The S&P/TSX Composite Index closed up 74.45 points to 25,971.93, gaining just more than 1,000 points over its winning streak. Rising sectors were led by Health Care, up 3.19%, followed by Energy, up 0.41%. Base Metals, down 1.19%, was the biggest decliner.
Falling interests rates are offering support to the market and investors are awaiting a June decision from the Bank of Canada after standing pat on rates at its last meeting. RBC Capital Markets on Friday said it expects two further 25 basis point cuts to rates from the central bank before it reaches an end to the easing cycle. However it is not placing bets on the timing of the cuts.
RBC said there are good reasons to expect the BoC to cut in June, citing weak employment data, a lower inflation print expected next week which will include the removal of the carbon tax and a soft housing market. But it also noted reasons the central bank may continue its pause.
"The fact they went on hold in April means the bar to cut in June is high(er). In the past 8 cycles over the last 25 years, when the BoC has paused they stayed on the sidelines for multiple meetings (range of 2-6) with the only case of a one meeting pause during a cycle being the last hike in 2018. Based on their reaction function, maybe they need multiple months of weakness in hard growth data + contained inflation. May not be enough data points between April and June meetings to shift to a cut," RBC noted.
RBC in a separate note said April's inflation reading for Canada on Tuesday will be distorted again by tax changes with the removal of the consumer carbon tax on energy products at the start of the month. This builds upon previous distortions caused by the federal GST tax break between December and February. RBC expects (after-tax) price growth in the Canadian consumer price index to drop to 1.6% in April from 2.3% in March, largely due to the removal of the carbon tax. The bank noted gasoline prices plummeted by 10% nationally in April from March, and it expects consumer natural gas prices plunged 27%.
RBC said the underlying inflation trend (controlling for the tax change) will be closely monitored after March data showed a moderate downside surprise, breaking a five-month streak of mostly upside surprises. The bank added the April inflation data is unlikely to show significant pressure from import tariffs yet, and it expects import substitution to alternative sources and consumer substitution to non-tariffed products will ultimately limit the impact of Canadian retaliatory tariff measures on consumer prices.
Still, RBC expects food price growth to remain elevated at about 3.2% year-over-year in April like March. Core inflation (excluding food and energy) is projected to rise to 2.6% from 2.4%. Annual growth in the BoC's preferred median and trim measures, which exclude the impact of tax changes, should hold steady, just under 3%.
This comes as National Bank of Canada in its 'Monthly Economic Monitor' for May 2025 noted tariff uncertainty has begun to drag down the Canadian economy.
National Bank said although the effective tariff rate imposed by Canada remains relatively low for the time being, the risk of escalation remains "very real" given the erratic nature of the U.S. administration. "It is therefore not surprising that businesses are being paralyzed by the lack of visibility." National Bank noted that while investment intentions pointed to a recovery in 2025 a few months ago, the situation has changed dramatically, with many projects now on hold. "Uncertainty is also beginning to be reflected in the labour market, which is showing signs of weakening again," the bank added.
West Texas Intermediate (WTI) crude oil closed higher on Friday, recovering from two losing sessions that came on expectations rising supply will swell global inventories. WTI oil for June delivery closed up US$0.87 to settle at US$62.49 per barrel, while July Brent oil was last seen up US$0.88 to US$65.41.
Gold prices fell late afternoon Friday as easing geopolitical tensions reduce safe-haven buying and investors shift to risk assets. Gold for June delivery was last seen down US$24.80 to US$3,201.80 per ounce
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