In a significant move, the Bank of Canada cut its benchmark interest rate by 50 basis points, lowering it to 3.75% in its October 2024 decision, as expected, and signalling that it will continue to lower its rate should the economy develop as expected.

This move is consistent with market expectations and demonstrates the bank’s willingness to explore more rate decreases if the current economic scenario persists as predicted.

The Bank of Canada’s current rate cut follows three previous cuts totalling 25 basis points.

This technique was prompted by recent data showing a significant drop in Canadian inflation rates.

In September, inflation decreased to 1.6%, which is the first time it has dipped below the 2% target in three years.

Furthermore, the bank noted a drop in per capita consumption and a softening labour market, highlighted by an unemployment rate that has risen to over 6.5%—a level not seen for more than two years.

Together, these indicators suggested a need for lower borrowing costs to help ease economic pressures.

Insights from the Monetary Policy Report

The Bank of Canada’s current Monetary Policy Report provides insight into the bank’s inflation and GDP growth expectations.

Policymakers expect inflation to stay close to target levels in the foreseeable future, with inflation risks looking to be fairly balanced in both directions.

Furthermore, the bank predicts a moderate 1.2% GDP growth this year, with a greater 2.1% growth rate expected next year.

These estimates are cautiously optimistic in the face of persistent economic concerns.

GDP growth is expected to steadily accelerate during the projection horizon, aided by decreasing interest rates.

This forecast incorporates the net effect of modest increases in consumer expenditure per person and slower population growth.

Residential investment growth is also expected to accelerate as robust house demand drives up sales and renovation spending.

Business investment is projected to increase as demand rises, and exports should stay strong, aided by sustained demand from the United States.

In the report, the Bank forecasts inflation to stay close to the goal over the projection period, with upward and negative pressures on inflation broadly equal.

The upward pressure from housing and other services progressively fades, and the downward pressure on inflation weakens as excess supply in the economy is absorbed.

Overall, the Bank expects GDP growth of 1.2% in 2024, 2.1% in 2025, and 2.3% in 2026. As the economy improves, excess supply is gradually absorbed.

Review of the Bank of Canada’s global economic outlook

According to the latest insights from the Monetary Policy Report, the Bank of Canada continues to project that the global economy will grow at roughly 3% over the next two years.

Interestingly, the United States is expected to see stronger growth than earlier estimates, while China’s economic outlook appears to be less robust.

In the eurozone, growth has been slow but is predicted to make a modest recovery next year.

Recently, advanced economies have seen a drop in inflation rates, bringing them closer to the targets set by central banks.

Moreover, since July, global financial conditions have become more relaxed, largely due to market expectations of lower policy interest rates.

It’s also worth noting that current global oil prices are about $10 lower than what was estimated in the July Monetary Policy Report.

This thorough assessment demonstrates the Bank of Canada’s careful consideration of various economic factors that are shaping the global environment.

What’s the importance of the rate cut?

The Bank of Canada’s decision to cut its main interest rate has substantial ramifications for a variety of economic participants.

By lowering borrowing rates, the bank hopes to increase consumption and investment, so increasing overall economic activity and promoting growth.

Lower interest rates also offer relief to both businesses and households by reducing the cost of servicing debt, potentially leading to higher disposable income and improved financial stability.

Ultimately, this rate cut demonstrates the central bank’s commitment to fostering economic recovery and tackling current challenges, all while striving to maintain a stable and sustainable economic environment for Canada.

In summary, the Bank of Canada’s decision to lower its benchmark interest rate demonstrates its proactive approach to shifting economic conditions.

By changing its monetary policy to handle the complexities of inflation and growth, the bank hopes to navigate uncertainty and give critical support to Canada’s economy.

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US benchmark equity markets fell on Wednesday as Treasury yields continued to rise amid a shallow outlook for the Federal Reserve’s rate-cut cycle. 

At the time of writing, the Dow Jones Industrial Average was down 1.4%. The average shed more than 600 points, and fell for the third straight session. 

The S&P 500 index was down 1.5%, while the Nasdaq Composite fell more than 420 points. 

Earlier in the session, the benchmark 10-year Treasury note yield topped 4.25%, reaching its highest level since July 26. 

