Equities are under pressure this morning as disappointing tech earnings, growing concerns over the profitability of AI investments, and escalating Middle East tensions weigh on sentiment. Nasdaq futures are down -1.7%, S&P 500 futures declined –1.0%, and the TSX is down -0.6, while European equities weakened -0.9%, while the MSCI Asia Pacific and Emerging Markets indexes dropped -1.7% and -2.2%, respectively. Tech stocks are under pressure as investors question whether huge spending on AI infrastructure and computing capacity would translate into earnings growth. Even Meta, which showed improving returns from its AI investments, struggled to meet elevated investor expectations, reinforcing concerns that the sector’s valuations have become difficult to justify. If that wasn’t enough, escalating tensions in the Middle East pushed Brent crude 2.8% higher to $112 per barrel, raising inflation concerns.
More talk than trade. Mark Carney said he spoke with Trump “for quite some time” on Wednesday morning, covering Iran, developments in the Middle East and Canada–U.S. trade relations. While the two leaders addressed outstanding trade issues, Carney revealed few specifics and announced no progress toward a deal. He said Canada remains ready to negotiate when Washington is prepared to engage, provided any agreement serves Canadian interests. If only we could have been a fly on that wall. The conversation coincided with Carney’s announcement of a $9 bln federal-provincial support package alongside Ontario Premier Doug Ford, to help the province’s steel and auto industries contend with U.S. tariffs. The measures include $5 bln over five years to modernize steel production and expand into non-U.S. markets, $2.5 bln over two years for automotive investments, and up to $1 bln in federal funding for roads supporting critical mineral development in Ontario’s Ring of Fire region. Ottawa will also hold vehicle emissions standards at 2026 levels through 2029, giving automakers flexibility, and strengthen enforcement against foreign steel dumping. For now, Ottawa is focused on helping affected industries adapt while a trade deal remains out of reach.
Europe is at risk of losing a significant share of its most promising tech startups as regulatory burdens, limited access to funding, and shortages of skilled workers undermine the region’s competitiveness in AI. A recent survey found that nearly 40% of European startups are considering relocating outside the region to scale their operations, while over 50% fastest-growing companies are looking to move. Regulatory compliance is seen as one of the largest obstacles, with some European businesses reporting that they could spend as much as €0.40 of every euro on compliance rather than technological investment. These challenges are only made worse by restrictive energy and electricity-grid capacity, limited funding opportunities, and the European Union’s AI Act, which is one of the world’s most tough regulatory frameworks for AI.
Staying in Europe, French 10-year government bond yields briefly topped 5% on Wednesday for the first time since 2002, before closing at 4.99%, as political unrest, fiscal concerns and higher inflation expectations continued to pressure the country’s debt market. Yields have climbed from 3.2% in February, with the spread over German bonds widening to nearly 160 bps, a level last seen during the Eurozone debt crisis. The selling has also extended to other heavily indebted European countries, including Belgium and Italy, as investors reassess sovereign credit risks across the region. With France’s presidential election approaching in April, meaningful fiscal consolidation appears unlikely in the near term. Moody’s is also scheduled to review France’s credit rating on Friday, with a downgrade possible. Although the ECB has tools to stabilize bond markets, analysts expect it to remain on the sidelines unless conditions deteriorate significantly. For now, the combination of rising borrowing costs, strained public finances and political resistance to spending cuts leaves European governments with limited room to maneuver, making sovereign bond spreads worth watching for signs of further contagion.
Whose data is it anyway? Banks have embraced AI to improve productivity, enhance customer service, and generate insights from their own data. This, however, has allowed third-party AI agents to access customer accounts, prompting RBC CEO Dave McKay to consider blocking Meta’s AI agent Muse from accessing customer information. McKay cited concerns over privacy, fraud, and the bank’s ability to monitor transactions, following in the footsteps of JPMorgan and Charles Schwab who have have already restricted outside AI agents over data privacy and security concerns. There’s also a commercial risk, as these agents could automatically shift deposits into higher-yielding accounts, putting pressure on banks’ low-cost funding and potentially weakening customer relationships. The hesitation isn’t necessarily about resisting innovation, but rather who controls customer data, how it is used, who bears responsibility when something goes wrong and, ultimately, who benefits financially. McKay remains a strong proponent of AI and sees Canada as an attractive destination for data centre investment, although RBC is also reducing its exposure to AI-related lending through strategic risk transfers. As McKay put it, “Too much of a good thing’s not a good thing in banking.”
A new season, a familiar face. When Kawhi Leonard arrived in Toronto in 2018, it was no secret that he didn’t want to be here. But as the wins piled up, a mutual affection grew between the city and its reluctant superstar, culminating in the 2019 championship run. For one glorious season, everything clicked. However, just as Raptors fans began dreaming of a dynasty, he was gone. Heartbreak doesn’t quite capture it. Fans felt jilted, perhaps even betrayed. We tried everything to convince him to stay, from massive city murals to free meals, but Kawhi chose home and family, signing with the LA Clippers and leaving an entire country wondering what might have been. Kawhi has said he came close to staying but has no regrets about returning to California. Seven years later, in a rather poetic twist, the man who broke Toronto’s heart is back in a Raptors uniform. And this is more than a nostalgic reunion. After improving from 30 to 46 wins last season and pushing their first-round playoff series to seven games, the Raptors have assembled arguably their strongest roster since 2019. Led by All-Star Scottie Barnes, alongside Immanuel Quickley and Toronto’s own RJ Barrett, this young team now has a two-time Finals MVP who knows exactly what it takes to win in June. The question is whether Kawhi, now a 15-year veteran, can stay healthy and help turn potential into another deep run. Judging by the reception at last night’s season opener, Raptors fans are ready to forgive and dream again. Toronto opened the season with a 132–95 win vs. Chicago, but the bigger story was seeing No. 2 back on home court. We may never stop wondering what could have been had Kawhi stayed in 2019, but seven years later, there’s a new chapter to write. Kawhi seems ready for it, saying, ‘I’m not here to live in the past, I’m here for what’s next.”
Diversion: Thirsty
