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TSX Closer: Index Drops as Financial, Mining Losses Outweigh Energy Surge; US-Iran Fighting Hikes Inflation Fears

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The Toronto Stock Exchange dropped on Wednesday as losses in financial and mining shares outweighed a sharp rise in energy stocks, while renewed fighting between the US. and Iran fueled inflation concerns and weighed on investor sentiment.

The S&P/TSX Composite Index closed down 336.79 points, or 0.95%, to 34,935.80, with a majority of sectors ending lower.

Energy led gainers, up 3.78%, with Telecom and Utilities, up 0.31% and 0.98%, respectively. Battery Metals Index led decliners, down 5.56%, while Financial, down 1.86%, Base Metals, down 2.01%, Industrials, down 0.42%, Information and Technology, down 0.71% and Health Care, down 0.04%.

In commodities, gold traded lower on Wednesday as renewed fighting between Iran and the U.S. boosted oil prices and the dollar, reviving inflation fears that weighed on the precious metal. Gold for August delivery was last seen down $80.90, or 2%, to $4,076.50 per ounce, the lowest since June 30.

Meanwhile, West Texas Intermediate (WTI) closed higher on Wednesday as the US. and Iran traded attacks, with President Trump saying the ceasefire deal reached last month is over. WTI crude oil for August delivery closed up $3.08, or 4.4%, to settle at $73.52 per barrel, the highest since June 18, while September Brent oil was last seen up $3.80, or 5.1%, to $77.96.

However, despite renewed fighting, ships trapped in the Persian Gulf since the start of the war have continued to move through the Strait of Hormuz, with hormuzstraitmonitor.com reporting 25 ships moved through the waterway in the past day.

Investors also weighed a weaker outlook for the Canadian economy. The International Monetary Fund on Wednesday trimmed its Canadian economic growth forecasts for this year and 2027 on slower population growth, weak investment and trade uncertainty.

These headwinds continue to outweigh the support provided by stronger terms of trade and resilient household consumption, wrote the IMF in its latest World Economic Outlook. The IMF now predicts Canada's economy will expand 1.1% this year and 1.7% in 2027, down from 1.5% and 1.9% estimated respectively in April.

The country's economy grew 1.9% last year. Stronger 2027 growth depends on effective policy implementation and a firmer private investment response, added the IMF.

In currency markets, the outlook for the Canadian dollar also remained in focus. Deutsche Bank said it is now taking profits on the USD/CAD long position, which has returned around 3.5% on the investment, while maintaining a negative view on the Canadian dollar.

"USD/CAD has only been higher than this in three episodes in the past 20 years," Tim Baker, Deutsche Bank macro strategist, wrote in a note on Wednesday. However, much of the move has been driven by broad U.S. dollar strength and Baker added he doesn't expect the current greenback rally to extend.

Deutsche Bank's outlook remains skewed toward USD/CAD moving to C$1.40 rather than back to the mid-C$1.30s, given limited downside potential.

Additionally, Canadian bank shares are over-valuing future growth and potential upside, said Jefferies on Wednesday. Except for Scotiabank (BNS.TO) and EQB (EQB.TO), all Canadian Banks are trading at an NTM P/E valuation above their respective historical peaks since 2005, Jeffries director of research John Aiken wrote.

Bank ROEs currently average 14.6%, compared with their historical average of 15.4%. Aiken found that near-to-medium ROE is currently the strongest driver of relative valuations, rather than EPS growth.

In corporate news, Air Canada (AC.TO) announced a leadership change, naming a new chief executive to succeed retiring CEO Michael Rousseau. The airline named Anko Van der Werff as president, chief executive officer and board member, effective by the end of January 2027. Van der Werff is replacing Rousseau, who previously announced his retirement after 19 years with Air Canada, the airline company said Wednesday.

Air Canada said Van der Werff has a 25-year track record and is currently serving as president and CEO of Scandinavian Airlines. Rousseau's retirement is effective Aug. 31. During the transition period, the executive committee will report to the board of directors, Air Canada said.

Besides, a new survey pointed to a positive hiring outlook among Canadian employers, even as recruitment challenges persist.

Nearly three quarters of a survey of 508 Canadian hiring managers feel positive about their company's hiring outlook for the remainder of 2026, with 43% of companies planning to boost the number of employees. However more than eight in 10 managers anticipate challenges in filling positions, with 45% citing difficulties with finding qualified candidates, the survey, conducted on behalf of staffing company Express Employment International, highlighted.

A similar survey conducted last year had 67% of participants feeling positive about hiring with 44% planning to hire more.

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