Group 1 - The business failure rate in Canada increased by 0.3 percentage points to 5.0% in July, reversing the previous month's decline, while the business opening rate remained stable at 5.0% [1] - There is a significant structural divide in business activity, with industries heavily reliant on U.S. demand experiencing a sharp contraction, particularly in mining, oil and gas extraction, and manufacturing, which saw a year-on-year decline of 1.7% [1] - The recent announcement by U.S. President Trump to impose an additional 10% tariff on Canadian goods has heightened tensions in the U.S.-Canada trade relationship, which is the largest bilateral trade relationship globally [1] Group 2 - The market widely anticipates that the Bank of Canada will lower its policy interest rate this week due to overall economic weakness, although core inflation's stickiness may complicate the decision [2] - Some analysts, like RSM's chief economist Joe Brusuelas, predict that the Bank of Canada will maintain the current policy rate at 2.5%, citing core CPI hovering around 3% [2] - Canadian National Bank's wealth management economist Ethan Currie expects a 25 basis point rate cut to 2.25% this week, with another cut to 2.0% in December, indicating a need for a moderately accommodative policy stance due to accumulated economic weakness [3]

Core Viewpoint - SAP SE's third-quarter cloud revenue fell short of analyst expectations, indicating that trade disputes and economic weakness are impacting sales [1][2] Financial Performance - Adjusted cloud revenue for Q3 was €5.29 billion (approximately $6.1 billion), below the market expectation of €5.33 billion, with a year-over-year growth rate of 22%, marking the slowest growth since Q4 2023 [1] - Overall revenue grew by 7% to €9.08 billion (approximately $10.59 billion), also missing analyst expectations of €9.17 billion [1] - Non-IFRS operating profit increased by 14% to €2.57 billion, slightly above the expected €2.55 billion [1] - Free cash flow available for dividends grew by 5% to €1.27 billion [1] Strategic Insights - The company is undergoing a strategic transformation under CEO Christian Klein, shifting from traditional software licensing to subscription services, with a focus on cloud business sales [1] - CFO Dominik Asam noted that despite uncertainties in the macroeconomic environment, the company maintains a growth momentum [1] Market Reaction - Following the earnings report, SAP's American Depositary Receipts (ADR) fell by approximately 6% in after-hours trading, although the stock price in Frankfurt has remained relatively stable throughout the year [2] Future Outlook - SAP updated its 2025 cloud revenue forecast, expecting it to approach the lower end of the previous range of €21.6 billion to €21.9 billion, indicating a projected growth of 26% [2] - The company anticipates adjusted profits to be at the upper end of the previously set range of €10.3 billion to €10.6 billion, with free cash flow expected to reach €8 billion to €8.2 billion, exceeding earlier expectations of around €8 billion [2] Industry Context - Analysts, including Derrick Wood from TD Cowen, noted that some transactions in Q3 were delayed due to "tariff turmoil," particularly affecting the manufacturing customer segment [2] - Analysis of U.S. government activities indicated a decrease in SAP's order volume in Q3, with cuts in government spending impacting business [2]

Group 1 - Canada has reduced tariffs on certain steel and aluminum products imported from China and the U.S. to alleviate domestic pressure [1] - The Canadian government has provided exemptions to several companies to avoid the costs of retaliatory tariffs on products that are in short supply or needed under existing contracts [1] - The new exemption measures aim to protect workers and families from the impact of retaliatory measures, particularly in downstream industries [1] Group 2 - China's response to Canada's tariff reductions includes anti-dumping investigations and increased tariffs on Canadian canola seeds, canola oil, seafood, and pork, putting pressure on Canada's agricultural sector [2] - Canadian Prime Minister Carney has sent officials to China for exploratory talks, indicating an effort to repair relations, although challenges remain in persuading China to lift measures against Canadian canola [2] - There is a growing pessimism regarding economic growth in Canada, with over half of Canadians believing the economy will weaken in the next six months, and reports of significant layoffs due to tariffs [2]

Group 1 - The UK economy is currently operating below its potential level, with concerns over a weakening labor market and high inflation, leading to uncertainty regarding future interest rate cuts by the Bank of England [1][3] - The International Monetary Fund (IMF) predicts that the UK will experience the fastest rising inflation rate among the G7 countries over the next two years, with current inflation nearly double the target level [1][2] - The unemployment rate in the UK has risen to its highest level since 2021, reaching 4.8%, which has contributed to market expectations of a 35% chance of a rate cut in December [3] Group 2 - UK Chancellor of the Exchequer, Reeves, plans to promote "economic stability" during her visit to Washington, emphasizing fiscal prudence and the creation of favorable conditions for productivity and investment [2] - The IMF has called for caution regarding further interest rate cuts, warning that rising wage pressures and household inflation expectations could pose new upward risks to inflation [3] - Bank of England Governor Bailey acknowledged that while high inflation remains a threat, economic weakness may suppress price increases in the future [3]

