The Toronto Stock Exchange closed sharply higher on Thursday, as investors assessed mixed economic data and the Bank of Canada's policy outlook, while a rebound in gold prices after U.S. President Trump said he's near a deal to end the war on Iran helped offset weakness in several heavyweight sectors.
The S&P/TSX Composite Index closed up 520.14 points, or 1.52%, to 34,671.46, with most sectors finishing higher on Thursday.
Base Metals led gainers, up 6.39%, with Information and Technology, up 1.34%, Utilities, up 0.35%, Telecom, up 0.29%, Industrials, up 0.19%, Financial, up 1.14%, and Health Care, up 0.38%. Battery Metals Index led decliners, down 3.16%, while Energy closed down 0.14%.
The latest construction data pointed to a broad-based slowdown in development activity, with both residential and non-residential projects weighing on overall building intentions.
The total value of building permits issued in Canada fell $1.0 billion, or 7.6%, month over month, to $12.5 billion in April, as both the non-residential sector and the residential sector contributed to the decline in construction intentions, said the country's statistical agency on Thursday.
April's slip was more than twice the 3% month-over-month drop estimated by the Bank of Montreal. On a constant dollar basis, the total value of building permits issued in April declined 7.7% from the previous month and was up 2.7% on a year-over-year basis, said Statistics Canada. The value of non-residential building permits fell $585.9 million to $5.0 billion in April.
In commodities, gold rose off a six-month low on Thursday, rising for the first time in five sessions after U.S. President Trump said he canceled planned attacks on Iran and talks between the two may be resuming. Gold for July delivery was last seen up US$10.00 to US$4,143.30 per ounce, rising off the lowest since Nov. 24 and recovering from session lows of US$4,046.20.
Meanwhile, West Texas Intermediate (WTI) crude oil closed lower on Thursday, falling off session highs after Trump's comments. WTI oil for July delivery closed down US$2.32 to settle at US$87.71 per barrel, falling off a session high of US$93.64, while July Brent oil was last seen down US$2.86 to US$90.24.
The Bank of Canada held rates at 2.25% at Wednesday's policy meeting and kept the policy rate at the lower end of its estimated neutral range of 2.25%-3.25%, UBS said. While communications were little changed, the BoC acknowledged more plainly the "policy dilemma" caused by weakening economic activity and rising inflation. With the outlook remaining uncertain, UBS expects the central bank to remain on hold this year and believes the balance of risks could even be tilted toward rate cuts rather than hikes, depending on how the economy evolves.
In Governor Tiff Macklem's opening remarks, he made it clear that "holding the policy rate unchanged balances those risks", referring to downside growth risks and upside inflation risks, noted Rosenberg Research.
However, the Canadian dollar should remain vulnerable since it will take a lot more to knock United States traders from the view that the Federal Reserve will be hiking rates sooner rather than later, according to Rosenberg.
Macklem's commentary was largely consistent with what was outlined at the April policy meeting, noted David Doyle, head of economics at Macquarie Group. As the governor did in April, Macklem referred to the potential for "consecutive increases" in the policy rate should energy prices remain elevated. Macquarie continues to anticipate the BoC's next move to be a rate hike, with the baseline timing in September 2026. Doyle added that the expectation for labor market improvement and stronger growth momentum informs this view.
Policymakers remained sanguine on inflation, citing improvement in core inflation measures and limited evidence of broad-based spillovers from higher energy prices. The BoC also reiterated that it would look through the Iran war's near-term impact on inflation, said Nomura, adding that, overall, downside risks to growth remain elevated while price pressures appear contained. The bank continues to expect the BoC to remain on hold through 2026.
The BoC's decision to keep rates unchanged reinforced Bank of Montreal's (BMO) view that rates will likely be at this level through 2026.
BMO, noting the BoC's policy dilemma, said: "Raising rates to dampen inflation could further slow the economy. Easing rates to support growth increases the risk that higher inflation becomes persistent. For now, holding the policy rate unchanged balances those risks."