04:21 PM EDT, 05/07/2025 (MT Newswires) -- The Toronto Stock Exchange closed at the highest in five weeks on Wednesday amid easing trade tensions between Canada and the United States, at least for now, following the day-prior meeting of Prime Minister Mark Carney and President Donald Trump yesterday, in addition to news the United States and China are preparing for talks of their own on trade matters.

The S&P/TSX Composite Index closed up 186.46 points to 25,161.18, the highest since April 2. Industrials and Information Technology led gains, up 1.25% and 1.5% respectively. Limiting upside was a 2.0% decline in Base Metals.

Carney and Trump staged an amicable chat in the Oval Office on Tuesday. While no deal on removing U.S. tariffs on Canadian goods was agreed to, the first meeting of the pair ended without rancor, an encouraging sign for future negotiations. As well, the United States and China will meet in Switzerland on the weekend for trade talks of their own, raising hopes for an end to the tariff battles between the world's two largest economies.

Economist David Rosenberg noted the U.S. Federal Reserve as expected today held the fed funds rate at its current target range of between 4.25-4.50% by unanimous decision. But he said, the Fed "keeps prioritizing the uncertain picture despite the negative GDP print in the first quarter".

Rosenberg, said "the bar has been raised" for any near term Fed rate cut even as the Bank of Canada is seen on the rate-cutting path. There is ongoing concern that a widening interest-rate differential between this nation and the United States could weigh heavily on the Canadian dollar.

According to Rosenberg, the Fed "clearly brushed off" the mild contraction in U.S. first-quarter real GDP, pointing to swings in net exports, mostly the pre-tariff import surge, and sticking with the label "solid" to describe the overall economic backdrop. "As bizarre as that sounds, consider it 'cover' for not signaling any rate cut coming," he said.

Rosenberg noted the press statement was "short and terse once again," but the new wrinkle was the addition of heightened risks around higher unemployment and higher inflation. "It's as if the latest flat reading in the core PCE deflator and the steady 4.2% unemployment rate never materialized. But Powell and crew are staring into a bog of uncertainty and getting a tad more nervous over a future of mild stagflation. The hidden message is that the bar for Fed easing has been raised a touch in the commentary, and any political pressure to lower rates will surely be resisted," he said.

Investors, Rosenberg said, should note that there is a reference to "uncertainty about the economic outlook has increased further." This is a key message because higher uncertainty, even with all the trade 'deals' being bandied about, translates into market repricing towards more defensive positioning and wider risk premia across all asset classes, he added.

Among commodities, West Texas Intermediate crude oil traded lower on abundant supply, despite early support on hopes talks between China and the U.S. can end their trade war. WTI oil for June delivery closed down $1.02 to US$58.07 per barrel, while July Brent crude settled down $1.03 to US$61.12.

Gold traded lower late afternoon as the dollar rose and safe-haven demand slows after the United States and China agreed to hold trade talks this weekend. Gold for June delivery was last seen down $25.50 to US$3,397.30 per ounce.