Mining & Metals
TSX Closer: Index Ends Higher as Inflation Jumps, Oil Retreats
The Toronto Stock Exchange closed higher on Monday as investors weighed stronger-than-expected inflation data alongside easing geopolitical tensions in the Middle East.The S&P/TSX Composite Index closed up 144.84 points, or 0.42%, to 35,002.18, with utilities and energy stocks providing the biggest lift.Energy led gainers, up 1.12%, with Industrials, Utilities, and Financial, up 0.24%, 0.36% and 0.34%, respectively. Telecom led decliners, down 1.87%, with Health Care, down 0.22%, Battery Metals Index, down 0.84%, Base Metals, down 0.65%, and Information and Technology, down 0.55%.In commodities, gold traded lower on Monday as the U.S. dollar climbed to its highest level in more than a year. The yellow metal for December delivery was last seen down 0.9% to US$4,206.80 per ounce.For oil, West Texas Intermediate (WTI) closed at the lowest in more than three months on Monday on reports that talks between Iran and the United States are progressing, raising hopes the Strait of Hormuz could fully reopen and allow Persian Gulf energy exports to flow more freely, while the United States lifted sanctions on Iran's oil exports. WTI crude oil for July delivery closed down 2.3% to settle at US$74.82 per barrel, the lowest since March 4, while August Brent oil was last seen down 3.6% to US$77.70.Meanwhile, Statistics Canada reported stronger-than-expected inflation data for May, driven largely by higher energy costs.Canada's consumer price index (CPI) accelerated to 3.2% year over year in May, exceeding expectations, as higher energy prices contributed to inflation, Statistics Canada said Monday."Higher prices for gasoline continued to drive the acceleration in the headline CPI in May," StatsCan wrote in a statement, adding that excluding gasoline, CPI would be at 2.2% year over year. However, May's CPI was stronger than the 3.0% year-over-year consensus figure provided by Scotiabank Economics.Prices for food, such as fresh fruit and vegetables, travel tours and air transportation accelerated, while housing remained a drag, added StatsCan. Shelter inflation eased slightly in May, with prices rising 1.7% year over year following a 1.8% increase in April.May's CPI is the highest rate since September 2023, due to soaring gasoline prices, which rose 33% year over year as a result of the closure of the Strait of Hormuz, noted National Bank. "Despite the fact that inflation came in higher than expected in May, we are not overly concerned about the inflation situation in Canada," National Bank economists Matthieu Arseneau and Alexandra Ducharme wrote.Stripping out food and energy, inflation remained well contained at 1.6% year over year in May, compared with 1.5% a month earlier, the two economists added, emphasizing that core inflation remains "generally contained".Additionally, bond yields were steady to slightly higher after Canadian inflation accelerated on Monday, while TD Economics said the country's central bank is likely to remain on the sidelines for some time. "Apart from energy costs and some emerging tech price pressures inflation remains very well behaved in Canada, as a relatively soft demand backdrop leans against sellers raising prices," wrote TD Senior Economist Leslie Preston in a note. "We expect this to keep the Bank of Canada on the sidelines for quite some time."CIBC Economics similarly said the jump in inflation was unlikely to alter the Bank of Canada's policy outlook.Canadian inflation picked up again in May, but with oil and gasoline prices down from earlier highs, the latest reading is likely to mark the peak giving the central bank space to hold rates this year, CIBC said.The headline reading was "a couple of ticks" above the consensus, CIBC said. "Once again, gasoline was the main source of inflationary pressure, and excluding that one area the year-over-year rate of CPI would have been a much more modest 2.2%," CIBC's senior economist, Andrew Grantham, said in the note.In contrast, Scotiabank Economics maintained its forecast for Bank of Canada rate hikes beginning later this year.Scotiabank Economics said it continues to expect the Bank of Canada to begin a tightening cycle toward the end of the year, with additional rate increases likely in early 2027. In a note, the bank said its base-case forecast calls for a cumulative 75 basis points of rate hikes over the fourth quarter of 2026 and the first quarter of 2027.Scotiabank noted that it has held this view since November, before the outbreak of the Iran conflict and the resulting surge in commodity prices.Separately, National Bank lowered its outlook for the Canadian economy following weaker-than-expected first-quarter growth.The weaker Q1 reading led National Bank of Canada Capital Markets to lower its 2026 growth forecast to 0.7% from 1.0%. The new estimate is based on the United States-Mexico-Canada, or USMCA, trade agreement being renewed, although trade uncertainty remains the main risk to the outlook, the bank wrote in a note.Canadian GDP shrank by 0.1% annualized in the first quarter, following a 1.0% drop in the previous quarter, putting the economy in a technical recession.Besides, Canada on Monday released a new Nuclear Energy Strategy aimed at boosting the country's nuclear industry, with plans to support up to 10 new reactor builds and increase exports of Canadian reactor technology, CTV News reported.The strategy focuses on four key areas: new reactor construction, nuclear exports, uranium and fuel development, and innovation in nuclear technologies, the report added.
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