Market Pulse

The strategy of borrowing in low-rate currencies, like the Japanese Yen, to reinvest in higher-yielding assets, like stocks or cryptocurrencies, is called a 'carry trade'. With the Bank of Japan raising interest rates and liquidity constrained by thin summer months, investors no longer have access to abundant cheap capital, leading to an unwinding of global carry trades which is disrupting markets. A selloff in risk assets is also being driven by fears the Federal Reserve may be too slow to support a weakening U.S. economy, pushing investors toward safer bonds.

Volkswagen is considering factory closures in Germany for the first time in 87 years as it grapples with rising costs, shrinking margins, and the transition to electric vehicles (EVs). Its struggles are compounded by competition from cheaper Chinese EVs and a slowdown in consumer spending. The move could exacerbate tensions in Germany’s labor market and political landscape as the country faces industrial shifts and growing populist movements.

Canada is imposing new tariffs on Chinese-made EVs, aluminum, and steel to protect domestic manufacturers and align with Western allies. Starting in October 2024, a 100% tariff will be applied to Chinese EVs and hybrids, alongside a 25% levy on steel and aluminum. Canada’s government emphasized the need to defend its automotive sector from unfair Chinese competition, citing labor and environmental abuses in China. While China criticized the move as protectionist, Canada's aim is to safeguard domestic jobs and industries, particularly in steel, aluminum, and auto manufacturing, which are closely tied to U.S. trade.

The post-pandemic influx of temporary foreign workers in Canada, particularly in food and retail, is making it harder for young Canadians to find jobs. Youth unemployment has surged to 14.2%, with younger immigrants facing even higher rates. Temporary foreign workers in these sectors grew by 211% between 2019 and 2023, as employers filled positions left vacant after the economy reopened. Critics argue this trend suppresses wages and reduces opportunities for local youth, as businesses often prefer experienced foreign workers willing to accept lower pay.

Catastrophe bonds, financial instruments issued by insurers, reinsurers, and governments for disaster coverage, face scrutiny over fairness concerns. A recent controversy arose when Jamaica’s catastrophe bond did not trigger a payout after Hurricane Beryl, despite the island being declared a disaster area. The Caribbean community is calling for a review of these bonds, but analysts warn that lowering payout thresholds would raise costs for issuers. The World Bank, a key facilitator of the bonds, stresses the trade-off between lower thresholds and higher premiums, as calls grow for a more equitable structure balancing investor protection with the needs of disaster-prone regions.

Alimentation Couche-Tard Inc., operator of Circle K and a CrossPoint portfolio investment, has made a preliminary offer to acquire Seven & i Holdings Co., owner of 7-Eleven, in what could be the largest foreign takeover of a Japanese company. The deal, which would create the world’s largest convenience store operator with around 100,000 locations, is under review by Seven & i’s board. The potential acquisition is fueled by a weak Yen and pressure from activist investors seeking greater value from Seven & i’s assets. Challenges include resistance from Seven & i’s management, the need for a strong cash offer, and potential regulatory scrutiny.

All data sourced from FACTSET and SIACharts.
All data is for the reported month and in local currentestcy.