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Canada's 2025/26 deficit came in at C$66.9bln, below the C$78.3bln Nov forecast. GDP growth trimmed to 1.1% for 2026. Tariffs seen keeping output 1.6% below pre-tariff path by 2029.

Summary:

• The 2025/26 federal deficit came in at C$66.9 billion, well below the C$78.3 billion forecast from November 2025
• Improvement was driven by spending restraint and higher crude oil export revenues
• Real GDP growth forecast for 2026 cut to 1.1% from 1.2%; 2027 trimmed to 1.9% from 2.0%
• The ministry warned the economy is not expected to return to its pre-tariff level, remaining about 1.6% below the 2024 autumn outlook by 2029
• Deficit forecasts for 2026/27 through 2029/30 left virtually unchanged at C$65.3bln, C$63.1bln, C$57.7bln and C$56.2bln respectively
• Federal debt-to-GDP ratio for 2025/26 revised down to 41.1% from 42.4% in November, but expected to edge higher to 41.9% by 2028/29

Canada's federal government posted a smaller budget deficit than expected for the 2025/26 fiscal year and slightly trimmed its growth forecasts, painting a picture of modest fiscal improvement set against a deteriorating economic outlook shaped by US tariffs.

The spring economic statement, released by the finance ministry on Tuesday, put the 2025/26 deficit at C$66.9 billion, a significant improvement on the C$78.3 billion shortfall pencilled in during the November 2025 budget. Officials attributed the better outcome to a combination of spending discipline and higher revenues from crude oil sales, reflecting Canada's continued reliance on its energy sector as a fiscal backstop.

Despite the headline improvement, the statement carried a cautious tone on growth. Real GDP is forecast to expand by just 1.1% in 2026, down from the 1.2% expected in November, and by 1.9% in 2027, trimmed from 2.0%. Forecasts for 2028 and 2029 were left at 1.9%, though the 2029 figure represented a downward revision from 2.0% previously.

The most pointed warning in the document concerned the lasting impact of US tariffs. The ministry stated that real GDP is not expected to return to its pre-tariff trajectory, and will remain approximately 1.6% below the level projected in the autumn 2024 outlook by 2029. That is a substantial permanent shortfall and reflects the scale of disruption that trade tensions with Washington have introduced into Canada's medium-term planning.

Forward deficit projections were left largely intact. The shortfall for 2026/27 is seen at C$65.3 billion, followed by C$63.1 billion in 2027/28, C$57.7 billion in 2028/29 and C$56.2 billion in 2029/30. A figure for 2030/31 of C$53.2 billion was also released. The gradual narrowing reflects a slow consolidation path rather than any urgent push toward balance.

On debt sustainability, the government offered some reassurance. The federal debt-to-GDP ratio for 2025/26 was revised down to 41.1% from the 42.4% forecast in November, with the ratio for 2026/27 also revised lower to 41.5% versus the prior estimate of 43.1%. The ministry projects the ratio will rise only marginally to 41.8% in 2027/28 before stabilising, suggesting the debt burden is seen as broadly manageable even under the revised growth assumptions.

The statement stops well short of a full budget and offers no major new spending measures. It serves mainly as a recalibration of Canada's fiscal and economic position as the government navigates an external environment that Ottawa acknowledges has fundamentally altered the country's growth prospects.

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The statement is broadly neutral to mildly positive for Canadian assets. The smaller-than-expected 2025/26 deficit and improved debt-to-GDP readings offer some reassurance on fiscal discipline, which could provide modest support for the Canadian dollar and government bonds. However, the downward revisions to GDP growth and the explicit acknowledgement that the economy will remain roughly 1.6% below its pre-tariff trajectory by 2029 are a drag on sentiment. The near-flat deficit path through to 2030/31 signals Ottawa is not pursuing aggressive fiscal consolidation, which limits any meaningful bond rally. Energy revenues provided a partial offset this year, but their reliability as a buffer depends on oil prices remaining supportive. Overall, the statement is unlikely to shift market positioning significantly.

Japan March 2026 jobs data.

Unemployment rate 2.7%

• expected 2.6%, prior 2.6%

Job-To-Applicant Ratio 1.18

• expected 1.19, prior 1.19

Still to come:

• BOJ expected to hold rates steady as Iran conflict complicates tightening path

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Markets are balancing extended ceasefire hopes with strong US data and upcoming UK CPI, as traders watch yields, oil, and Middle East headlines for direction.

The US 500 index continues its upward momentum and has reached a new all-time high. The US 500 forecast for today is positive.

