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TSX Closer: The Index Falls For a Fifth-Straight Session as the Bank of Canada Stands Pat

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-- The Toronto Stock Exchange closed down for a fifth-straight session Wednesday, with most sectors lower, bar the notable exception of Energy as Scotiabank's Derek Holt said market participants are "chasing higher oil prices oil prices" that are up "on a bet that war may be back on, if it ever subsided".

The S&P/TSX Composite Index closed down 265.95 points, or 0.8%, to 33,318.39,, led lower by the Battery Metals Index, down 4.8%, and Base Metals, down 2.2%. In contrast the S&P 500 was flat to slightly lower, while the Nasdaq was flat to slightly higher.

FactSet noted the index, going in to today, was down 370.77 points, or 1.09%, over the prior four trading days, its longest losing streak since Dec. 31, 2025, when the market also fell for four straight trading days. Month-to-date going in to Wednesday the index was up 2.49%, and year-to-date it was up 1,871.58 points, or 5.9%.

As unanimously expected and priced, the Bank of Canada this morning left its overnight rate unchanged at 2.25%.

But Derek Holt, Head of Capital Markets Economics at Scotiabank, said "markets couldn't really have cared less about the BoC's communications. They're chasing higher oil prices that are on fire." Holt noted WTI and Brent were up about US$7.00 to US$8.00 "on a bet that war may be back on, if it ever subsided."

Accordingly, Holt said, the post-communications market reactions are mixing market pricing of oil impacts and BoC communications while treating the latter as "stale on arrival". Holt noted July is now 50/50 priced for a BoC rate hike. He added: "June is not a base case at this point, but is underpriced in my opinion; six more weeks of this and it will be harder for Macklem & Co to sit tight and the BoC doesn't have to have an MPR to move." Holt noted volatile markets are swinging between pricing about 55 to 70 basis points of Scotia's 75bps forecast hikes by year-end.

Elsewhere, David Doyle, head of economics at Macquarie Group, said the BoC communications "leaned hawkish and emphasised greater concern on upside risks to inflation". In the months ahead, Macquarie expects rhetoric to move further in a hawkish direction amid economic improvement and a falling unemployment rate. Macquarie continues to anticipate the next move from the BoC will be a 25 bps rate hike. On today's hawkish communication, Macquarie pulls slightly forward its baseline timing for this to September, from October, and it also now expects a second 25 bps hike in Q4 2026, previously Q1 2027.

Of commodities today, West Texas Intermediate crude oil closed higher, rising for a fourth-straight session as hopes around an end to the Iran war and a reopening of the Strait of Hormuz fade, while a report showed an larger than expected drop in U.S. oil inventories. WTI crude oil for June delivery closed up US$6.95 to settle at US$106.88 per barrel, the highest since April 7, while June Brent oil was up US$6.74 to US$118.00.

But gold was lower for a third-straight day, pressured by inflation worries even as the Federal Reserve's policy committee as expected left rates steady when ending its two-day meeting this afternoon. Gold for June delivery was down US$50.40 to US$4,558.00 an ounce, the lowest since March 30.

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