04:21 PM EDT, 05/08/2025 (MT Newswires) -- The Toronto Stock Exchange closed with a second-straight gain on Thursday as Scotiabank started to look at the impact of temporary versus permanent tariffs and BMO Capital Markets cited "high-quality Canadian companies that have exhibited decelerating breadth of positive revisions over the past several months."

The S&P/TSX Composite Index closed was up 93.88 points at 25,254.06, adding to the 180-plus points gained Wednesday. Among sectors, the biggest gainers were Energy, up 2.8% and Base Metals, up 1.8%.

With officials from the United States set to meet their counterparts from China over the weekend to start talks on a possible trade deal between them, and with the U.S. today getting the ball rolling with the outline of a deal between it and the United Kingdom, investors are already looking towards an end to the brewing trade war between Canada and the United States. too.

Scotiabank presented an alternative scenario where tariffs are removed September 2025, generating significantly less economic damage and fewer job losses than the bank had seen as its April baseline. By 2026, GDP is up to one percentage point higher in both countries compared to a permanent tariffs scenario, while the unemployment rate is around one percentage lower, Scotia said. "The implications for monetary policy differ between the two countries, reflecting how each economy absorbs the trade shock, it added.

In the United States, Scotia sees a large increase in import duties functioning as a supply shock, raising inflation substantially and damaging growth. "This limits the Federal Reserve's ability to react, leading to a higher policy rate relative to a no-tariff scenario. Quick removal of tariffs would allow inflation to reverse on its own, creating more room for monetary policy to ease. In this case, the policy rate would be lower than in a permanent tariffs scenario but still above the no-tariff scenario."

In Canada, Scotia sees the tariffs "shock" primarily acting through demand-side channels, allowing the Bank of Canada more flexibility to respond. "Under permanent or temporary tariffs, monetary policy is looser than in a no-tariff scenario, with temporary tariffs requiring less easing than permanent ones."

Meanwhile, some investors are again looking at their Canadian investment strategies, given trade tensions and the corresponding threat of a global recession are seemingly easing, at least for now.

Brian Belski, Chief Investment Strategist at BMO Capital Markets, noted he and his team recently adjusted their 2025 EPS target for the TSX down 3%, from $1,600 to $1,550, "reflecting what the bank believes is a minor 'tweak' when considering all the emotion, rhetoric, and frankly, unsubstantiated 'noise' that has bullied many analysts, companies, and macro-observers to 'react' in a much more decidedly negative tone."

Nonetheless, Belski said, while the actual quantifiable impact of tariffs and U.S. growth remains unknown, TSX earnings estimates will likely remain under pressure over the near term. "In fact," he added, "forward earnings revision trends, which had been stagnant throughout the year as analysts assessed the trade risks, have started to decidedly swing negative since the end of March."

From BMO's perspective, Canadian stocks are "exhibiting a well-anticipated negative revision cycle, one we believe has already been fully priced in and may ultimately be shortlived (e.g., regressive)". As such, the team at BMO believe investors should not be reactionary to negative guidance and instead use the downward revision cycle for what it truly represents; a historically tested and proven contrarian indicator. "Overall," Belski said, "we continue to believe investors should remain focused on high-quality Canadian companies, while also overlaying a contrarian revision tilt. As such, we have included a screen of high-quality Canadian companies that have exhibited decelerating breadth of positive revisions over the past several months."

Belski's "Canadian Quality Screen" included ATCO (ACO-X.TO), Alimentation Couche-Tard ( ANCTF ) , Bank of Montreal ( BNKD ) , Cogeco Communications CCA.TO), CCL Industries (CCL-B.TO), Canadian National Railway ( CNI ) , Constellation Software ( CNSWF ) , Dollarama ( DLMAF ) , Enghouse Systems ( EGHSF ) and CGI (GIB-A.TO). It also included Great-West Lifeco ( GWLIF ) , iA Financial ( IAFNF ) , Intact Financial ( IFCZF ) and IGM Financial ( IGIFF ) .

Of commodities, West Texas Intermediate crude oil closed with a gain on Thursday amid hopes around a cooling of trade tensions as the United States readies for tariff talks with China, while reports said the Trump Administration has reached a framework for trade deal with the United Kingdom. WTI crude oil for June delivery closed up $1.84 to settle at US$59.91 per barrel, while July Brent crude was last seen up $1.67 to US$62.79.

But gold traded lower for a second day late afternoon on Thursday as planned weekend talks between the U.S. and China seemed to calm trade tensions and ease safe-haven demand, while the Federal Reserve held interest rates steady in a day-prior decision, pushing the dollar and yields sharply higher. Gold for June delivery was last seen down $80.80 to US$3,311.10 per ounce.