War jitters appear to be fading, at least in the equity markets for now. Yesterday’s trading session initially reflected a risk off response, with the Nasdaq falling as much as -1% in early trading following renewed attacks between the U.S. and Iran. However, buyers returned throughout the day, lifting the index to a 0.2% gain by the close. That resilience has carried into this morning, with Nasdaq futures again leading gains. Overseas, trading was mixed, with London’s FTSE the only major European index lower at the time of writing, while China’s and Japan’s markets led advances in Asia. Despite another round of overnight attacks, markets appear to be looking past the latest escalation. The U.S. said it had struck Iranian infrastructure and sites near the Strait of Hormuz to degrade Tehran’s ability to target commercial shipping, while Iran responded that passage through the Strait would be determined by Iranian arrangements, not American threats. Investors may also have taken some comfort from comments by Trump aboard Air Force One following the NATO summit, where he claimed Iran “want(ed) to make a deal so badly.” Whether those remarks reflected meaningful diplomatic progress remains unclear, but for now markets appear to be treating the conflict as a contained geopolitical risk rather than pricing in a broader disruption.
AI offsets global headwinds. The IMF left its 2026 global growth forecast unchanged at 3%, saying the AI investment boom has helped offset the economic damage from the Middle East war. The global economy has weathered the conflict better than initially feared, with AI-related exports and investment driving strong growth in economies like South Korea, Taiwan, Malaysia, and Thailand. Still, the IMF warned that risks remain tilted to the downside, due to renewed U.S.-Iran tensions, trade uncertainty, and the possibility that high expectations surrounding AI could unravel. Inflation has also proved more persistent, with the IMF raising its 2026 global consumer-price forecast to 4.7% from 4.4%, mainly due to higher energy and food costs. The group expects conditions to improve next year, raising its global growth forecast to 3.4%, although it’s worth noting that the latest escalation between the U.S. and Iran occurred after the report was finalized.
China saw consumer inflation slowing to 1% in June, while core inflation also eased to 1%, suggesting that weak domestic demand is limiting companies’ ability to pass higher costs on to consumers. Producer prices were still 4.1% higher than a year earlier, but they fell 0.3% from May, their first monthly decline since July 2025, leading some economists to find that factory-price inflation has peaked. Renewed U.S.-Iran tensions could temporarily lift energy-related prices, but analysts expect inflation to drift back toward very low levels once oil supplies normalize. The softer inflation outlook leaves room for additional policy support, with some economists expecting the People’s Bank of China to cut its key policy rate later this year as economic growth weakens. This comes after the PBOC said it plans to increase financial support for domestic consumption as the country struggles with strong production but weak demand. Attention now turns to Q2 GDP data, with economists expecting growth to slow from Q1, with the government now targeting annual growth of 4.5% to 5%.
Canada courts Saudi capital. Mark Carney is visiting Saudi Arabia, the first Canadian leader to do so in 26 years. Canada hopes to finalize a Foreign Investment Promotion and Protection Agreement (FIPA) this year, laying the groundwork for a potential free trade agreement. Discussions have centred on attracting investment from Saudi Arabia’s $900 billion Public Investment Fund into sectors such as critical minerals, energy, artificial intelligence, defence, agriculture, and life sciences, while also expanding opportunities for Canadian companies in the Kingdom. During the visit, Carney met with senior Saudi officials, including representatives from the Public Investment Fund, Saudi Aramco, and Ma’aden, Saudi Arabia’s state-backed mining company and one of the world’s largest producers of phosphate and other critical minerals. The meetings reflect Canada’s effort to position itself as a reliable supplier of critical minerals and other strategic resources while reducing its economic dependence on the U.S.
Hawkish. Minutes from the Fed’s June meeting showed that a few officials saw a case for raising interest rates, although the committee ultimately voted unanimously to keep the federal funds rate at 3.5% to 3.75%. Policymakers expressed growing concern about inflation while becoming somewhat less worried about the labour market, with several officials expecting rate hikes if price pressures remain high. The Fed discussed risks from strong AI-driven demand, high energy prices and tariffs, while recent renewed hostilities between the U.S. and Iran have further complicated the inflation outlook by pushing oil prices higher. Officials still expect solid economic growth and a stable labour market, but their rate projections revealed a more divided outlook, with half anticipating at least one hike this year and the other half expecting no increase or a cut. Investors are now focused on June inflation data for further clues about whether the Fed will begin tightening monetary policy later this year.
Na na na na na….Police in Mexico are searching for a vigilante dubbed the “Batman of Lagos de Moreno” after at least five motorcycle thieves were found duct-taped to lampposts over a 10-day period. Some of the men even had mustaches, cat whiskers, and the Spanish word for thief drawn on their faces, while the stolen motorcycles were left nearby. Authorities are treating the tied-up men as victims and are trying to identify the vigilante responsible for chasing them down and restraining them. The men were freed and treated for injuries, although it remains unclear whether they are also being investigated for the alleged thefts. With no arrests made, you may want to think twice about stealing a motorcycle if you happen to be in Mexico.
Diversion: Where’d you go?!