Robust economic data pushes yields higher

Strong economic data from the US are fueling the rise in Treasury yields. 

The US economy continues to remain resilient, which is also dampening hopes of a larger Fed rate cut in November. 

“To me, it’s all about the impact of higher rates. The market is repricing the probability that the Fed can aggressively cut rates,” Brent Schutte, chief investment officer at Northwestern Mutual Wealth Management, told CNBC. 

“There have been parts of the economy that haven’t felt the impact of rising interest rates yet, but the longer rates remain higher, the more different parts of the economy have to reprice to that reality…the economy is out of equilibrium,” Schutte told CNBC. 

Shares of Coca Cola and Tesla fall

Shares of Coca Cola fell about 2% on Wednesday even though the company’s third-quarter earnings beat expectations. 

Tesla’s shares also dropped more than 1.5% as the company is scheduled to release its third-quarter earnings results after the closing bell on Wednesday.

McDonald’s shares drop after E. coli outbreak

Shares of McDonald were on track for its worst day since March 2020 as the fast-food giant scrambles to limit the damage from an E. coli outbreak. 

The outbreak linked to Quarter Pounder burgers has killed one person and sickened nearly 50 others in several US states, according to a Reuters report. 

The outbreak has also sickened people in more than 10 US states, with 10 hospitalised due to serious illness, according to the US Centers for Disease Control and Prevention (CDC). 

The CDC and McDonald’s are scrutinising McDonald’s supplies of slivered onions and Quarter Pounder beef patties as they investigate the cause of the E. coli outbreak, Reuters reported. 

At the time of writing, shares of McDonald’s Corp were down nearly 5% from the previous close. 

Walmart shares rise, but Boeing slips

Shares of Walmart rose almost 1% on Wednesday to reach a fresh all-time high on Wednesday. 

Shares of Walmart have outpaced the S&P 500 index in 2024, up 57% compared to the index’s nearly 22% jump this year, according to CNBC. 

Meanwhile, the stock of Boeing slipped nearly 3% after reporting its largest quarterly loss since 2020.

The company reported a loss of nearly $6 billion in the third quarter, while also losing more than $4 billion in its commercial aeroplane sector. 

Meanwhile, shares of Starbucks fell 1% after the coffee chain reported its results for the fourth quarter.

The company posted declines in same-store sales, net revenue and profit due to weaker demand in the US. 

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Bitcoin’s designation as a “Trump trade” is beginning to feel the pressure from broader global market shifts, spurred by the possibility of Donald Trump’s return to the White House.

With the Republican nominee leading Vice President Kamala Harris in prediction markets, bond yields, and the US dollar have jumped recently.

According to a Bloomberg report, investors are adjusting their bets, pulling back on expectations of looser monetary policy, as Trump’s pro-growth agenda could fuel an already strong US economy if he secures victory in the November 5 election.

This market shift has caused Bitcoin and stocks to fluctuate, as financial conditions tighten in response.

Bitcoin is facing its first weekly decline in three weeks. Although Trump has historically embraced the digital-asset industry, questions remain as to whether his broader economic agenda will negatively impact the cryptocurrency.

“Absolutely, yes, the selloff in stocks, higher US dollar, and higher yields all equal a tightening in financial conditions,” said Tony Sycamore, a market analyst at IG Australia Pty in the report.

He explained that the rapid pace of the tightening is creating pressure on risk assets like crypto.

Bitcoin’s performance under Trump remains uncertain

Bitcoin saw a 1% rise on Thursday, reaching $67,300, but its weekly decline still hovers around 2%.

Despite the recent dip, Bitcoin has surged by 60% this year, with a record high of $73,798 in March.

Demand for US spot bitcoin exchange-traded funds (ETFs) has been a key driver of the asset’s rally, but the market now faces uncertainty as financial conditions tighten.

Trump, in contrast to President Biden’s regulatory stance, has vowed to make the US the “crypto capital of the planet,” appealing to crypto enthusiasts.

Democratic candidate Harris has taken a more cautious approach, advocating for a regulatory framework for the sector.

These contrasting positions highlight the differing impacts each candidate could have on the industry.

