Launch Pad

The S&P/TSX surpassed 35,000 for the first time in yesterday’s trading session, helped by a rebound in energy stocks, uranium producers, insurers, and banks. At the same time, AI enthusiasm remains a tailwind through technology names like Celestica, which has emerged as one of the TSX’s biggest beneficiaries of increased spending on AI infrastructure. The rally is particularly notable given the backdrop of a slowing Canadian economy and a housing correction that has seen home prices fall roughly 20% nationally from their 2022 peak. Investors appear to be looking through domestic economic weakness and focusing instead on higher commodity prices, resilient corporate earnings, and Canada’s exposure to energy, electricity, critical minerals, and AI-related infrastructure spending. 

Not everything is moving higher though, with Bitcoin’s recent weakness highlighting how quickly investor attention has shifted toward AI and away from digital assets. The immediate catalyst was a surprisingly small sale by Strategy Inc which sold just 32 Bitcoin worth approximately $2.5 million from a holding of more than 843,000 coins. While it may appear insignificant, the move rattled investors because it appeared to contradict chairman Michael Saylor’s long-standing philosophy of “never selling”. Since then, Bitcoin has lost roughly $160 billion in market value and U.S.-listed Bitcoin ETFs have experienced a record 12 consecutive days of outflows totaling nearly $4 billion. The selloff reflects a broader rotation occurring across markets, as investors begin to once again favour AI-related equities over cryptocurrencies. Over the past year, the Nasdaq 100 has gained 42%, while Bitcoin has fallen -37% and remains nearly 50% below its peak. 

Pain before progress? Mark Carney said Canada’s economy is showing signs of weakness after two consecutive quarters of GDP contraction but stopped short of calling the situation a recession. Carney said part of the slowdown reflects deliberate policy choices, including reduced immigration targets and lower government spending, as the government attempts to rebalance the economy and reduce dependence on the U.S. Carney emphasized the transition will create uneven economic data in the short term, even as longer-term initiatives aimed at boosting investment, trade diversification, and major infrastructure projects begin to take shape. Some have accused the government of avoiding the recession label, pointing to rising insolvencies, and job losses as evidence that Canadians are struggling. However, many economists and senior officials at the BoC have cautioned against relying solely on the technical definition of two consecutive quarters of negative GDP growth, noting that employment, income growth, and business investment remain more resilient than typically seen during a traditional recession. 

Europe is heating up. Eurozone inflation has moved above the ECB’s 2% target, with headline inflation accelerating to 3.2% in May, the highest level since 2023. What’s concerning policymakers is that core inflation rose to 2.5%, and services inflation jumped 3.5%, suggesting that price pressures are broadening beyond energy and beginning to impact the wider economy. While the initial inflation shock was driven by higher oil and energy costs stemming from the Iran war, ECB officials are worried about second-round effects, including stronger wage demands and businesses passing higher costs on to consumers. The data has increased expectations for a 25 bps rate hike at the ECB’s June 11 meeting, which would be the first increase since September 2023. However, policymakers remain divided on what comes next. The challenge for the ECB is that it now faces a stagflation-like environment with inflation well above target while business activity has weakened to its lowest level since 2023, making future policy decisions more difficult. 

On the trade front, Canada has signaled that negotiations with the U.S. remain active despite growing concerns that Mexico may be moving ahead more quickly in discussions around the future of the CUSMA. Trade Minister Dominic LeBlanc said Canada has submitted new and detailed trade proposals to U.S. officials following recent negotiating progress, while admitting that there could still be some bumps along the way. Mark Carney has emphasized that Canada’s priority remains  resolving sector-specific tariffs on automobiles, steel, aluminum, and softwood lumber, while also navigating U.S. proposals that could require vehicles produced in North America to contain at least 50% U.S. content. The broader message from Ottawa is that while recent economic weakness and political rhetoric have created uncertainty, Canada remains committed to renewing and strengthening the CUSMA framework rather than preparing for its termination. 

A traffic citation in Florida recently went viral after a woman was accused of holding a cellphone in her right hand, despite not having a right hand. The citation was eventually withdrawn at the request of the Palm Beach County Sheriff’s Office before a scheduled court hearing. Watching the video, you would have thought a ticket wouldn’t have even been issued, but evidently that wasn’t the case. The incident gained attention after the woman posted video of the traffic stop on TikTok, where she challenged the deputy’s claim and pointed out that she physically could not have been holding a phone in the hand referenced on the ticket. The case has also highlighted how difficult texting-while-driving violations can be to prove, with attorneys suggesting many drivers pay citations without realizing the evidence may not support the charge. 

Canola futures are at the highest level since September 2023 on expectations of lower production in Australia, a major producer and exporter of the oilseed. According to the Australian Bureau of Agricultural and Resource Economics and Sciences, Australia’s output is forecast to decrease to 6.2 mln tons in the 2026-27 season, down 19% from last year, and the area planted is forecast to fall by 6% to 3.5 mln hectares. Australian growers have been grappling with high fuel and fertilizer costs due to the war in Iran, and dry weather is also gripping some farming areas. After Canada,  Australia is typically the second-largest canola exporter in the world, so a decline in its output stands to tighten global supplies. Firm vegetable oil prices have also supported canola as the Iran war has sent crude oil higher, boosting the appeal for edible oils as a feedstock for biofuel.