The Toronto Stock Exchange slumped Wednesday as the Iran war's impact on oil prices and the ongoing uncertainty around the Trump Administration's trade policies continue to weigh, even if Canadian investors appear to be positive on domestic market fundamentals.
The S&P/TSX Composite Index closed down 249. points to 34,041.43, falling for the first of four sessions, even with sectors mixed and with the Battery Metals Index, up 4.4%.
Base Metals was up 1.5% as gold edged higher by midafternoon Wednesday even as the dollar rose after a report showed U.S. wholesale inflation surged in April. Gold for June delivery was up US$17.90 to US$4,704.60 per ounce.
West Texas Intermediate crude oil closing lower, although it did stick above US$100, as the loss of Persian Gulf supply since the start of the war on Iran cuts into stocks, with the International Energy Agency (IEA) reporting a record draw down in inventories since the conflict began. WTI crude oil for June delivery closed down US$1.02 to settle US$101.02 per barrel, while July Brent oil was down US$1.98 to US$105.79.
Reflecting a view that the outlook for markets in Canada is largely conditional on external matters, Tiago Figueiredo, a Macro Strategist at Desjardins, said the April summary of monetary policy deliberations by the Bank of Canada for the policy decisions announced two weeks earlier "underscored a conditional policy stance", with the Governing Council prepared to look through energy-driven inflation so long as broader price pressures remain contained. Governing Council was much more explicit their reaction function would be conditional on the trajectory of oil prices and developments on U.S. trade policy, he added.
In the base case, members judged that a policy rate close to current levels would likely remain appropriate, Figueiredo noted. "Central bankers agreed that they had the scope to be patient for now, but the situation could change quickly and they would need to be nimble in their response to events. This assessment is broadly in line with our view that, although uncertainty is elevated, the most likely path forward is that policymakers remain on hold this year," he said.
Meanwhile, an RBC Economics 'Insight' said Canadian consumers have proven "remarkably resilient" over the past year despite trade wars, immigration cuts, and persistent economic uncertainty. "Household spending remained a steady engine of growth with RBC cardholder transactions suggesting that resilience extended into Q1 2026 even as a significant new shock hit the economy -- at gas pumps," the bank added.