Group 1 - The Bank of Canada has indicated that inflation risks have diminished but are not entirely eliminated, with ongoing uncertainties related to trade tensions and their impact on costs [1][2] - The central bank decided to lower interest rates to 2.5% for the first time since March, shifting focus towards addressing economic weakness as inflationary pressures ease [1] - The Canadian economy contracted by 1.6% in Q2, with exports plummeting by 27%, and the unemployment rate rose to 7.1% in August, reflecting a challenging labor market [1] Group 2 - Structural changes in demand and supply due to U.S. tariffs complicate the assessment of idle capacity in the Canadian economy, potentially weakening the job market and impacting business investment [2] - Despite the cancellation of retaliatory tariffs, concerns remain about the restructuring of global trade leading to efficiency losses and increased costs, with U.S. tariffs possibly affecting Canadian prices [2] - The Bank of Canada plans to cautiously adjust policies while balancing economic downturn risks and inflationary pressures, preparing to respond to new information as it arises [2]

Economic Outlook - The Congressional Budget Office (CBO) projects higher inflation and unemployment with slowing economic growth for the year [1] - The anticipated population growth due to immigration is expected to be significantly lower, impacting labor supply [2][4] - The reconciliation bill is boosting the economy, while tariffs are raising inflation and slowing down economic growth [3][6] Labor Market Dynamics - Labor demand is decreasing as the economy weakens, while labor supply is also falling dramatically, leading to a complex jobs market [4][6] - The population numbers are projected to be several hundred thousand fewer each year over the next decade, with a million fewer this year alone [4][5] Tariff Impacts - Tariffs are contributing to higher inflation and are expected to reduce the deficit by $4 trillion over the next 10 years, with $3.3 trillion in revenue and $700 billion in averted debt costs [10][11] - The CBO follows the administration's policies closely, adjusting forecasts based on current laws and tariffs [9][18] Inflation and Economic Assumptions - Inflation has come in higher than CBO's expectations, attributed to the impact of tariffs, despite a weakening economy [20][21] - The CBO updates its forecasts a few times a year, with the latest adjustments reflecting higher inflation than previously anticipated [20][22]

Group 1 - The latest employment report in the US was weaker than expected, leading Wall Street to believe that the Federal Reserve will lower interest rates this month [1][3] - The non-farm payroll report showed only 22,000 new jobs added last month, with the unemployment rate rising to its highest point in nearly four years, indicating a cooling labor market [3][4] - The market has fully priced in a 25 basis point rate cut in September, with expectations of a total reduction of 68 basis points by the end of the year [3] Group 2 - The 2-year and 10-year US Treasury yields fell for the third consecutive week, reflecting market assessments of a potential 50 basis point rate cut [4] - Concerns about consumer purchasing power due to tariffs and job security are increasing, as indicated by the weak employment report [4][6] - The upcoming consumer price index (CPI) data is expected to show a 0.3% increase, which may not hinder the Fed's decision to cut rates [5] Group 3 - Major US stock indices showed mixed performance, with the S&P 500 reaching a historical high before a sell-off occurred [6] - The communication services sector led gains with a 5.1% increase, while the energy sector fell by 3.5% due to declining oil prices [6] - Small-cap stocks are expected to benefit from the anticipated rate cuts, with significant buying activity observed in small-cap stocks and ETFs [7]

Core Viewpoint - Nomura Securities economist Hannah Liu anticipates that the Reserve Bank of Australia (RBA) will unanimously agree to lower interest rates by 25 basis points, but is unlikely to provide dovish guidance [1] Economic Indicators - The second quarter Consumer Price Index (CPI) data suggests that the RBA's previous concerns about inflation may have been somewhat overstated [1] - The average unemployment rate for the second quarter was 4.2%, but it slightly increased to 4.3% in June [1] Economic Activity - Recent economic activity data has shown improvement, indicating that the current rationale for the RBA's interest rate cut is more about the policy space provided by falling inflation rather than a need for continuous rate cuts due to economic weakness [1]

Core Viewpoint - The Bank of Canada's Governor Macklem stated that while the economy is weak, it is not in a severe state [1] Economic Conditions - The Canadian economy is experiencing a slowdown, but the situation is not critical [1] - There are signs of resilience in certain sectors, indicating potential for recovery [1] Monetary Policy Implications - The central bank may need to adjust its monetary policy in response to the current economic conditions [1] - Interest rates could be influenced by the ongoing economic performance and inflation trends [1]

Core Viewpoint - The Federal Reserve, represented by Harker, indicates that it will respond decisively if economic weakness is observed [1] Group 1 - The Federal Reserve is closely monitoring economic indicators and is prepared to take action if signs of economic fatigue emerge [1]