| Close
Jul 17 | Close
Jul 10 | Weekly
Change | Net Weekly
Change % |
DJIA | 52,146.42 | 52,637.01 | -490.59 | -0.93% |
Nasdaq | 25,520.24 | 26,281.60 | -761.36 | -2.90% |
S&P 500 | 7,457.59 | 7,575.39 | -117.70 | -1.55% |
| S&P TSX | 35,263.65 | 35,305.31 | -41.46 | -0.12% |
Source: Globe & Mail
Bank of Canada: See You in September
Benjamin Reitzes
BMO Canadian Rates & Macro Strategist
The Bank of Canada held policy rates steady at 2.25%
this week as widely expected. The policy statement and press conference
took a more upbeat tone compared to the past few meetings. Governor Macklem
characterized the outlook as “fairly positive”. That’s a notable change
from the June policy statement that noted “Economic activity in Canada has
been weak”. Even so, uncertainty remains elevated, though risks to the
outlook have lessened somewhat on both sides, while continuing to be
balanced.
The upbeat tone was centered around a firmer economic
outlook. The BoC upgraded its Q2 GDP projection to 2.5% (from 1.5%
previously), which would be the best quarter since 2025Q1. However, the
strength was caveated as driven by temporary factors (e.g. rebounding from
back-to-back quarterly contractions), with Q3 growth at 1.5%, hardly gangbusters.
Still, policymakers would surely welcome consecutive positives after the
unevenness over the past 18 months. One important takeaway from the policy statement
is that “more businesses report they are finding ways to navigate through the
uncertainty” even as the fate of USMCA remains in flux. If businesses are
indeed moving past the trade uncertainty and energy prices can stabilize,
that would be a big positive for growth. Business investment growth is
-1.4% a.r. since the start of 2025, weighing heavily on headline GDP. Turn
that sector around and the BoC’s growth projection looks doable. It’s also
worth noting that the BoC (and BMO; see Robert’s Thought) see housing
bottoming, which will eliminate another drag on growth. Don’t expect
housing to rebound anytime soon, but at least it won’t be a negative.
Firmer growth projections didn’t move the needle on
inflation, with the core CPI forecasts effectively unchanged from the April
MPR. The Bank believes that any wardriven price pressures are being offset
by output gap-driven disinflation. We get June CPI next week, which will
see some easing of headline inflation with energy prices falling.
Unfortunately, oil prices have bounced off the lows with renewed Middle
East hostilities which will likely keep gasoline from falling further in
July (it could even rise). Near-term headline inflation forecasts moved up,
but the BoC isn’t anticipating any renewed acceleration and kept a similar
profile to the April MPR, but with a higher starting point.
While the tone was more upbeat in general, there remains
significant uncertainty around the outlook keeping the Bank of Canada
cautious. Energy-related inflation worries appear to have eased a touch,
but the coast isn’t clear yet with heightened uncertainty around the path
of the U.S.-Iran conflict. That will keep policymakers on guard for signs
of pass-through, which have yet to materialize. The growth outlook is subject
to significant uncertainty as well. Indeed, Macklem highlighted that
“there’s a risk that the second-quarter pickup in growth is not sustained.”
Trade frictions persist, and the hoped-for improvement in business
investment sentiment needs to materialize. Consumers have to continue
spending amid a mediocre (at best) economic backdrop and labour market,
while governments have to keep the investment taps open. There are still
plenty of unknowns.
Key Takeaway: The clearest message for this week’s
policy announcement is that the Bank of Canada is nowhere near moving rates
in either direction. Policymakers view the risks to the outlook as
balanced, which gives them room to maneuver in either direction. The keys
to watch over the coming months will be whether the positive growth
momentum that’s expected in Q2 is sustained into the second half of the year.
That would narrow the output gap which has been in a -0.5% to -1.5% range
for a full year. On the inflation side, it’s about energy prices and
breadth. Oil is subject to Middle East headlines, while we’ll get a reading
on breadth in next week’s June inflation report. Bank-watchers can take a
break for the rest of the summer as, barring a sizeable shock, it continues
to look like policy rates are going to stay at 2.25% for the balance of
2026.
