Morning Markets for Friday, Feb. 27, 2026

Key Concepts

• Canadian GDP: Contraction in Q4 2025, slowest annual growth since 2020 (1.7%).
• Bank of Canada: Unlikely to cut rates without sustained economic weakness.
• Canada-China Trade: China halting tariffs on Canadian canola in exchange for Canada cutting tariffs on Chinese EVs (details uncertain - ~15% reduction hinted).
• AtkinsRéalis: Q4 revenue & profit beat expectations, but stock down due to investor concerns about outlook despite strong nuclear backlog.
• Market Performance: TSX and US markets down, tech sector driving declines.
• KUZMA: Critical exemption shielding Canadian exports to the US from new tariffs.
• Canada-US Trade: Focus on renegotiating trade agreements, potential for auto pact, Buy American exemptions.
• India-Canada Relations: Prime Minister’s trip to India to reset diplomatic ties, focus on trade, energy, and addressing concerns about foreign interference.
• Nuclear Energy: Significant growth potential for AtkinsRéalis, driven by backlog and potential projects in Canada and Poland.

Canadian Economic Performance & Monetary Policy

Canada’s economy contracted by 0.6% in the fourth quarter of 2025, according to Statistics Canada (Statscan). This decline was primarily driven by a sharp decrease in business inventories, partially offset by increased household spending and exports. Overall GDP growth for 2025 was 1.7%, the slowest pace since 2020. Preliminary estimates suggest real GDP remained unchanged in January.

Clare Fan, Senior Economist at RBC, noted that despite the decline, the Canadian economy demonstrated resilience, considering headwinds like slowing population growth and trade shocks. She believes the Bank of Canada is unlikely to cut rates unless there is sustained weakness in the economy or labour market. The Bank of Canada’s current rate is borderline stimulatory at 2.25%. The Q4 decline was slightly weaker than the Bank anticipated, but not enough to trigger a rate cut.

International Trade Developments

China will begin halting tariffs on Canadian canola next week, following Prime Minister’s visit to China in January. This is part of a deal where Canada will reduce tariffs on Chinese electric vehicles (EVs). The extent of the tariff reduction on canola is still uncertain, with estimates around 15%.

The importance of the KUZMA (United States–Mexico–Canada Agreement) exemptions was highlighted, shielding approximately 90% of Canadian exports to the US from new tariffs, including the recently imposed 10% tariffs threatened to be raised to 15%. This is a key factor in maintaining Canadian economic stability.

Company Specific News: AtkinsRéalis

AtkinsRéalis reported fourth-quarter revenue and profit exceeding expectations. However, the stock price declined due to investor concerns. A higher-than-expected lump-sum project loss and a miss on capital revenue contributed to the negative reaction. Despite this, AtkinsRéalis boasts a record-high backlog, driven by strong demand for its services and nuclear products. The company’s nuclear sector is experiencing 29% year-over-year growth, fueled by a backlog increase of over 50%. Potential future projects in Ontario and Poland could significantly boost the company’s earnings, potentially adding $3.5 billion in cumulative EBITDA (excluding the Polish opportunity).

Market Overview

The TSX is experiencing a down day after a strong week, currently down 0.55%, with the tech sector being the primary driver of the decline. US markets are also down: the S&P 500 is off by 0.54%, the Dow by over a point, and the NASDAQ by 0.7%.

Canada-US Relations & Trade Policy

Conservative Leader Pierre Poilievre outlined his vision for Canada-US relations, advocating for a new tariff-free auto pact, an end to sectoral tariffs, and a full exemption from Buy American provisions. He also criticized Prime Minister’s approach to trade diversification, warning against swapping dependence on the US for dependence on China. He used strong language criticizing US President Trump.

Dominic LeBlanc, the Liberal Minister leading trade negotiations, provided an update on talks, indicating bilateral arrangements will be pursued alongside the broader trilateral trade agreement.

Canada-India Relations

Prime Minister is currently in India to strengthen diplomatic ties and explore trade opportunities. Discussions will focus on energy, education, technology, crime, and immigration. India is seeking alternative energy sources, potentially creating opportunities for Canadian energy exports. However, the trip is occurring amidst concerns about foreign interference and allegations of Indian involvement in the killing of Hardeep Singh Nijjar in Canada. The government has stated it believes India is no longer actively involved in such activities, a claim that has drawn criticism from the Sikh community and calls for clarification.

Commodity Markets & Energy

Helima Croft, Head of Global Commodity Strategy at RBC Capital Markets, discussed the potential impact of a US strike on Iran on oil prices. She highlighted Iran’s ability to disrupt oil transport through the Strait of Hormuz and attack energy infrastructure in the region. She noted that Saudi Arabia is the only country with significant spare capacity to offset potential supply disruptions, but even that capacity is limited. The US Strategic Petroleum Reserve (SPR) has not been fully replenished, reducing its ability to act as a shock absorber.

Synthesis/Conclusion

The Canadian economy faces headwinds with a recent GDP contraction, but demonstrates resilience. International trade is a key focus, with efforts to diversify beyond the US and renegotiate agreements. AtkinsRéalis shows promise in the nuclear sector, despite short-term investor concerns. Canada is actively working to navigate complex geopolitical relationships with both the US and India, balancing economic interests with security concerns. The global energy market remains vulnerable to disruptions, highlighting the importance of diversified supply and strategic reserves.