04:32 PM EST, 12/16/2024 (MT Newswires) -- The Toronto Stock Exchange lost ground for a third-straight session on Monday as Canadian Finance Minister Chrystia Freeland unexpectedly resigned just hours ahead of a key economic update, throwing the government of Prime Minister Justin Trudeau into turmoil even as it looks to fend off promised tariffs from a Trump Administration.

The S&P/TSX Composite Index closed down 127.09 points to 25,147.21, falling 510 points over the past three sessions. Among sectors today, the biggest decliners were Base Metals and Energy, down 1.92% and 1.81%, respectively. Financial was the main gainer, up 0.6%.

Deputy Prime Minister and Finance Minister Chrystia Freeland announced early on Monday she's resigning from both posts, saying in her resignation she and Prime Minister Justin Trudeau "found ourselves at odds about the best path forward for Canada."

This came just hours before Freeland was due to belatedly deliver a fiscal update that market watchers had seemed to already accept would show a large budget deficit, but they were also hoping would include an outline on plans for dealing with whatever tariffs U.S. President-elect Trump introduces against Canada when he takes power early in 2025.

Multiple sources were reporting late afternoon that Dominic LeBlanc was to be named the next finance minister, and would be sworn in to the position just as markets were closing at 4:00 p.m. ET and then deliver fiscal updates. LeBlanc is already the minister of public safety, democratic institutions and intergovernmental affairs, will be appointed as the next Finance Minister at a crucial time for the Canadian economy.

The CBC on Tuesday afternoon said the fiscal update was tabled in Parliament after market close and showed a $61.9 billion deficit, well above Freeland's promise to keep it at $40.1 billion.

The turmoil comes ahead of inflation data due out Tuesday, with RBC Economics saying it expects the Consumer Price Index to be flat month over month in November, taking the year over year rate a tick lower to 1.9%, back below the Bank of Canada's 2% target. This is slightly below consensus of a 0.1% monthly rise and 2% annualized. RBC continues to flag that inflation is taking a backseat to GDP as the main data for the BoC. "Q3 GDP growth disappointed the 1.5% annualized forecast from the BoC, but was in line with RBC's expectation of 1.0%," RBC said, noting the BoC cut their policy rate by 50bp last week, in accordance with RBC's view.

According to RBC, CPI ex-food & energy should tick lower from 2.3% to 2.1% y/y in November. It said inflation has been a shelter story, but should show further signs of slowing in November with mortgage interest costs cooling down as interest rate cuts make their way through the economy. Sequential growth in the BoC's preferred "core" measures, CPI-trim and CPI-median should come in the 0.15-0.2% m/m range after averaging a firm 0.3% m/m in October, it added.

In other CPI-related news, Bank of Canada Governor Tiff Macklem in an end of year speech delivered in British Columbia said a "critically important" priority for the Bank is the review of its monetary policy framework. Every five years, he noted, the Government of Canada and the Bank of Canada review their inflation-targeting framework. "Right now," Macklem said, "we're considering what issues to focus on in the upcoming review, reflecting on the big forces on the economy and what we're hearing from Canadians. This points to several questions. In a more volatile world, how do we identify and measure underlying inflation? Is 2% still the best target for the future? What's the interaction between housing affordability and monetary policy? I'll have more to say about the framework review in the new year, once the work truly begins."

Meanwhile, recent losses on the TSX come even as National Bank published its most recent Monthly Equity Monitor. Amid continued geopolitical tensions, the bank noted, the MSCI ACWI Index reached a new record high in December. However, it also noted, Q4 gains have been uneven, driven primarily by strong performances in Canada and the United States, followed by Japan. "This development largely stems from economic policy uncertainty linked to the president-elect's commitment to reshaping the global supply chain in favor of U.S. reindustrialization. As of this writing, the extent of Washington's potential protectionist measures remains unclear," National Bank said.

Defying most expectations, National Bank noted the S&P/TSX has emerged as one of the best-performing equity indices in Q4, delivering a total return of close to 6%. It said: "This strong market performance comes against the backdrop of a relatively weak economy and the threat of tariffs from the U.S. If Ottawa can implement economic policies aligned with U.S. interests, making Canada more business-friendly and supporting the reindustrialization of its economy, there could be greater reason for optimism on this side of the border."

National Bank said its asset mix "remains cautious" this month amid lingering uncertainty surrounding U.S. economic policy and its potential impact on inflation and long-term Treasury yields, especially with the equity risk premium already at a generational low. It noted investors have benefited from two consecutive years of exceptional returns in 2023 and 2024. However, National remains skeptical of the consensus expectation for a repeat performance in 2025.

West Texas Intermediate (WTI) crude oil closed down from a three-week high on Monday as weak economic data from China showed the prospects for the economy of the largest oil importer remain dim. WTI crude oil for January delivery closed down US$0.58 to settle at US$70.71 per barrel, while February Brent crude closed down US$0.58 to US$73.91.

Gold prices edged down late afternoon on Monday following two losing sessions as the dollar weakened. Gold for February delivery was last seen down US$6.80 to US$2,669.00 per ounce.