04:25 PM EDT, 06/02/2025 (MT Newswires) -- The Toronto Stock Exchange closed at another record high on Monday following two losing sessions as Canadian investors not only got back into the buying habit again with commodities prices surging as the U.S. dollar weakened following fresh trade threats from President Trump, while economists see less need for another cut from Wednesday's Bank of Canada interest-rate decision.

The S&P/TSX Composite Index closed up 213.91 points to 26,388.96, topping the prior record set on Wednesday of 26,283.45. Among sectors, The biggest gainers were Energy and Base Metals, up 1.86% and 1.19%, respectively, followed by Telecoms, up 0.97%. Health Care, down 2.4%, and Industrials, down 0.25%, were the biggest decliners.

Despite the continuing threat of a costly trade war with the United States, Canada's largest trading partner, The Canadian Press is reporting that the Canadian federal government collected an extra $617 million in import duties in March compared to a year earlier as counter-tariffs against U.S. trade restrictions came into effect.

Separately, The Canadian Press cited Industry Minister Melanie Joly as saying Sunday the federal government is committed to using Canadian steel and aluminum in national infrastructure and defense projects after U.S. President Donald Trump threaten on the weekend said he'll double the tariff on U.S. imports of both metals to 50% beginning on Wednesday

The resilience has prompted many of those who watch markets closely to say that they now see the BoC leaving the key benchmark interest rate unchanged this week, even in the face of recent mixed economic data.

National Bank in a preview note published last Friday said it expects the Bank of Canada to leave its policy rate unchanged at 2.75%. In explaining its rationale, the bank said, ultimately, its call hinges on policymakers' judgement that they can't be forward-looking. "If they could be forward-looking (and despite uncertainty, we'd argue they should be), we see it as a clear-cut decision to ease. But if policymakers are, as they imply, able to only react to the data they have in hand, the picture is admittedly mixed."

National Bank noted the labor market, which carries a lot of weight, is consistent with further rate relief, but said the inflation picture right now is not giving the green light. It noted there are also still key unknowns on trade impacts, inflation expectations and fiscal policy which further obscure the picture. "Really though," National Bank said, "if the Bank was comfortable holding steady in April when the outlook looked even more troubled, they should be fine waiting eight weeks from here. The next decision in July will bring more data (to gauge tariff impacts), another Business Outlook Survey and greater clarity on the U.S. trade relationship with Canada (and the world). We expect that by the time 30-Jul arrives, inflation anxiety will have moderated as economic slack accumulates and dominates modest tariff-driven inflation. This would tip the scales towards a cut. Further out, our outlook for two quarters of negative growth, an unemployment rate above 7% and on-target inflation is consistent with the overnight target reaching 2% by year-end."

Douglas Porter, Chief Economist at BMO Capital Markets, on Friday said while the BoC will share BMO's concerns over the employment outlook, "robust" financial markets and "surprisingly sturdy" GDP growth will provide an offset. Meanwhile, he added, the back-up of core inflation to above 3% will keep the BoC more cautious, suggesting that rates will be held steady at this week's decision. "We continue to believe that this is not the end of the line for rate cuts, but we are officially pushing back our timing of those trims, to restart in late July, and perhaps stretching into early next year. We are still circling the likelihood of a 2.0% end-point for the overnight rate, on the view that policy will need to be a bit below the neutral range amid the ongoing trade cloud."

TD Bank, in its Friday week-ahead outlook, also noted markets expect policymakers to hold the line on rates, especially with a hot core inflation print in April, the federal election bringing the possibility of stimulus, and some global de-escalation in the trade war since the Bank's last decision in April. On the other hand, TD said, Canada's jobs market is weakening, a narrative reinforced by last week's payroll data, and domestic activity flatlined in the first quarter. "As Canada is likely entering a weak growth period, two more cuts are likely on tap for this year, even if the Bank stands pat next week," according to TD.

RBC too said Friday it expects the BoC will forego an interest rate cut on Wednesday in another close call following April's pause after seven consecutive cuts, although it added "arguments for a rate cut still remain". RBC noted labor markets have weakened, particularly in manufacturing where jobs dropped by 30,600 in April, the largest one-month decline since the pandemic, pushing unemployment to 6.9% from 6.6% in Q1. It also noted housing markets have cooled, reducing the risk that lower rates would reignite surging prices, and gross domestic product growth has remained positive, although the monthly pace slowed sharply after a surge in production in January.

"However," RBC added, "the limited data since the BoC's last decision in April hasn't been entirely negative. Our RBC cardholder tracking shows consumer spending held up better than expected in March and April despite lower survey-based confidence measures."

Of commodities, West Texas Intermediate crude oil rose on Monday even as OPEC+ agreed to a third monthly production hike of 411,000 barrels per day in July, but failed to meet market rumors reported last week that it was considering an even-larger increase. WTI crude oil for July delivery closed up $1.73 to settle at US$62.52 per barrel, while August Brent crude was up $1.67 to US$64.43.

Gold was sharply higher late afternoon on Monday, supported by a weaker dollar amid further U.S. tariff hikes and rising safe-haven demand. Gold for August delivery was last seen up $90.70 to US$3,406.10 per ounce.