The S&P/TSX Composite Index fell on Monday as a decline in financial shares outweighed gains in technology, while investors assessed softer-than-expected Canadian inflation data and ongoing geopolitical tensions in the Middle East.
The index closed down 303.53 points, or 0.9%, at 34,960.32, with mixed sectors. Information Technology led gainers, up 0.7%, while Financial led decliners, down 1.9%.
In commodities, gold was steady on Monday, holding above $4,000 despite a stronger US dollar and rising bond yields. The precious metal for August delivery was last seen down $8.80 to $4,010.00 per ounce.
Gold prices have been buffeted by the rise in oil prices that followed the US war on Iran, raising worries central banks will need to raise interest rates due to energy inflation.
Meanwhile, West Texas Intermediate (WTI) crude oil closed higher on Monday, with continued fighting between Iran and the US offsetting reports that talks between the two countries may resume.
WTI crude oil for August delivery closed up $0.74, or 0.9%, to settle at $83.23 per barrel, while September Brent crude was last seen up $1.08, or 1.2%, to $89.18. The rise comes despite reports that Iran remains open to a negotiated settlement to the war that was launched by the US and Israel on Feb. 28.
On the economic front, investors also weighed the latest Canadian inflation data that showed price pressures eased more than expected in June.
Canada's consumer price index (CPI) rose 2.8% year over year in June, easing from a 3.2% annual increase in May, reflecting a sharp decline in oil prices, said the country's statistical agency on Monday. June CPI was a tad lower than the 2.9% consensus. Excluding gasoline, inflation remained unchanged at 2.2% annually.
"While gasoline prices remained elevated due to the conflict in the Middle East, diplomatic talks and an interim ceasefire arrangement contributed to an easing of global oil prices in June, leading to a 10.2% month-over-month decline," added the Ottawa-based agency.
The non-seasonally adjusted CPI declined 0.4% in June, marking the largest monthly drop since December 2024. On a seasonally adjusted basis, CPI fell 0.1% month over month, the first decline since April 2025.
While higher oil and energy prices, including a recent uptick in gasoline prices, pose some upside risk, excess economic slack continues to weigh on underlying inflation, said Benjamin Reitzes, Canadian Rates and Macro strategist at Bank of Montreal Capital Markets in a note after CPI data.
"This will keep the BoC comfortably on the sidelines, where we expect them to stay through at least the rest of this year," Reitzes wrote.
CIBC, Desjardins, TD Economics and KPMG Canada all forecast Canada's central bank to be on hold for at least this year.
"It looks like we'll be stuck with headline inflation at 3% and core inflation at 2% for some time yet," wrote Ali Jaffery, chief economist at KPMG Canada. "The Bank of Canada can live with that as long as inflation expectations remain manageable, which we expect they will."
Meanwhile, National Bank of Canada said the municipal and local government authority (MLGA) bond market continued to expand in the first half of 2026, supported by robust infrastructure spending and strong investor demand. The bank said MLGA bond issuance topped C$6 billion in the first six months of the year, up about 40% from a year earlier, with full-year supply expected to surpass the record C$8.7 billion issued in 2025.
National Bank added that the sector continues to benefit from strong credit quality, with ratings generally higher and more stable than provincial peers despite rapid supply growth. The bank also said the expanding market is providing investors with a larger pool of high-quality, increasingly liquid securities.
In corporate news, Air Canada (AC.TO) on Monday said it is investing C$13.7 million through a jointly funded Sustainability Co-Investment Platform with Airbus to support a sustainable aviation fuel (SAF) industry in Canada.
Key areas include accelerating a Canadian SAF project toward a final investment decision. While Air Canada and Airbus intend to drive this investment, both companies hope to spur government partners to support large-scale SAF production in Canada.
Additionally, The Canadian Press reported that Enbridge (ENB.TO) started construction on its C$4 billion Sunrise Expansion Program, a natural gas pipeline project in British Columbia that received federal approval in April.
The expansion will increase the province's gas transmission capacity by 300 million cubic feet per day, helping supply liquefied natural gas export terminals on Canada's West Coast while continuing to serve domestic demand, CP reported.