US 500 forecast: key takeaways

• Recent data: US industrial production fell by 0.5% in March
• Market impact: the data is negative for the US stock market

US 500 fundamental analysis

The US industrial production figures look negative for the US 500 index, as the actual reading was significantly worse than expected: a decline of 0.5% versus a forecast for a 0.1% increase. The downside is reinforced by the fact that the previous reading was +0.7%, suggesting the market is seeing not just a weak print, but a sharp shift from growth to contraction in industrial activity.

This could put pressure on the US 500, as the index comprises a broad range of major US companies, and a deterioration in manufacturing activity typically heightens concerns about an economic slowdown, weaker corporate revenues, and worse future financial results.

US 500 technical analysis

Volatility in the US 500 remains elevated, but the uptrend is still fairly strong. A resistance level has formed near 7,155.0, with the key support level at 6,810.0. If the rally resumes, the next upside target could be 7,260.0.

The US 500 price forecast considers the following scenarios:

• Pessimistic US 500 forecast: a breakout below the 6,810.0 support level could send the index down to 6,630.0
• Optimistic US 500 forecast: a breakout above the 7,155.0 resistance level could drive the index up to 7,260.0

Summary

Overall, the release is a negative signal for the US 500 and the US stock market, as it points to weakening industrial activity and increases the risk of a broader economic slowdown. The main pressure may fall on cyclical sectors, including industrials, materials, energy, and parts of the financial sector. At the same time, technology and defensive companies could show more resilient performance if investors begin to factor in the probability of a more accommodative Federal Reserve stance. From a technical perspective, the US 500 index could rise towards 7,260.0.

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Halliburton: ⬆️ Buy – Halliburton reversed from support area – Likely to rise to resistance level 38.70 Halliburton recently reversed from the support area between the key support level 36.00 (former resistance from February), support trendline of daily up channel.

The Pentagon is in talks with US automakers and manufacturers to boost weapons production as conflicts in Ukraine and Iran deplete stockpiles, in a push to expand the defence industrial base, WSJ reports.

Summary:

• The Pentagon is exploring partnerships with major US manufacturers, including automakers, to boost weapons production.
• Talks with companies like GM and Ford are preliminary but reflect growing concern over depleted munitions stockpiles.
• The push is framed as a national security priority, with officials seeking to expand the defence industrial base.
• Conflicts in Ukraine and Iran are accelerating the need for increased production capacity.
• The initiative echoes WWII-style industrial mobilisation and a broader “wartime footing” for manufacturing.
• Challenges include contracting hurdles and how quickly commercial firms can pivot to defence output.

The Pentagon is in early-stage discussions with major US manufacturers, including leading automakers, as it looks to expand weapons production capacity amid mounting strain on military stockpiles, according to a Wall Street Journal (gated) report.

Senior defence officials have engaged executives from companies such as General Motors and Ford, as well as industrial groups including GE Aerospace and Oshkosh, to explore whether commercial manufacturing capabilities can be redirected toward defence needs.

The outreach reflects growing concern within the US government that existing defence contractors alone may not be sufficient to meet rising demand for munitions and military hardware. Prolonged conflicts in Ukraine and Iran have accelerated the depletion of weapons inventories, increasing urgency around scaling up production.

Officials are seeking to understand how quickly manufacturers could shift capacity toward defence output and what obstacles they might face, including procurement rules and contracting complexity. The discussions remain broad and exploratory, but signal a strategic effort to tap into America’s wider industrial base.

The initiative is part of a broader push by the Trump administration to place US military production on what has been described as a “wartime footing.” It also revives a historical model of industrial mobilisation, drawing comparisons to World War II when US automakers pivoted from civilian production to military equipment as part of the “Arsenal of Democracy.”

While some large manufacturers already maintain limited defence-related operations, their involvement is typically narrow in scope. Expanding their role would represent a significant shift in how the US defence sector sources production capacity, potentially increasing resilience but also introducing new coordination challenges.

The Pentagon’s latest budget request—its largest on record—underscores the scale of the effort, with substantial investment planned for munitions and emerging technologies such as drones and counter-drone systems.

Ultimately, the success of this strategy will depend on whether commercial firms can integrate into defence supply chains quickly enough to address current shortages while maintaining efficiency in their core businesses.

Signals potential upside for US industrials and defence-adjacent sectors, with broader manufacturing pulled into military supply chains. Highlights sustained demand for munitions and defence hardware amid prolonged geopolitical tensions.