Good morning. The federal government is placing a bet on Europe’s rearmament efforts – a move aimed at deepening alliances and rebuilding industrial muscle. Business leaders say defence spending could be an important driver of Canada’s economic growth. Below, more on how the country’s best economic offence could be a strong defence.
Today’s news
Insurance: Definity Financial Corp. is set to acquire the Canadian operations of U.S. insurance giant Travelers for $3.3-billion, vaulting it into fourth place among property and casualty insurers in Canada.
Energy: A coalition of Alberta landowners and scientists has filed a regulatory appeal against the province’s energy watchdog, arguing that the agency has consistently failed to collect enough money from oil and gas companies to cover the substantial cost of cleaning up orphan wells.
Retail: By the time Hudson’s Bay Co. winds up the last of its liquidation sales this Sunday, the vast majority of its employees – more than 8,300 people – will have been terminated by the company without severance payments.
What else we’re following:
- Bank of Montreal and National Bank of Canada both reported second quarter profit that beat expectations this morning and increased their quarterly dividends by 4 cents.
- Bank of Nova Scotia missed analysts’ profit estimates yesterday, citing higher loan loss reserves.
- Chipmaking giant Nvidia, a bellwether for the AI market and a poster child for Trump’s export restrictions, reports after close.
Donald Trump announced the Golden Dome program last week. Carney said Canada could benefit from joining, but that it would be a military consideration. Economically, joining the EU defence program could open access to new markets.Reuters
In focus
The best offence: A good defence?
As Canada’s entry into the €800-billion “ReArm Europe” plan was touched upon in yesterday’s Throne Speech, executives from Bombardier, ATCO and OMERS told an audience at the Canadian Club in Toronto that increased spending on defence can boost the country’s prosperity and security.
“We’ve been navel-gazing for the past 10 years,” ATCO chief executive Nancy Southern said. “We don’t have any time to waste.”
Canada’s calculus
Prime Minister Mark Carney’s commitment signals a deeper alignment with Europe’s push to expand arms production and reduce reliance on non-European suppliers.
The speech, delivered by King Charles, included mentions of other Liberal election promises such as a middle-class tax cut, an end to interprovincial trade barriers, and fast approvals of major infrastructure projects.
By joining ReArm, the federal government is aligning its defence sector with a European model that emphasizes collective investment and long-term manufacturing.
Why it matters to Bay Street
Canadian companies could benefit from increased access to European supply chains and co-financing for equipment and materials, particularly as the EU expands funding for munitions and logistics hubs.
- (In Canada, Bombardier, ATCO and OMERS have significant exposure to the country’s defence industry, which generated more than $14-billion in revenue in 2022.)
In April, then-foreign affairs minister Mélanie Joly said she expected a defence deal with Europe within a matter of months. Joly, who is now Industry Minister, said the deal could be a boon for Canadian aerospace and artificial intelligence companies.
Stay SAFE
The Throne Speech announcement came just hours after EU ministers finalized a related measure – a €150-billion loan-based fund known as Security Action For Europe – to support joint weapons manufacturing across the continent.
The SAFE program is designed to fund joint defence initiatives across EU countries and aligned partners. While the bulk of financing will remain within the bloc, the European commission left the door open to trusted non-EU contributors. Canadian participation could enable domestic companies to bid on projects tied to shared production goals and procurement frameworks.
The Trump of it all
The move also spotlights NATO’s upcoming summit in The Hague, where U.S. President Donald Trump is expected to demand allies commit 5 per cent of their GDP to defence – more than double the existing guideline. (The Liberal platform vowed dozens of billions in new military spending to reach the current two per cent target by 2030. That pledge was not mentioned in yesterday’s speech.) This June’s summit, typically a three-day affair, has already been shortened to two – a sign of friction over spending and strategic priorities.
What about the Golden Dome?
Still very much a thing! Possibly, maybe. Last week, Carney was non-committal when he said there would be benefits to Canada in joining the White House’s plan for a US$171-billion system to expand defences against missile and ground attacks. The “Golden Dome” missile shield could cement Canada’s military reliance on the U.S. even as it seeks new alliances.
“We are in a position now where we co-operate when necessary, but not necessarily co-operate,” Carney said last week.
A new world
The ReArm initiative forms part of a broader European effort to rebuild military readiness and reduce dependence on U.S. arms exports.
The related loan program is structured to strengthen defence co-operation across the continent and accelerate the buildout of key industrial capabilities, according to the European Commission.
Ursula von der Leyen, the commission’s president, has described it as a “strategic breakthrough” and a response to “today’s harsh realities.”
Liftoff?
At the Toronto event, Bombardier CEO Éric Martel took questions from reporters, including about the impact that tariff uncertainty is having on his company. He said the company is comfortable with the guidance it has provided, and that “our sales keep going in the U.S.”
A reporter then joked: “Have you thought of offering President Trump a plane?”
Martel laughed loudly. “Not an option for now,” he said.
Charted
Debt comes calling
Canada’s four largest telecoms have become increasingly weighed down by a key metric they have relied upon to build their businesses: debt. As intense competition between the large carriers coincides with slower overall sector growth, Irene Galea writes, that weight has become difficult to ignore.
Bookmarked
On our reading list
In the sky: WestJet’s CEO says Ottawa is “fundamentally wrong” to treat air travel as a luxury in a country the size of Canada.
In Japan: 7-Eleven shareholders backed management as the company’s Japanese owner fights Couche-Tard’s takeover bid.
Back to that Golden Dome: Trump can’t build it without Canada.
Morning update
Global shares were steady on promising signs of United States trade talks, while attention was turning to earnings from Nvidia later in the day. Wall Street futures were in the red after yesterday’s sharp rally, while TSX futures followed sentiment lower.
Overseas, the pan-European STOXX 600 slipped 0.22 per cent in morning trading. Britain’s FTSE 100 was down 0.11 per cent, Germany’s DAX gave back 0.13 per cent and France’s CAC 40 edged lower 0.04 per cent.
In Asia, Japan’s Nikkei closed flat, while Hong Kong’s Hang Seng slid 0.53 per cent.
The Canadian dollar traded at 72.36 U.S. cents.
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