Frank and Mark.
Source: Globe & Mail, BMO Capital Markets, Bank of Canada, Bloomberg.
Canada
The TSX was essentially unchanged (-0.1%) last week with
support from energy, industrials and banks.
Canadian consumer spending has weathered elevated economic
uncertainty, most recently from the war-driven energy price shock. We
expect higher spending at gasoline stations drove retail sales up 1.0% in
May, in line with StatCan’s flash estimate. Weaker auto sales could leave
spending ex-autos rising 1.5%, but higher prices suggest volumes could be
meaningfully softer, following two months of declines. Thankfully, a drop
in gasoline prices in June (despite a partial retracement in July) and
government support for lower-income households indicate a recovery is just around
the corner.
YTD, the TSX is up 11.20%, and the benchmark 10-year yield ended the week to yield 3.45%.
U.S. & Global
Equity markets were mostly lower last week as some
encouraging U.S. inflation data was countered by a slide in some
high-flying sectors. The S&P 500 fell 1.6% on the week, with technology
and communication services posting the sharpest declines.
Some hot spots of the market were getting doused this
week, most notably semiconductors. The chip sector has been on an absolute
tear since the spring, with the Philly semiconductor index up almost 200%
y/y at one point, before the pullback deepened this week. Massive earnings
results from the likes of Taiwan Semiconductor couldn’t counter the profit
taking, and investors continue to grapple with the AI boom—how much
investment will prove to be too much? And will the returns justify the
shoot first/ask questions later infrastructure build out?
While semiconductors are just one area of the market
that has been lifted by the AI tide, it probably won’t be long before
attention turns elsewhere, and with some questions. For example, are the
massive runs in some industrials, banks and utilities going to be justified
by future earnings growth? The market hasn’t been bothered yet in those
quarters, but have an eye out.
Back in the economy, the closely-watched U.S. inflation
print for June came in better than expected, with headline inflation
cooling to 3.5% y/y from 4.2% y/y in the prior month. This wasn’t a true
surprise given the slide in oil prices in the month, but the core measures
were decidedly soft as well. Core inflation slowed to 2.6% y/y from 2.9%
y/y in the prior month, while the 3- and 6-month annualized trends now sit
at a moderate 2.3% and 2.6%, respectively. While Fed Chair Warsh was
asserting the Fed’s independence in testimony to Congress—the Fed has “no
tolerance” for high inflation—markets proceeded to pare the amount of
tightening priced in later this year.
YTD, the DJIA is up 8.50%, the NASDAQ is up 9.80%, and the S&P 500 is up 8.94%. The 10-year Treasury yield ended the week to yield 4.50%.
Source: BMO Capital Markets
The Good:
Existing Home Sales +0.5% (June); Manufacturing Sales
Volumes +0.5% (May); Global Investors bought a net $7.9 bln in Canadian
securities (May).
The Bad:
MLS Home Prices -3.6% y/y (June); Housing Starts -5.6%
to 238,971 a.r. (June); New Motor Vehicle Sales -1.9% y/y (May); Core
Wholesale Trade Volumes -0.2% (May).
The Good:
Consumer Prices -0.4% m/m (June)—first drop since the
pandemic and core unch; Producer Prices -0.3% m/m (June); Retail Sales
+0.2% (June)—and control measure +0.5% Industrial Production +0.1%
(June)—capping off strong quarter; Initial Claims -8k to 208k (July 11
week); Housing Starts +19.0% to 1.43 mln a.r. (June); NFIB Small Business
Optimism +2.1 pts to 97.4 (June); NY Fed Manufacturing +4.1 pts to 57.5;
Philly Fed Index +5.0 pts to 58.1 (July)—both ISM-adjusted; Global
Investors bought a net $262.8 bln in U.S. securities (May); U of M Consumer
Confidence +4.9 pts to 54.4 (July).
