Canada announced increased defence spending to meet NATO's 2% GDP target this fiscal year. Prime Minister Carney warned of "new imperialism" while NATO chief Rutte's stark messaging of "wishful thinking will not keep us safe" and warnings to "learn to speak Russian" as tension heightened in the region. Prime Minister Mark Carney committed an additional C$9 billion ($6.58 billion) for military recruitment, equipment repairs, and new defence partnerships, with prospect of further spending given the need to modernise outdated equipment and reduce reliance on the US. Rutte emphasised NATO needs a "quantum leap" in collective defence capabilities, citing Russia's ability to produce in three months what NATO takes a year to manufacture. The spending increase will fund new submarines, aircraft, ships, armoured vehicles, artillery, radar systems, drones, and higher military pay, though economists warn it will significantly expand Canada's budget deficit.
EQUITY
The market saw significant gains in small caps while the main market stayed flat ahead of US-China trade talks in London. Consumer discretionary stocks led gains while utilities declined, with Edison International falling 8.1% on a downgrade and ON Semiconductor gaining 4.4% on a raised price target. Wall Street analysts are turning bullish on small-cap stocks, citing attractive valuations and delayed Fed rate cuts as catalysts for rotation out of rate-sensitive stocks.
GOLD
Gold prices swung in consolidation at an average price of $3,315 as U.S.-China trade talks began in London, with both sides working to cement a 90-day tariff truce. Officials described progress in thawing relations between the world's two largest economies, diminishing gold's appeal as a crisis hedge. While near-term pressure remains from trade optimism, analysts see room for gains given continued economic instability.
OIL
A gain in crude oil prices is primarily fuelled by US-China trade negotiations in London that could ease tariff tensions and support demand. The ongoing Russia-Ukraine conflict and US-Iran nuclear negotiations see an opportunity for a rally, while the approaching peak summer travel season would limit gain. Supply-side concerns linger as Saudi Arabia pushed for significant OPEC+ production increases in August with a chance for another hike in September.
CURRENCY
The greenback index managed to rally above 99 on Tuesday with optimism surrounding trade negotiations in London that extended into a second day. President Trump claimed he was receiving "good reports" from his team as delegations worked to resolve disputes over tariffs and rare earth mineral restrictions. Meanwhile, the British pound fell following weak U.K. labour market data along with the euro, though analysts noted the currency remains within established trading ranges pending concrete outcomes from the trade discussions.
