Good enough

Good morning. For the first time ever, Canada is on to the round of 16 in the World Cup after a thrilling late-game goal by Stephen Eustáquio gave them a 1-0 win over South Africa. 

And if you think you know how the rest of the tournament is going to go, there’s still time for you to complete your Knockout Challenge bracket — we’ve given everyone full points for yesterday’s game, so you have until the next matches start at 1pm ET today to fill in your predictions.

Today’s reading time is 5½ minutes.

Markets this week: An abbreviated week — the TSX is closed on Canada Day and U.S. markets shut on Friday for Independence Day — doesn’t mean no news in markets. Bending Spoons, an Italian tech conglomerate, and Lime, the Uber-backed e-bike and scooter sharing app, will go public this week, and investors will be hoping for a bounce-back from last week’s sell-off triggered by AI bubble nerves.

You may not be able to access Anthropic’s best AI model anymore, but open-source alternatives from China appear to be catching up.

What happened: GLM 5.2, a new open-source AI model released earlier this month by the Chinese startup Z.ai, has quickly climbed leaderboards that chart how often different LLMs are being used. It’s also performed well on benchmark rankings that attempt to compare the capabilities of different models.

What they’re saying: One respected industry observer called GLM 5.2 a “step change” in capabilities and the first “open weight model that feels right in coding harnesses as a general agent.” 

Why it matters: GLM 5.2 may be the first open-source LLM that’s a realistic option for businesses to use. It may not be as powerful as the best closed models offered by Anthropic, OpenAI, and Google DeepMind, but it may be good enough — and it’s much cheaper.

Our take: As open-source models improve, it’s very likely the U.S. government will attempt to limit their usage, particularly for those made in China. It’s difficult to imagine a scenario where the White House blocks the latest releases from American AI labs while permitting unrestricted access to Chinese alternatives.

Iran and the U.S. traded blows over the Strait of Hormuz. Both sides alleged that the other violated the terms of the memorandum of understanding (MOU) that formed the basis of the recent ceasefire. Iran fired on a ship it said was using an unauthorized route to pass through the strait, and the U.S. retaliated with strikes on Iranian military installations. The two countries will reportedly stop attacking each other while their officials meet in Qatar tomorrow. (Axios)

Big Tech’s AI spending could end in a long bust, according to the BIS. The Bank for International Settlements (BIS), which advises the world’s central banks, warned in its annual report that disappointing returns on investments in AI “could trigger a sudden pullback in financing and turn the capex [capital expenditure] boom into a protracted investment bust, with potential knock-on effects on financial conditions.” The BIS also flagged that households have more exposure to the stock market than ever before, which means a sharp pullback in equities could drag down other parts of the economy. (BIS)

The U.S. cleared Anthropic to release Mythos 5 to some users. The list of “trusted partners” was not disclosed but reportedly includes more than 100 U.S. entities, including any foreign national employees. Last week, OpenAI released its latest model to a set of users approved by the U.S. government. Fable 5, Anthropic’s model that was released to consumers, is still restricted. (Semafor) 

📡 What else is on our radar: 

🤝 First trilateral CUSMA review. While we’re flipping burgers and cracking open a few cold ones, Canada’s trade negotiators will be engaged in talks with their Mexican and American counterparts on July 1 to review CUSMA, the first trilateral meeting on the matter involving officials from all three countries. All three countries will need to decide by that day whether they want to renew the deal as-is for 16 years, start an annual review process, or cancel the agreement altogether. It’s likely that the U.S. will opt for annual reviews and further negotiations on a new deal, but there’s also a possibility they announce plans to withdraw altogether.

🛢️ Alberta pipeline proposal expected. The province has said it will submit a plan to build a new pipeline to the Major Projects Office by Wednesday. Alberta officials have said the pipeline will carry one million barrels of oil per day from the province’s oilsands to the west coast, but details beyond that are scant — including, importantly, what the proposed route will be and whether there will be enough private-sector buy-in to make the project commercially viable.

📊 New GDP numbers. Analysts expect data from Statistics Canada arriving tomorrow to show the economy grew slightly in April after two straight quarters of stagnation. Increased activity in the housing market and a jump in employment in May are both signs of a bounceback, which (if it materializes) would settle the debate about whether Canada is in a technical recession.

Germany’s automakers are getting crushed by Chinese competitors, and some are worried it’s a bleak preview of what could be in store for North America’s auto sector in the not-so-distant future.

Catch up: Volkswagen is considering a dramatic restructuring that would see it close four of its German plants and lay off as many as 100,000 of its roughly 625,000 workers. BMW and Mercedes-Benz have also warned that they will need to embark on cost-cutting efforts to cope with intensifying competition from Chinese automakers. 

Why it matters: Industry observers see Canada as a possible beachhead for Chinese automakers to break into North America’s auto market — potentially with the same devastating impact on America’s Big Three automakers. 

Yes, but: The U.S. is likely to insist on keeping Chinese-made vehicles out of the North American market as part of a new CUSMA deal — it’s one of the few things Republicans and Democrats can agree on. 

What’s next: Industry Minister Mélanie Joly has met with Chinese automakers to explore setting up joint ventures to make cars in Canada. But even that may be too far for the U.S. — last week it banned the sale of Polestar vehicles, despite some models being built in the U.S., under a law restricting the sale of cars with hardware and software connected to China.

🌡️ 191 million. The number of people in Europe who faced temperatures of at least 35C yesterday. The continent has been sweltering under a brutal heat wave for more than a week and new heat records have been set in multiple countries. France’s public health agency reported 1,000 excess deaths between June 24 and June 27, but officials warned that number was likely to rise. 

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And now time to hit the games table: here’s today’s mini-crossword, sudoku, Codebreaker, and Who’s Who.

Plus: Enter your Knockout Challenge bracket before the next batch of World Cup games start at 1pm ET today.