Today
Equities are looking to begin September under pressure as rising oil prices raised inflation concerns, pushing bond yields higher and reinforcing expectations for additional central bank tightening. Brent climbed above $92 amid renewed disruptions in the Strait of Hormuz, while the U.S. 10-year Treasury yield reached 4.78% and 30-year yields remained above 5%. Higher yields are weighing on technology and AI-related shares, with Nasdaq futures falling -1.1% and S&P 500 futures down -0.6%, while the TSX is –0.4% lower. With economic activity remaining relatively resilient, investors remain focused on upcoming U.S. CPI and jobs data as the key test to see if yields continue rising.
The Bank of Canada is expected to keep its policy rate unchanged at 2.25% tomorrow, but renewed U.S.-Canada trade tensions are changing the outlook of future moves. Strategists estimate the combined effect of the U.S. tariffs, Canadian retaliation, and federal support measures will reduce Canadian output by about 0.3% relative to its 2027 baseline, while the counter-tariffs alone could lift consumer prices by 0.5%. Although Canada posted strong 3.3% annualized growth in Q2, momentum is expected to slow as trade uncertainty weighs on investment and activity, especially in manufacturing-heavy provinces like Ontario and Quebec. With inflation around 3% and underlying measures relatively contained, economists expect officials to emphasize growing downside risks, leaving the door open to rate cuts if the trade conflict leads to an economic slowdown.
Things are a little different in Europe, with eurozone inflation picking up to 3.3% in August from 2.9% in July, its highest level since September 2024, as the Iran war and disruption to energy supplies pushed energy inflation to 14.3%. Underlying pressures were more contained, however, with core inflation easing to 2.4% from 2.5%, signalling that much of the latest increase is being driven by the external energy shock. Still, markets see another ECB rate increase as almost certain, pricing roughly a 99% probability of a 25 bp hike to 2.5% at their meeting next week. Policymakers have voiced their concerns, noting that elevated energy costs could become embedded in wages and services prices, pushing them to tighten policy despite relatively contained core inflation.
France’s deteriorating fiscal position and political instability are pushing government borrowing costs toward financial-crisis-era levels, with the 10-year yield rising above 4.1%, its highest since 2008. Government debt is projected to exceed 120% of GDP in 2027, while the deficit remains well above EU limits and economic growth has stalled. Investors are now focused on the upcoming 2027 budget and presidential election although markets remain skeptical that the next government will have the political appetite to stabilize the debt trajectory. French bonds are now trading at distressed valuations, but analysts warn that renewed budget deadlock or election uncertainty could produce another period of volatility late this year and into 2027. Some investors are concerned that this could spread into a broader bond market revolt, forcing France into more spending cuts or tax increases while adding upward pressure to European sovereign yields.
Strategists expect China’s economic momentum to continue to soften this year, forecasting real GDP growth of around 4.5% as policymakers favour incremental support rather than major stimulus. August data reinforced this view, with the manufacturing PMI improving more than expected to 49.8 but remaining in contraction, while output, new orders, and export orders strengthened on resilient overseas demand and tech-related activity. The picture at home remains weak, however, with non-manufacturing PMI falling to 49, its lowest since December 2022, alongside slowing credit growth, deteriorating labour-market conditions, weak consumer spending, and an ongoing housing recession. Export and import growth are also expected to moderate, although semiconductor-related imports remain strong. At the same time, rising input costs are squeezing manufacturers’ margins and Chinese manufactured-goods export prices are increasing at double-digit rates, raising concerns about how that will impact inflation globally.
Emerging-market bonds could extend their strong YTD performance as concerns about rising U.S. debt and potential dollar debasement encourage investors to diversify away from dollar-denominated assets. EM local-currency bonds have returned 3.3% this year versus a 1.9% decline for developed-market peers, helped by disciplined fiscal policies, credible inflation targeting, and growing allocations to non-U.S. assets. The theme has picked up some traction after U.S. debt surpassed $40 trillion and Treasury buybacks raised concerns about the attractiveness of long-duration U.S. assets, benefiting EM currencies and local rates alongside gold and Bitcoin. Still, the trade faces risks from the 10-year Treasury yield approaching 5%, elevated oil prices, and Fed Chair Kevin Warsh’s hawkish stance, all of which could increase demand for the dollar and U.S. bonds.
They do say that art is subjective. The City of Saskatoon is defending a $297,490 public-art project consisting of three large plastic rocks after the Canadian Taxpayers Federation criticized the spending as wasteful, especially as it comes amid a 6.7% property-tax increase this year. The city, however, said the installation was funded from a previously approved budget rather than the 2026 tax increase, and argued that the installation reflects its environmental identity by transforming discarded materials into artwork emphasizing waste reduction and reuse. The taxpayers federation on the other hand has noted that real rocks could have been purchased locally for much less and is now calling for Saskatoon to eliminate its public-art funding policy.
Diversion: Still got it kid