Election result to influence Bitcoin’s future?

The race between Trump and Harris is statistically tied in key swing states, according to a Bloomberg News/Morning Consult poll.

The tight margins indicate that final campaigning efforts could play a significant role in deciding the winner.

If Trump wins, bond yields may rise further, negatively impacting risk assets like Bitcoin.

Caroline Mauron, co-founder of Orbit Markets, noted, “The expected regulatory softening of a Trump administration toward the crypto industry should still be the more important factor,” despite potential market tightening.

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The slow and dirty process of extracting lithium from rocks and salt water could take a toll on the environment, especially when the world tries to limit carbon emissions. 

But, the race towards achieving net-zero emissions relies heavily on lithium. And, so finding a solution to produce lithium in a cleaner manner remains imperative. 

Even as lithium prices have been rising sharply, demand for the precious metal is expected to increase by almost nine times over the next 15 years, according to estimates from the International Energy Agency (IEA). 

IEA said in a report:

EVs and battery storage have already displaced consumer electronics to become the largest consumer of lithium and are set to take over from stainless steel as the largest end user of nickel by 2040. 

As extracting lithium could be a slow process that often harms the environment, more efficient and less damaging methods of production are required going forward. 

According to a Bloomberg report, one promising solution is direct lithium extraction, which can significantly reduce the time taken to produce the metal from as long as 18 months to just days or even hours. 

Additionally, recycling and increasing the lifetime of lithium batteries could help reduce the need to mine huge quantities of the metal. 

“This effort should be accompanied by launching lithium mining operations with strict environmental laws and regulations and investing in advanced mining methods capable of extracting lithium from seawater,” according to a report by State of the Planet, which is a news site of the Columbia Climate School. 

Importance of lithium

Australia, Chile, and China are the largest producers of lithium, accounting for 90% of the world’s total supply. 

Lithium is an important mineral, which is used in electric vehicles (EVs) and stores the energy generated by solar and wind power.

According to Bloomberg, the low mass and radius of lithium atoms ensure that the batteries can absorb and store more electricity than other types of batteries of the same weight. 

“The weight aspect is crucial when it comes to EVs as a lighter car will travel further on the same charge,” according to the Bloomberg report. 

Growing demand for lithium-ion batteries is also at risk of supply bottlenecks, which could inflate prices and slow the process of shift to EVs. 

Moreover, the production process makes lithium more expensive. 

Problems with lithium mining

Mining operations are vulnerable to growing climate risks. 

Copper and lithium are particularly vulnerable to water stress given their high water requirements. 

Moreover, EVs are supposed to lead the world into an energy transition, However, mining spodumene, a primary source of lithium, is an energy-intensive process that is powered by carbon-spewing fossil fuels, according to Bloomberg. 

There is a risk that this sulfuric acid while extracting lithium could spill into local water streams, posing a threat to wildlife. 

IEA said:

Over 50% of today’s lithium and copper production is concentrated in areas with high water stress levels. Several major producing regions such as Australia, China, and Africa are also subject to extreme heat or flooding, which pose greater challenges in ensuring reliable and sustainable supplies.

Moreover, brine lithium extraction uses a lot of freshwater, which could pose a threat to wildlife as it is mainly conducted in arid regions across the world. 

Lithium brine is a saline groundwater that contains dissolved lithium and is a primary source of lithium for the world. 

Possible solution: direct lithium extraction

One of the solutions for limiting the hazards of mining is direct lithium extraction, according to experts. 

“Emerging technologies, such as direct lithium extraction (DLE) or enhanced metal recovery from waste streams or low-grade ores, offer the potential for a step change in future supply volumes,” the IEA said. 

The direct extraction method uses industrial equipment instead of the long and slow process of evaporation, which takes months. 

According to a report in Bloomberg, startups have been using this technology but it has only recently matured to a point, which can potentially compete with existing methods.

DLE methods could potentially open up supplies in new regions around the world. 

“Adopting DLE could be the only way to access some important lithium sources in the future, as Bolivia and Chile push companies eyeing their lithium riches to adopt DLE techniques — an approach aimed at conserving scarce water supplies,” Bloomberg reported. 

