauge arrives alongside updated Q2 GDP data, with a hotter inflation reading potentially raising expectations for a September rate hike. Jackson Hole will provide additional insight into monetary policy as the Fed grapples with sticky inflation and a Treasury Department that is attempting to push down long-term yields through expanded bond buybacks.
No deal, now what? Trade negotiations collapsed over the weekend, with Mark Carney announcing counter-tariffs on $20 billion worth of U.S. goods beginning Sept. 8, including U.S. steel, dairy, appliances, agricultural equipment, electronics and pulp and paper. The response matches new 50% U.S. tariffs on roughly $20 billion of Canadian exports. Talks broke down in the eleventh hour over issues including auto and truck tariffs, along with U.S. demands that Canada revisits trade relationships with other countries. The economic stakes are high, with the two countries exchanging nearly $900 billion in goods and services last year. BC, Ontario, and Quebec are among the most exposed to the new tariffs, with some estimates showing the dispute could subtract 0.2% from Canadian growth this year and 0.3% next year. This also complicates the BoC’s job, as weaker exports weigh on growth while retaliatory tariffs increase inflation. Still, the decision is being backed by many Canadians, with a recent poll showing 56% of Canadians favour taking a hard line and making no further concessions to the U.S.
Yield. Scott Bessent’s effort to push down long-term U.S. borrowing costs appear to be failing as it contends with outside forces driving bond yields higher. His plan to buy back long-dated Treasuries while issuing more short-term debt, a strategy he calls a Treasury twist, initially sent yields lower, but the effect quickly faded, with the 10-year yield ending the week at 4.73%, near its highest level since he took office. Instead, investors remain focused on record government debt, a roughly 6% of GDP fiscal deficit, heavy AI-related corporate borrowing, higher inflation, and uncertainty surrounding Fed policy, all of which are putting upward pressure on longer-term rates. While Treasury buybacks can improve liquidity and influence yields temporarily, analysts argue they cannot address these headwinds, especially without first reducing the deficit.
The other 493. Equal-weight strategies are outperforming the traditional market-cap-weighted S&P 500 this year as market leadership broadens beyond the mega-cap tech stocks that dominated recent years. The shift reflects concern about concentration risk, with the Mag Seven accounting for roughly one-third of the S&P 500 and posting flat performance in the first half compared with a 9.3% gain for the broader index. Investors are also becoming more cautious about elevated AI valuations and whether huge capital expenditures by hyperscalers will generate sufficient returns, while earnings and share-price gains have spread to a wider range of companies and sectors.
Emerging-market carry trades are enjoying their longest winning streak since 2008, as high interest rates across developing economies and a weaker U.S. dollar attract investors looking for yield. A Bloomberg gauge of eight major EM currencies has returned about 22% since the end of 2024, outperforming U.S. Treasuries, EM sovereign dollar bonds, and EM corporate debt, while dollar-funded carry strategies have generated positive returns for seven consecutive quarters. Central banks in Latin America and Eastern Europe have maintained high policy rates to contain inflation, producing strong returns in currencies like the Colombian peso, Turkish lira, Brazilian real, Mexican peso, and South African rand. Strategists note that the environment could remain supportive as U.S. efforts to contain long-term Treasury yields reduce the relative appeal of dollar assets, while wide rate differentials and relatively low currency volatility favour EM currencies.
Collateralized cheese obligations. Extreme heat in Northern Italy is putting pressure on the parmesan supply chain by reducing milk production from heat-stressed cows and increasing the cost of cooling the warehouses where cheese wheels must age for at least a year. Producers are spending more on fans, water spraying, and environmental monitoring, while climate-controlled, aging facilities also face higher energy costs as heat waves become more frequent and intense. The issue has financial implications because banks have accepted aging cheese wheels as collateral, allowing farmers to borrow up to 80% of their estimated value while the cheese matures. The industry is sizable, producing about four million wheels annually worth nearly €4 billion, giving new meaning to a hard asset.
Diversion: Yeah, I play like the pros…
