Good morning. In focus this week: the terms that could bring the U.S. and Iran closer to a deal; whether Canada’s largest banks can clear lofty expectations; what a battery of economic tests will tell us about the country’s momentum; and why AI is producing strong earnings alongside existential angst.
Up first
In the news
Energy: The federal government’s pipeline deal with Alberta includes a cancellation fee that critics say is too low to ensure the province holds up its end of the bargain.
Real estate: Developers are calling on Canada’s biggest banks to make it easier for them to get financing to start construction on condo buildings.
Labour: Restaurant chain Tim Hortons is planning to dial back its use of Ottawa’s Temporary Foreign Worker program to staff restaurants.
'Welcome. You're fired! Just kidding. We like to kid, don't we folks?' – Donald Trump, maybe. Supreme Court Justice Clarence Thomas swears in Kevin Warsh as Federal Reserve Chair on Friday.Evelyn Hockstein/Reuters
In focus
What’s on tap this week
1. Deal or no deal?
The United States is close to reaching a deal with Iran that would end the war, reopen the Strait of Hormuz and see Iran give up its stockpile of highly enriched uranium, regional officials told The Associated Press yesterday. They said details and timelines would be worked out later.
U.S. President Donald Trump said on Saturday that a deal had been “largely negotiated,” but then said yesterday that the talks would continue beyond the weekend. Tehran and Washington have previously seemed close to a deal in recent weeks only to see diplomacy falter.
“Both sides must take their time and get it right,” Trump wrote on Truth Social. “There can be no mistakes!”
The strait’s reopening would begin to ease a worldwide energy crisis sparked by the surprise U.S. and Israeli bombardment of Iran on Feb. 28, which led Tehran to effectively close the waterway. Prices have spiked for oil, gas and several related products, jolting the world economy. Experts say it would take several weeks or even months for shipping and prices to recover once the strait is reopened.
2. Banking on a ‘banger’
Canada’s biggest banks are set to post a round of resilient profits, bucking economic uncertainty and looming trade pressure ahead of talks to renew the USMCA, The Globe’s Stefanie Marotta reports.
Analysts expect capital markets and wealth management activity to continue to bolster profits while loan growth slows and credit losses remain at elevated but manageable levels. Canadian bank stocks have surged 16 per cent this year on the optimism surrounding the sector’s ability to withstand economic uncertainty. That compares with an 8-per-cent climb from the S&P/TSX Composite Index.
While banks are expected to post strong earnings results this week, investor reaction will depend on management’s expectations for the latter half of the year, Jefferies analyst John Aiken said in a note to clients.
“Despite some serious potential headwinds, the Canadian banks continue to boast almost historically high valuations,” Aiken said. “We do not anticipate that the Q2 earnings will put this at risk, but with almost all the upside priced in, any questions surrounding promised robustness of the second half of 2026 could potentially upset the apple cart.”
CIBC Capital Markets analyst Paul Holden and his team perhaps said it best in a recent note to clients: “Six banks, two days – it’s going to be a banger.” Here’s the lineup:
Wednesday
- Bank of Montreal
- Bank of Nova Scotia
- National Bank of Canada
Thursday
- CIBC
- Royal Bank of Canada
- TD Bank
3. Tracking Canada Inc.
Statistics Canada on Friday will release gross domestic product numbers for the first quarter, March and an early estimate for April – a kind of economic reckoning for the start of 2026, and an early look at whether tariff friction and volatile energy prices carried into the spring.
The Canadian economy is expected to grow at about a 1.5-per-cent pace in the first quarter, reversing a decline at the end of last year. That period looked less worrying beneath the surface, RBC economists Nathan Janzen and Claire Fan wrote on Friday, because consumers, businesses and governments were still spending.
Much of the drop came from businesses reducing inventories – a factor that can weigh on growth in one quarter but does not necessarily point to a lasting downturn unless companies keep cutting back.
The expected first-quarter gain should be driven by stronger household, government spending, and a rebound from strike-related disruptions that weighed on output late last year, the economists wrote.
4. Rate work, if you can get it
Rising energy prices are pushing up costs for U.S. consumers and producers ahead of Thursday’s release of the personal consumption expenditures price index, the Federal Reserve’s preferred inflation gauge.
Another high reading would add to the pressure on newly sworn-in Fed chair Kevin Warsh, who took over on Friday as oil prices, tariffs and weak consumer sentiment complicated the central bank’s inflation fight. (Congratulations on your new job!)
The report is unlikely to settle the question of whether the Fed will raise rates this year, but a higher than expected number would make any move toward lower borrowing costs harder to justify.
5. AI earnings and existential woes
Before we get to the AI latest controversy, a couple of widely held economic principles:
→ A “lower-value” job is a task or role that, in economic terms, produces less output, revenue or strategic advantage relative to its cost.
→ “Human capital” is a term used in economics that refers to the skills, knowledge, experience and productive capacity of workers.
And one observation:
→ “Lower-value human capital” are words that do not need to go next to each other, particularly when the person saying them is a chief executive discussing job cuts at his own company.
Standard Chartered CEO Bill Winters later said his heavily criticized choice of words at an investor event in Hong Kong reflected “changes in the work, not the value of our people,” and suggested media coverage had reduced his full comments to “simple headlines” or a “quote out of context.”
The phrase was quoted accurately, as far as I can tell (and I’m at least mid-value human capital!) and the surrounding context does not appear to change its plain meaning. But the backlash shows how artificial intelligence can keep markets and workers on edge even before companies such as Dell and Salesforce report earnings later this week.
With a report from The Associated Press
Charted
A lucrative time to lend to government
It’s rarely a good sign when the bond market is creating headlines, Matt Lundy writes. Earlier this week, the 30-year U.S. Treasury yield hit 5.2 per cent, its highest level in 19 years. A selloff in the bond market continues to have investors on edge.
Quoted
The people who are to blame are the 14 cowards who signed a letter to the Prime Minister trying to derail our [memorandum of understanding on energy].
— Danielle Smith
Alberta Premier lays blame for national unity crisis.
Morning update
Global shares were on the rise as signs Iran and the U.S. were negotiating an end to their conflict eased concerns about inflation and a global economic slowdown.
TSX futures followed sentiment higher, while markets in the United States, Britain and Hong Kong were closed for holiday.
Overseas, the pan-European STOXX 600 was up 0.85 per cent in morning trading. Germany’s DAX rose 1.4 per cent and France’s CAC 40 advanced 1.5 per cent.
In Asia, Japan’s Nikkei closed 2.87 per cent higher, surging past the 65,000 level for the first time.
The Canadian dollar traded at 72.39 U.S. cents.