Today
Stock futures are mixed this morning with the TSX pointing higher while U.S. equities edged lower as renewed fighting between the U.S. and Iran revived geopolitical and inflation concerns. The calendar is relatively light this week, with U.S. 2Q earnings season winding down and many Canadian kids enjoying their last few days of summer before heading back to school or, for some, making the big leap to first-year university. Oil prices are moving higher with Brent and WTI up nearly 3%, which isn’t great timing as it comes on the heels of Kevin Warsh’s hawkish Jackson Hole remarks, which emphasized inflation as the greater economic risk and pushed market-implied odds of a September rate hike to roughly 60% from 34%. Despite the mixed returns this morning, equity markets are still heading for a winning month with both the TSX and S&P 500 over 3% on a total return basis for the month.
Investors will be paying close attention to U.S. jobs numbers this week, with payroll growth in the U.S. expected to show a rebound in August. Economists are estimating 55,000 new jobs and the unemployment rate holding at 4.1%, supporting Kevin Warsh’s view that the labour market remains near full employment. The relative stability in employment allows the Fed to concentrate more on fighting inflation, which remains well above its 2% target. Markets will also be looking to ISM manufacturing and services price indicators for evidence that inflationary pressures warrant additional tightening. It’s also an important week closer to home, with the Bank of Canada expected to leave its policy rate unchanged on Wednesday before trade and employment reports later in the week, against the backdrop of escalating U.S.-Canada tariffs.
Let’s try this again…Trump’s plan to give a new U.S.-backed venture control over more than 65 billion barrels of Venezuelan oil is raising concerns. The venture would become the world’s second-largest corporate holder of proven oil reserves after Saudi Aramco, while Chevron and other U.S. producers are also considering investments needed to revive Venezuela’s deteriorated energy sector. Critics compare the arrangement with earlier periods of U.S. economic dominance in Latin America, warning that unclear agreements and limited Venezuelan control could eventually create political backlash. These risks are especially relevant given Venezuela’s history which saw foreign companies once produce most of its oil before the industry was nationalized and assets belonging to companies were later seized. While the Trump administration argues that U.S. investment could rebuild production, strengthen Venezuela’s economy, and increase oil supplies at a time of elevated global energy prices, the scale and structure of the agreement could create both political and investment risks for companies entering the country.
Japan spent a record ¥15.4 trillion over the past month supporting the yen after it fell to a four-decade low, including the first coordinated U.S.-Japan currency intervention since 1998. The moves temporarily strengthened the yen from nearly 164 per dollar to as high as 155.23, but it has since weakened back toward 160, highlighting just how powerful the underlying forces are pressuring the currency despite roughly ¥27 trillion of Japanese intervention this year. Still, U.S. participation has discouraged traders from aggressively pushing the yen beyond 160, with both governments signaling they are prepared to act again if necessary. The coordinated action has also increased expectations that the Bank of Japan could raise interest rates in September, which could provide more long term support for the currency than intervention alone. The yen’s direction now depends on relative monetary policy, especially whether the BOJ turns more hawkish and whether U.S. economic data reinforce expectations for further U.S. rate increases.
Scott Bessent’s threats against Iran have so far had limited impact, with major trading partners continuing commercial and financial ties despite warnings of sweeping sanctions. China, which purchases roughly 90% of Iranian oil, has resisted U.S. pressure, while banking, flights, and trade links with countries including the UAE, Turkey, and Pakistan have continued. Analysts argue that increasing economic pressure on Iran would ultimately require targeting Chinese financial institutions, but doing so could risk retaliation and create huge risks for global trade and financial markets. The limited international response also highlights the difficulty of enforcing unilateral sanctions against a country that has spent decades developing ways to operate under economic restrictions. Bessent is now looking for support from G20 nations in tightening economic pressure on Iran. The only problem is that many G20 members have been hit with new U.S. tariffs, making cooperation less likely. With this in mind, the latest measures appear unlikely to meaningfully impact Iran or quickly bring an end to the conflict.
China’s five largest banks reported their strongest first-half profit growth in years, with earnings rising between 3% and 5% as falling deposit costs provided relief on lending margins. Net interest margins stabilized or improved across the major lenders, while non-performing loan ratios remained steady, suggesting asset quality at the largest banks remains relatively resilient despite China’s sluggish economy and property-sector weakness. Executives and analysts did, however, warn that the benefit from repricing expensive deposits will fade, while weak borrowing demand continues to pressure loan growth and asset yields. Smaller banks, on the other hand, face more risks because they have less capacity to avoid weaker borrowers, while weak consumption is also limiting fee income across the industry.
Finders keepers? Construction workers renovating a former brewery site in Belgium, discovered a pile of gold worth roughly €9 million, while removing foundations to install a sewer pipe. The haul included gold coins, bars, and bullion, which workers initially mistook for ordinary euro coins before realizing what they had discovered, Surprisingly, the crew turned the treasure over to police rather than keeping it, and the gold is currently being held while authorities determine its rightful ownership. A local historian has suggested the hoard may have belonged to the Van Assche brewing family, though its origin remains uncertain. There still is a chance the workers don’t come away empty handed, with Belgian law stating that an owner has five years to claim the treasure and if no rightful owner emerges and it is not tied to a crime, it may eventually be divided between the finder and the property owner.
Diversion: Don’t jump 
