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CAD

Markets rise on interrupted shutdown

US markets are gaining this morning after the government reached a last-minute deal to avert a shutdown – but with the same brinksmanship likely to play out again in less than eight weeks, we’re not sure how long the momentum can last. Equity futures are rising ahead of the open, Treasury yields are pushing toward Friday’s highs, and the dollar is climbing against its major Asian and European rivals. In a surprising and confusing late-Saturday development, House Speaker Kevin McCarthy – who had for weeks refused to consider a similar bipartisan measure crafted in the Senate – agreed to table...

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Up and away

Another round of stronger-than-expected US activity data combined with surging oil prices to send Treasury yields roaring to new cyclical peaks yesterday, triggering yet another spike in the dollar. Durable goods orders surprised with a 0.2-percent gain in August – markets had expected a -0.5 percent contraction – and non-defence capital spending climbed 0.9 percent, suggesting that the business investment cycle remained in relatively robust health. West Texas Intermediate prices briefly jumped above the $95 mark after the Energy Information Administration said crude inventories at the Cushing, Oklahoma delivery hub fell to less than 22 million barrels, nearing tank bottoms...

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Bonds have more fun

Treasury yields are retreating from multi-decade highs, helping relieve pressure on equity and foreign exchange markets. North American stock markets look set to open in the green and the dollar is putting in a mixed performance, but the risk-sensitive Canadian dollar is inching lower, and background volatility measures are creeping up. Bond yields moved higher in yesterday’s session after home prices resumed their rise, with the S&P CoreLogic Case-Shiller 20-city index climbing for a fifth month in July – a development that could indicate financial conditions are still too loose, and one that suggests inflation might remain sticky for longer....

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Weapons of mass disruption

In 1939, after the Soviets invaded Poland, Winston Churchill told radio audiences, “I cannot forecast to you the action of Russia. It is a riddle wrapped in a mystery inside an enigma; but perhaps there is a key. That key is Russian national interest.”  We find ourselves in a similar position. We cannot predict what Russia will do in the coming days, let alone the coming months. We’re not even sure the key is Russian national interest: Vladimir Putin’s actions in recent years would suggest he is driven by other motives.  We worry, however, that the world looks increasingly vulnerable...

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