04:30 PM EDT, 05/09/2025 (MT Newswires) -- The Toronto Stock Exchange on Friday made it four winning sessions in a row as BMO's Douglas Porter seemed to catch the mood of investors in noting an easing in global trade tensions and that the Canadian economy is "holding up a touch better" than expected, though he noted the uncertainty around tariffs continues.

Buoyed too by higher commodity prices, the resources-heavy S&P/TSX Composite Index closed up 103.68 points at 25,357.74, adding to the 300 points gained over the prior three days. Sectors were mixed, with the gains led by Telecoms, up 2.6%, and followed by Energy, up 2%. Limiting gains was the Information Technology sector, down 1.5%.

Porter, chief economist at BMO Capital Markets, in his weekly 'Talking Points' noted at least three developments this week were widely interpreted as turning down the temperature on the brewing global trade war, providing modest support for equity prices.

Probably most important, Porter said, the United States and China agreed to talk, without either losing face, and some form of negotiations begin this weekend in neutral Switzerland. Second, with much fanfare, the U.S. and U.K. agreed on a preliminary deal to dial down tariffs on metals and autos, perhaps providing a framework for others. And, finally, Canadian PM Mark Carney's "high-stakes meeting" with President Trump at the White House "at least set the stage for less fractious relations between the two massive trading partners" than seen for four months. "The calmer tone is a small positive," Porter added.

However, Porter said "while all these steps are indeed incrementally positive, it really doesn't add up to much progress". He added, "The stark reality is that overall U.S. tariffs have barely budged, with the weighted average still hovering at levels no one has seen in their lifetime. And, from our perspective, the U.K. 'deal' was arguably bad news. Even with some concessions, Britain is still left with a base-line tariff rate of 10%, and this is for one of the few major economies that runs a trade deficit with America. In other words, all others, including penguins, but excluding USMCA-compliant goods, will be dealing with a minimum tariff rate of 10% for the foreseeable future. And those nations running significant trade surpluses with the U.S. are likely looking at a higher base rate. The U.K. deal normalized the abnormally high base tariff rate, not good."

Similarly, Porter said BMO's big takeaway from the Carney and Trump meeting was the President's telling response to a journalist question on why Canada couldn't say or do anything to get tariffs lifted: "It's the way it is". Porter said while words are clearly not policies, the President was "decidedly lukewarm" on the future of USMCA, seeming to even question whether it need exist. Somewhat offsetting those concerning remarks, he also hinted that Canada may not face any additional measures. "So," Porter added, "tariffs on metals and autos are here to stay, as well as on non-USMCA-compliant goods, but that may be it. If that's where things settle, the economy faces something right between the Bank of Canada's two scenarios, and perhaps slightly firmer than our current base case projection."

Canada, Porter noted, remains the single biggest U.S. export destination, absorbing US$351 billion in the 12 months to March.

Meanwhile, Porter noted Canada began to see the first "hard" economic results for April this week. "Our take so far is that while conditions may be holding up a touch better than we expected, it's still not good." He noted employment eked out a modest 7,400 gain, but said that was "flattered" by a 37,100 increase in public administration, likely due to election workers. In other words, Porter said, the economy just saw back to back underlying job losses of around 30k, with all of the latest drop in manufacturing payrolls. He added the spread between Canada's 6.9% jobless rate and the 4.2% in the U.S. is now a "towering" 2.7 ppts, matching the widest gap of the past 24 years, aside from some results during Covid.

Porter also noted home sales are "slumbering" amid the economic uncertainty. He said: "One major retailer did report that consumers have been resilient so far, albeit against a backdrop of the country's oldest retailer sadly in the throes of liquidation. In sum, the economy has perhaps held up slightly better than our weak and below consensus call, but still leaving the Bank of Canada in a position to cut further, with the next meeting in early June very much a live option."

Canada employment data will push the BoC to cut by 25bps in June, according to David Doyle, head of economics at Macquarie. He noted the OIS market probability of a rate cut for June 4 increased to about 60-65%, up from near 45% yesterday. Doyle said whether the BoC proceeds with a cut may hinge on other incoming data including CPI for April due on May 20 and real GDP for Q1, due on May 30. "Overall, we anticipate intermittent cuts totaling 75 bps by year-end, pushing the Overnight rate down to 2.0%."

Of commodities, gold prices rose late afternoon on Friday following two days of losses as the dollar fell off the highest in a month ahead of trade talks between the US. and China. Gold for June delivery was last seen up US$28.70 to US$3,334.70 per ounce.

Also, West Texas Intermediate crude oil closed higher on Friday on hopes global trade tensions will ease as the U.S. and China ready to meet in Switzerland on the weekend for their first talks since the pair last month imposed punishing tariffs on each other's exports that have nearly halted all trade between the world's two largest economies. WTI oil for June delivery closed up $1.11 to settle at US$61.021 per barrel, while July Brent crude was last seen up $1.10 to US$63.94.