Views

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).

We project headline inflation to average 2.8% year-over-year and core inflation to average 2.4% year-over-year in 2026.

Foreign outflows eased to USD64mn in the week to 30 August from USD124mn previously, with selling moderating in both Saudi and Dubai.

Structural drivers including demographics, talent availability, digital infrastructure investment, Make in India and Production Linked Incentive (PLI) schemes continue to strengthen India’s position as an investment destination.

As per a Confederation of Indian Industry (CII) report over 160 Indian companies have collectively generated over USD40 billion of investment in tangible investments across the US.

Indian companies are pursuing growth in the US through acquisitions, partnerships and strategic investments, reinforcing the US’s position as a key destination for Indian outbound capital.

Brent futures rose from USD84/bbl on 25 August to USD89/bbl on 1 September as renewed fighting rebuild the Hormuz risk premium.

Oil prices started the week stronger following the first military strikes between the US and Iran in a month. ICE Brent briefly moved back above US$90/bbl in early morning Asia trading.

GCC CDS were broadly stable over the week, with only small moves across markets.

Abu Dhabi, Saudi Arabia and Bahrain fell on direct attack risk and thinner fiscal cover.

On 1 September, another tanker reported being hit by three projectiles while leaving the Strait.

The S&P 500 fell 0.3% to 7,686 on Monday, its second straight decline, while the Dow dropped 0.7% to 53,186 and the Nasdaq 100 edged up 0.1%. Rising oil prices and Treasury yields pressured most sectors as renewed US-Iran tensions revived inflation concerns.

The Stoxx 600 fell 0.6% to 651, the Euro Stoxx 50 dropped 1.0% to 6,420 and Germany’s DAX lost 1.2% to 26,258 as higher oil prices and bond yields weighed on risk appetite.

Asian equities traded lower on Tuesday as oil above $90 and rising global bond yields revived inflation concerns.

The S&P 500 fell 0.3%, the Dow slipped less than 0.1% and the Nasdaq 100 dropped 0.7% on Friday as Fed Chair Kevin Warsh’s hawkish Jackson Hole remarks lifted rate expectations and hit technology shares.

The S&P 500 fell 0.3%, the Dow slipped less than 0.1% and the Nasdaq 100 dropped 0.7% on Friday as Fed Chair Kevin Warsh’s hawkish Jackson Hole remarks lifted rate expectations and hit technology shares.

Nvidia fell 4.6%, while Marvell Technology sank 10.3% despite beating estimates as its outlook failed to clear elevated AI expectations.

Equity markets gained after fresh earnings data reinforced confidence in the AI boom and helped restore investor sentiment.

US equities closed higher overnight, led by a strong rally in technology shares. Sentiment was partly lifted by strong results and guidance from Nvidia, which reinforced confidence in continued AI-related demand.

We believe resilient economic growth and robust earnings offer room for global equities to move up

India’s economy grew 7.8% YoY for 2Q26, comfortably beating market expectations of 7.1%, and the RBI’s 7.0% forecast, although growth moderated from a revised 8.6% in the previous quarter.

the production index remains in very strong growth territory at 58.3, historically consistent with GDP growth of close to 3%.

CommBank estimates hyperscaler and other AI capital spending will add about 0.5 percentage points to US economic growth in 2026.

Growth is expected to moderate from Q2’s strong pace but remain positive over the remainder of 2026.

We are less optimistic about the growth outlook, forecasting 2026 GDP growth at 3.2%.

Statistics Canada’s advance estimate indicated GDP was unchanged in July, suggesting economic activity likely moderated at the beginning of Q3.

Increases in real estate and rental and leasing and professional, scientific and technical services were offset by decreases in retail trade and manufacturing.

CommBank expects national dwelling prices to fall around 9% from their peak this cycle.

CommBank now expects peak-to-trough declines of around 13% in Sydney and 12% in Melbourne.

Annual growth slowed to 2.7%yr.

CommBank now expects prices in Brisbane, Perth and Adelaide to fall by around 8% from peak to trough.

If the cash rate instead remained at 4.60% throughout 2027, CommBank estimates national dwelling prices would be broadly flat over the year.

Brisbane and Adelaide have each recorded three consecutive monthly price falls, while Perth has fallen for four months in a row.

For now, however, the combination of weaker momentum and higher borrowing costs means CommBank expects the housing adjustment to continue through the first half of next year.

Barring a fresh surprise announcement on Treasury market intervention, the index can reclaim the 100.0 level.

Still, we’d be very cautious about chasing a dollar correction further this week. In our view, markets would need a string of materially disappointing data releases over the coming days to meaningfully reassess September FOMC expectations after Warsh’s hawkish message last week.

We see NZD/USD trading back below 0.590 in the near term as the RBNZ may fail to meet hawkish expectations and USD finds some support.

European natural gas prices are at the March peaks, keeping the euro’s terms of trade under pressure.

The Czech market is still pricing in almost four rate hikes and the Polish market nearly three, which should limit further weakening and could support gains today given further widening of rate differentials versus euro.

In FX, the US dollar edged slightly higher.