The Toronto Stock Exchange rose on Thursday as strong gains in base metals and financial shares helped lift the benchmark index, while investors assessed the outlook for interest rates and the Canadian economy ahead of Friday's jobs report.
The S&P/TSX Composite Index closed up 264.65 points, or 0.76%, to 35,200.45, with sectors closing mixed.
Base Metals led gainers, up 3.41%, with Industrials, Information and Technology, and Financial, up 0.06%, 0.49%, and 1.01%, respectively. Battery Metals Index led decliners, down 2.42%, while Health Care, down 0.54%, Utilities, down 0.58%, Energy, down 1.29%, and Telecom, down 0.16%.
In commodities, gold traded higher on Thursday as the dollar and yields fell, but remained rangebound as inflation worries again heightened with oil prices rising earlier in the day on renewed fighting between the U.S. and Iran.
The precious metal for August delivery was last seen up $58.90, or 1.4%, to $4,141.30 per ounce. The price of the metal has hovered above the $4,000 mark for the past two weeks, staying well under its Jan. 29 record high of $5,354.90.
Meanwhile, West Texas Intermediate (WTI) crude oil closed lower on Thursday even as fresh friction between the U.S. and Iran threatens to keep the Strait of Hormuz closed, again shutting in tankers bringing Persian Gulf supply to the market. WTI crude oil for August delivery closed down $1.44, or 2%, to settle at $72.08 per barrel, while September Brent oil was last seen down $1.72, or 2.2%, to $76.30.
In currencies, The Canadian dollar has edged higher this week thanks to stronger oil prices, but remained range-bound ahead of this week's Labour Force Survey (LFS), Corpay said in a note on Thursday.
The LFS report, due Friday, is expected to show a slowdown in job creation and a stabilization in the unemployment rate in June, following an unexpectedly strong performance in the previous month, Karl Schamotta, Corpay's chief market strategist, wrote.
Additionally, the guidance for the Canadian dollar will depend heavily on whether US-Canada rate differentials begin to narrow, according to TD Economics. TD's base case is that moderating U.S. inflation and slower growth will allow the Federal Reserve to gradually cut rates toward 3.25% in 2027, reducing the appeal of US. dollar assets and providing support for the Canadian dollar, the bank wrote in a Thursday note.
"The main risk is that the U.S. economy proves strong enough to keep those rate differentials wider for longer," wrote Andrew Hencic, director and senior economist at TD note. A resilient U.S. economy could limit Fed easing, while stronger American productivity growth may keep the neutral rate higher than in Canada.
Looking ahead, this week's LFS for June will provide another update on Canada's jobs market, but National Bank of Canada Capital Markets said it doesn't expect the data to significantly alter the Bank of Canada's outlook.
With ongoing uncertainty around United States-Mexico-Canada Agreement negotiations weighing on the economy, a broad-based recovery is unlikely in the near term in Canada, wrote National Bank. As a result, the BoC is expected to maintain a balanced policy stance, leaving both rate hikes and cuts on the table.
With growth subdued and inflation pressures contained, market pricing has pushed the timing of rate hikes further out, added National Bank.
Turning to the auto sector, Canadian vehicle sales are expected to ease this year before recovering in 2027.
Canadian light vehicle sales are forecast to be slightly lower this year before improving in 2027, although the outlook remains highly uncertain with risks stemming from volatile oil prices and U.S. trade policy, according to Scotiabank Economics.
Canadian light vehicle sales are expected to reach 1.86 million units in 2026, or 1.6% less than the previous year, with demand remaining broadly stable through mid-year before recovering to 1.9 million units in 2027, wrote the bank in a note.
In line with this forecast, Canadian light vehicle sales increased 1.6% on the month in June to a seasonally adjusted annualized rate of 1.9 million units, according to Omdia, marking the fourth rise in five months, said Scotiabank.