Stock futures are pointing higher this morning, helped by Broadcom’s latest earnings report, which added more fuel to the AI fire. Investors are also becoming more confident that the Fed will deliver a quarter point interest-rate cut next week. And for any bond nerds investors, the less popular but (arguably) more important 3-month/10-year-yield curve just dis-inverted and turned positive earlier this morning. This yield curve is one of the main indicators for recession by the Federal Reserve Bank of St. Louis and has been inverted since November 2022.
Stats Canada reported that Canadian household debt relative to income decreased for the sixth consecutive quarter in Q3, as disposable income growth outpaced debt accumulation. The ratio of household credit market debt to disposable income fell to 173.1% from 175.3% in Q2, meaning households owed $1.73 for every dollar of disposable income. Additionally, the household debt service ratio, which measures payments on principal and interest as a share of disposable income, dropped to 14.72% from 14.98%. While debt payments edged up by 0.2%, disposable income rose by 2%, driving the overall improvement.
Canada is considering imposing export taxes on key commodities such as oil, uranium, and potash as a last-resort response to Trump’s threat of sweeping tariffs on imports from Canada. The risk move aims to pressure the U.S., which heavily depends on Canadian resources. This includes crude oil vital to Midwest refineries and uranium for nuclear power. While Canada prefers diplomatic solutions and has hinted at other retaliatory measures like tariffs on U.S. goods, export taxes remain an option if Trump’s actions escalate. However, such measures could deepen political divisions within Canada, particularly with opposition from resource-rich western provinces. The federal government has emphasized avoiding a trade war while preparing measures to address U.S. concerns, including border security and immigration control.
The ECB is preparing for a gradual easing of monetary policy, with quarter-point rate cuts anticipated at its January and March meetings, as inflation stabilizes near the 2% target and economic growth remains sluggish. Officials view smaller, incremental reductions as the most appropriate approach to balance lingering inflation risks and economic weakness. A larger half-point cut is considered an emergency option but believed to not be necessary at this time. The ECB’s recent fourth rate cut of the year reduced the deposit rate to 3%, and further assessments will depend on economic developments, including the impact of Donald Trump’s upcoming presidency. Investors don’t seem to be on the same page though, with markets currently anticipating a more aggressive rate-cutting trajectory than policymakers’ signal.
France’s splintered political landscape just received another lifeline after President Emmanuel Macron appointed centrist ally Francois Bayrou to be the country’s new Prime Minister. Bayrou will be tasked to redraft fiscal plans that will likely include concessions to win support from Macron’s adversaries. It was just last week when far-right leader Marine Le Pen helped to topple the previous administration led by Michel Barnier after Barnier tried to push through an austerity-filled budget. The recent political upheaval has battered business and household confidence and has led to a decline in French assets including bonds, which were at one point trading at the highest spreads (relative to German bonds) since the 2012 EU debt crisis
Economists expect the Fed to deliver a third consecutive quarter-point interest rate cut in December according to a Bloomberg survey, bringing the benchmark rate to a 4.25%-4.50% range. Predictions for 2025 suggest three additional rate reductions, as inflation remains elevated at 3.3% y/y, while unemployment stays low. Still, the incoming Trump administration’s policies, including potential tariffs and tax cuts, are expected to heighten inflation risks, possibly limiting the scope of rate cuts. Economists anticipate the Fed will proceed cautiously next year, with early adjustments likely to balance economic growth, inflation concerns, and political uncertainties. Quantitative tightening may persist into 2026, adding complexity to future policy decisions.
The FDIC reported a 29% drop in U.S. banks’ unrealized losses on securities to $364 billion in Q3 2024, the lowest since early 2022, due to lower long-term interest rates, though recent rate hikes could reverse these gains. Loan balances grew slightly, driven by credit card lending, while credit losses rose amid weaker office markets and increased charge-offs. Bank profits fell 8.6% to $65.4 billion due to the absence of one-time Q2 gains, and the number of “problem banks” rose from 66 to 68, with $87.3 billion in assets. Despite ongoing risks from inflation, interest rate volatility, and geopolitical uncertainty, domestic deposits grew 1.1%, signaling resilience in the banking sector.
Do you excel at excel? Michael Jarman, a financial modeling director from Canada, was crowned the Microsoft Excel World Champion in Las Vegas, defeating 11 finalists, including three-time champion Andrew “The Annihilator” Ngai of Australia. Jarman won the $5,000 prize and a championship belt by excelling in a World of Warcraft-themed challenge. The competition featured eliminations every five minutes until Jarman emerged victorious. Reflecting on the experience, he described it as an unforgettable and thrilling achievement. It’s not every day you hear someone refer to Excel as “thrilling”.
Diversion: Lucky guess or genius?