The Bad:
Budget Balance swung to a $120.3 bln deficit (June);
tariff rebates weigh Import Prices +0.3% (June); Pending Home Sales -5.4%
(June); Building Permits -3.0% to 1.37 mln a.r. (June); NAHB Housing Market
Index -2 pts to 34 (July); MBA 30-year Fixed Rate Mortgage climbs to 6.65%
(July 10 week)—highest since Aug. ’25.
Source: Associated Press
Erling Haaland is Norway’s World Cup machine — and the
internet’s Babygirl
Erling Haaland stands at 6 feet, 5 inches, an
intimidating force who can make fellow soccer players look tiny in stature
and talent. Scoring seven goals across four World Cup matches entering
Saturday, the Norwegian player has been described as a machine. But if you
ask some loyal new fans, he’s also a babygirl and princess.
Haaland has become a social media phenomenon, with his
own posts and memes from others turning even soccer novices into diehard
fans.
His domineering physical appearance coupled with his
goofy online persona have contributed to the craze. Fans remark on his
flowing blond mane, color-coordinated hair ties and playful posts like a
Snapchat-filtered selfie in which he proclaimed Shrek his “twin.” The
contrast between his strength and skill on the field and his softer, looser
online presence has also subjected him to the “babygirl” treatment online.
That term is used frequently by fans of endearing male celebrities or
characters who come across as sensitive, caring or vulnerable.
Haaland is emblematic of a broader embrace of soccer
players as pop culture figures, driven in large part by how they present
themselves off the pitch.
Haaland as a ‘pretty Norwegian princess’
Sarah Wilson, a baseball content creator in New York, is
new to following soccer, but has become a big enough fan in the past month
that she embarked on a lengthy hunt to buy the jersey of her new favorite
player.
“I love Erling Haaland more than life itself,” Wilson,
31, said in a now viral video. “I cannot fathom being such a pretty
Norwegian princess and also being one of the best strikers in all of
football.”
Haaland is being catapulted into a fame even more
intense than he had already known as the Premier League’s top scorer. This
moment boils down to the pairing of elite skills with quirky personality,
Wilson said.
“Him being really, really talented — that’s the first
pillar of it all. And then you find out that he’s 25 years old and he’s
probably the most Gen Z athlete in the World Cup,” Wilson told The
Associated Press, noting his use of Snapchat and goofy filters in photos
online. Many are thinking, “‘Wow, I love that guy, he’s hilarious. Now he’s
my new favorite player,’ which is exactly what happened with me,” she
added.
Haaland’s expressive reactions on the pitch and his
unique appearance have spawned hundreds of memes. He’s leaned into this
virality, posting cheeky selfies on Instagram, uploading long-form vlogs on
YouTube and interacting with fans on his public Snapchat stories, often
poking fun at himself.
After scoring two goals to knock out Brazil, he posted a
smug selfie from the locker room with the caption, “Well well well.” When
an Instagram video with nearly 100 million views likened his appearance to
a green onion — its wiry roots standing in as his hair — Haaland responded
in the comments with a side-eyeing dog GIF. When Google added a Viking row
animation to his search results, Haaland wrote on X, “One thing to do
today… search my name on Google,” with a winking emoji.
Haaland said in a team news conference on Thursday that
he’s enjoyed being embraced in the U.S.
“I think it’s a good thing because I like the Americans.
I think they are kind of hilarious as well. They are funny. I like the way
they are,” he said. “I think it’s just good and honestly, on every single
thing, the World Cup so far here has been amazing.”
Sports are a “cultural force,” one on par with politics
or religion, said Jeffrey Kassing, an Arizona State University professor
who has studied fans’ and athletes’ social media use. It’s natural that
Haaland has “crossed over” into non-soccer audiences, he said. A song from
his youth has gone viral. A lookalike contest is in the offing. Even dogs
are sporting blond wigs.
“There used to be a whole lot of gatekeeping that would
happen with athletes; you would only ever hear from athletes maybe in an
interview or in a press conference,” Kassing said. Haaland is evidence of
how players have much more control in shaping their image now, he added.