Lithium recycling is an option

Meanwhile, recycling remains a challenge as well for minerals such as lithium. 

According to IEA, for bulk metals, recycling practices are well established, but this is not the case for many energy-transition minerals such as lithium and rare earth metals. 

IEA said:

Emerging waste streams from clean energy technologies (e.g. batteries, wind turbines) can change this picture.

The Paris-based energy watchdog said that recycling may not eliminate the need for continued investment in new supply to meet climate goals. 

However, by 2040, recycled quantities of copper, lithium, nickel, and cobalt from spent batteries could reduce combined primary supply requirements for these minerals by around 10%, IEA said. 

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Elon Musk’s $1 million-per-day giveaway has come under scrutiny as the US Department of Justice (DOJ) warns it may breach federal election laws.

Musk, actively supporting Donald Trump in the presidential race against Kamala Harris, launched this initiative through his political action committee, America PAC.

The giveaway offers a chance for registered voters who sign a petition in support of the First and Second Amendments to win $1 million daily.

This effort is targeting voters in seven crucial swing states: Pennsylvania, Georgia, Nevada, Arizona, Michigan, Wisconsin, and North Carolina.

As Election Day on 5 November nears, the contest has sparked controversy and legal questions about its compliance with US electoral law, raising concerns among Democrats and prompting calls for a DOJ investigation.

What is the legality of Elon Musk’s voter giveaway?

The core of the DOJ’s concerns lies in US laws prohibiting payment for voter registration.

These laws aim to prevent undue influence in the election process. Musk’s giveaway, while framed as a petition initiative, requires participants to be registered voters, creating potential legal issues.

The DOJ’s Public Integrity Section reportedly reached out to Musk’s America PAC, highlighting the possibility of federal election law violations.

The specific timing of the DOJ’s communication remains unclear, and the department has not commented on the matter publicly.

Musk’s America PAC has made it clear that the contest aims to attract over 1 million voters in pivotal battleground states.

These states, often crucial in determining the outcome of elections, could see significant influence if a substantial number of new voters sign the petition.

The PAC has positioned the effort as a campaign for constitutional rights, notably freedom of speech and the right to bear arms.

While no party affiliation is required for participants, the event’s timing and focus on swing states have led to criticism from Democratic leaders who see the giveaway as an attempt to bolster Trump’s support base.

Is the giveaway illegal?

While some legal analysts believe that Musk’s contest could violate federal law, others suggest that it may exploit a legal loophole.

The US Code specifically prohibits offering payment for voter registration or voting.

Legal experts like Paul Schiff Berman from George Washington University argue that targeting registered voters could breach this provision, potentially exposing Musk and America PAC to fines or imprisonment if found guilty.

Adav Noti from the Campaign Legal Center echoed these concerns, stating that the scheme is subject to civil or criminal enforcement by the DOJ.

Musk has dismissed allegations of illegality on social media platform X (formerly Twitter), claiming that the contest is open to all voters, regardless of party affiliation or voting status.

In response to mounting criticism, America PAC modified the contest’s terms, now describing the prize as payment for a role as a spokesperson.

Winners must create videos promoting the PAC’s agenda, aligning the payments with promotional work rather than voter registration.

Despite this adjustment, some legal experts believe the giveaway could still face legal challenges, as the connection to voter registration remains a potential issue under electoral law.

Republican ex-prosecutors demand DOJ action

Adding to the pressure on the DOJ, a group of Republican ex-prosecutors has urged the department to investigate the contest, citing potential violations of state and federal laws.

They argued that such activities, especially so close to an election, require scrutiny despite a general reluctance among law enforcement to act on election-related matters near voting day.

Their letter underscores the unprecedented nature of the contest in modern US political history, highlighting its potential impact on voter behavior in key battleground states.

As Election Day approaches, the outcome of this legal dispute could have significant implications for Musk’s political influence and America PAC’s operations.

If the DOJ pursues formal action, the case could set a precedent for how electoral laws apply to unconventional voter engagement efforts.

For now, the controversy continues to unfold, with Democrats and legal experts closely monitoring any developments.

Whether Musk’s giveaway will face legal consequences or succeed in reaching its voter targets remains uncertain.

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