Good morning. I’m filling in for Chris Wilson-Smith, who was at an annual conference held by the Society for Advancing Business Editing and Writing (SABEW) to accept a Best in Business award for this newsletter (everyone say congrats to Chris!). In focus today is what we’re watching this week, plus CEOs share their mom’s best advice.
Up first
In the news
Middle East: U.S. President Donald Trump says Iran’s peace proposal response was “unacceptable,” raising fears the Strait of Hormuz will stay closed and sending oil prices higher.
Institutional investing: Behind Alphabet’s record-breaking Canadian bond deal.
Security: The B.C. Securities Commission identifies more than 100 money mules in investment fraud cases.
Defence: Tension is high among the Canadian cities pursuing a bid to host a new multilateral defence bank.
People make their way past the Bank of Canada building in downtown Ottawa.Sean Kilpatrick/The Canadian Press
In focus
This week’s reading list
Hi, I’m Stefanie Marotta, the banking reporter at The Globe and Mail. Here’s my take on the five files worth watching this week in business news.
1. Economic Forecasting
The Bank of Canada is set to release its market participants survey for the first quarter. The survey samples 27 to 30 representatives from banks, dealers, pension funds, insurers, and asset-management and research firms.
While the results are unlikely to move markets, the survey is interesting because it indicates how the people who trade Canadian rates, bonds and currency are interpreting the economy, inflation and the path of monetary policy.
In the last survey, trade tensions dominated the risks, with respondents seeing easing trade tensions as the biggest upside risk and worsening trade tensions as the biggest downside risk. Respondents expected inflation to stay close to target, at 2.1 per cent by the end of 2026.
Also coming up this week from the central bank:
- On Wednesday, the BoC will release its summary of deliberations from its last rate announcement – a hold, but with hints of hikes down the road.
- Later that day, the bank’s external deputy governor will deliver a speech on what AI adoption could mean for productivity and economic potential.
2. Consumer costs
The U.S. consumer price index (CPI) for April – the most widely cited measure of inflation, which also draws the most political attention – drops on Tuesday.
The war with Iran has skyrocketed gasoline prices, putting pressure on inflation.
With U.S. inflation stubbornly sitting above the U.S. Federal Reserve’s target for so long, some economy watchers say policymakers have accepted higher levels as the new normal. The question on everyone’s mind: will inflation creep even higher?
In March, U.S. inflation surged by the most in nearly four years.
If this week’s report shows inflation is even “stickier” than projected, markets fear the Federal Reserve might have to raise rates further, which could hit stock valuations and further dampen demand for borrowing.
What does this mean for Canadians? Higher-than-expected inflation could lift the U.S. dollar, weaken the loonie and push Canadian bond yields higher – the same yields lenders use to price fixed-rate mortgages.
3. Telecom chatter
Leaders in the telecommunications sector will gather this week at the Canadian Telecom Summit, where AI is expected to dominate the conversation.
Canada’s telecom giants have been grappling with how to implement the technology.
Most of the current-use cases in AI revolve around productivity and cost savings. Last week, Telus Corp. said it deployed AI models that alters the accents of customer service agents.
The big question among investors: when will AI start to generate revenue for large companies? Canada biggest banks have just started to figure out the answer.
The opportunity could offer the industry a lifeline. Last week, both BCE and Telus reported a drop in profit amid heavy wireless competition.
4. Housing woes
Later in the week, we’re getting a two-day run of housing data that will offer a wide look at the state of the real estate market.
On Thursday, existing home sales and the MLS Home Price Index will show whether buyers are returning to the market. Friday’s housing starts data will indicate whether builders are adding supply at the pace Canada needs.
Real estate experts and economists have been hopeful that sunnier spring weather will jumpstart activity in the coming months. Senior bankers echoed this sentiment during first quarter earnings conference calls in February.
However, home sales were essentially flat in March and benchmark prices were little changed from the previous month.
A rebound is expected to be uneven across Canada, with Ontario and British Columbia facing affordability issues.
5. Banking competition
There’s a lot happening in banking, and it’s happening fast. (Not sure whether anyone has ever referred to developments in the banking industry as “fast,” but hey, there’s a first time for everything.)
Ottawa is focusing on boosting competition and innovation in Canada’s highly consolidated banking market in a bid to help bolster the country’s economic productivity and sovereignty. Lenders and fintechs are making big moves to meet the moment.
Last week, Finance Minister François-Philippe Champagne pitched fintech and payments leaders on a digital trade mission to showcase Canada’s innovators to global markets. EQ Bank chief executive officer Chadwick Westlake said the country’s banking sector is failing to put the needs of consumers and businesses first. And Wealthsimple Financial Corp. and Visa Canada unveiled an experiment they ran using stablecoin to settle payments in Canada as Ottawa works on establishing its own regulatory regime for the digital currency.
Keep an eye on this space. I’ve been inundated with updates to report on, and there’s more to come. It should be an interesting few weeks as we head toward bank earnings later this month.
Charted
Asia’s growing pains
It’s planting season across much of Asia, but many farmers are not sowing seeds because there is no fertilizer for their crops – and the Strait of Hormuz is not the only reason, writes correspondent James Griffiths.
Quoted
My mom taught me entrepreneurship long before I knew what the word meant.
— Michael Katchen, CEO of Wealthsimple
In honour of Mother’s Day, we asked 14 leaders of Canadian companies for the best advice they ever got from their moms.
Morning update
Global markets were mixed as stalled U.S.-Iran peace negotiations weighed on risk appetite.
Wall Street futures were muted, while TSX futures were in the red.
Overseas, the pan-European STOXX 600 was down 0.17 per cent in morning trading. Britain’s FTSE 100 rose 0.11 per cent, Germany’s DAX slid 0.18 per cent and France’s CAC 40 retreated 1 per cent.
In Asia, Japan’s Nikkei closed 0.47 per cent lower, while Hong Kong’s Hang Seng edged up 0.05 per cent.
The Canadian dollar traded at 73.20 U.S. cents.