Views

Commodity producers can benefit when higher rates are being driven by stronger nominal growth, inflation, supply constraints or geopolitical risks.

The US 3-2-1 crack spread has reached USD 63 per barrel, while even stronger European margins reflect diesel above USD 200 per barrel and expensive natural gas.

EU gas is trading near USD 142 per barrel of oil equivalent, more than USD 45 above Brent and around eight times the prevailing US natural gas price.

The Magnificent Seven are spending vast sums today to support earnings expected tomorrow. The Energy Seven are harvesting exceptional cash flow today from scarcity, elevated prices and infrastructure that already exists.

AI remains a powerful structural growth theme. However, its expanding requirement for electricity, natural gas, backup generation and grid infrastructure means some of its most immediate profits are accruing not only to those developing the technology, but also to those supplying the molecules and electrons needed to run it.

WTI crude surged 5.2% to USD90.22/bbl, while Brent jumped 4.6% to USD94.65/bbl. The selloff in global bonds was equally striking: Japan’s 10 -year government bond yield reached 3.0% for the first time since 1996

Overall, we view the development as mildly negative for near-term credit metrics but supportive of longer-term pipeline visibility and geographic rebalancing.

Japan’s 10 -year government bond yield reached 3.0% for the first time since 1996

Tencent Music Entertainment Group may issue USD-denominated 5Y and/or 10Y bonds.

US Treasury Secretary Scott Bessent also signaled that additional sanctions targeting Iranian banks could be announced this week.

we expect the ECB’s growth and inflation forecasts to be revised upwards slightly, mainly due to earlier statistical upward revisions of first-quarter growth and slightly higher oil prices.

But if debt sustainability concerns grow, possibly ahead of next year's French presidential elections, markets might want to test the ECB.

Some tightening of financing conditions can ease the ECB’s job; too much tightening, and unequal tightening, would bring new problems.

the possibility of an early exit for Christine Lagarde as ECB president and the question of who would be her successor. Some of the names of possible candidates currently circulating have, at least in the past, not been strong supporters of quantitative easing.

Prefunding should ultimately reduce these increases, but the draft budget is clearly negative for the CZGB market.

On the positive side, the Ministry of Finance has gained a new funding source through retail bonds and is likely to rely on it more as borrowing needs rise.

Assuming no switches or budget changes, gross CZGB issuance would rise 28% year-on-year and net issuance 19%.

Brent pushed back above $95/bbl, reaching its highest level in more than a month, as Persian Gulf tensions escalated further.

TTF gas prices traded to their highest level since 2023, with front-month futures breaking above EUR75/MWh in early morning trading today.

CBOT soybean futures climbed to their highest level since December 2023, supported by a stronger-than-expected US renewable fuel exemption decision that improved the biofuel demand outlook.

We favour DXY grinding higher to the 100.10/20 area and probably moving a little higher tomorrow on the Waller event.

Below 1.1565/70, EUR/USD can extend its drop to the 1.1520 area and we think something like 1.15 looks an appropriate target for month-end.

For USD/JPY, the hawkish Fed is a game-changer and suggests USD/JPY can spend much more time in this 160/162 area.

Paired with our bullish call on USD, we see USD/CAD upside risks extending to 1.400 this month.

We assume gradual interest rate hikes in 2027 but conditional on the Canadian economic backdrop continuing to improve.

monetary policy cannot offset the effects of tariffs or influence global energy prices.

Fiscal policy is objectively a more effective policy tool to address targeted economic impacts from tariffs than blanket BoC interest rate changes

there would be room for the BoC to respond were those shocks to spread across additional sectors/products to impact broader inflation trends.

higher energy costs could spread to increase costs for a wider array of consumer goods and services, and those risks grow the longer energy prices remain elevated

We remain cautiously optimistic that the Canadian economy will continue to gradually improve and the unemployment rate will drift gradually lower.

increased trade uncertainty could weigh broadly on consumer and business spending in a way that would increase slack in the economy and cause underlying inflationary pressures to ease (arguing for lower interest rates for longer).

Canadian consumers and businesses have shown signs of adapting to life under increased trade uncertainty — business investment strengthened in Q2 and consumer spending has remained resilient.

Canada has made significant progress in reducing interprovincial labour mobility barriers through initiatives such as the Red Seal program and CFTA, making it easier for qualified workers to move across provincial borders.

The stakes are particularly high in healthcare and construction, where demographic pressures, retirements, and growing labour demand are expected to intensify worker shortages over the coming decade.

Additional progress will require governments to further streamline applications, harmonize occupational standards, and build on reforms such as Ontario’s as-of-right certification model, which allows many workers to begin working while registration is finalized.

Healthcare stands to benefit considerably. Canada’s aging population is expected to increase demand for healthcare services while simultaneously raising retirement rates of healthcare workers.

Quebec’s construction sector, for example, operates under a distinct regulatory framework. As a result, a certified tradesperson may have their credential recognized and still face additional training requirements before beginning work.

Geography, housing costs, employment opportunities, personal circumstances, and social ties all shape whether people relocate.

In short, today's above-target inflation is arithmetically a profit-share story, not a labor-cost story.

labor’s share of income has fallen to the lowest level in the series since 1947. The mirror image shows up in profits: After-tax corporate profit margins as a percentage of gross value added were at their highest level in over 80 years of data

Q2 GDP growth of 3.3% surpassed the BoC’s 2.8% projection and Q1 was revised up by 0.4 ppts for a net beat to their expectations of nearly a percentage point.

Our assessment at this point is that the inflationary impact of the retaliatory tariffs is modest.

We see merit in reviewing currency allocations versus longer-term spending and investment needs, rebalancing away from excess US dollar exposure, and potentially using structured strategies to diversify or harness pockets of volatility to generate yield.

And we also see value in maintaining a strategic allocation to gold, which can complement these positions with robust central bank demand, and its role as a portfolio hedge against currency debasement and US fiscal pressure.

Third, in case of market reaction (which is highly probable), the likely increase of risk premium on French public bonds would imply an increase of costs rather than benefits.

Markets are aware of the difficulties involved in fiscal adjustment under the current political circumstances, including difficult cohabitation between the government and the president and next year's parliamentary elections. In our view, however, the fiscal plans should provide some reassurance to financial markets. Concerns about next year's budget have been reflected, among other things, in elevated spreads, including long-term asset swaps.

Sweden has built up a high level of debt in its household sector for many years and now has challenges in the real estate sector, which suggests that the krona should carry a risk premium.

Spreads are also 3bp above their Italian peers, which suggests that a high uncertainty premium is already baked into the spread.

First, without changes in the Treaty on the European Union, any form of public debt restructuring would be legally challenged by euro area partners.

Second, the non-respect by France of key founding principles surrounding the euro area and its monetary policy could lead the market to question future participation of France to the euro (implying the resurgence of the (Frexit) redenomination risk).