04:28 PM EDT, 09/03/2024 (MT Newswires) -- The resource-heavy Toronto Stock Exchange closed with a loss on Tuesday, returning from the Labor Day long weekend in a mood to sell after weak economic data from China sent commodity prices sharply lower.

The S&P/TSX Composite Index Closed down 303.73 points to 23,042.45. The biggest decliners on the day were Base Metals, down 7%, and Energy, down 3.0%, as copper prices fell 2.9% and oil fell to a nine-month lower after China on Monday reported its manufacturing sector contracted again in July and exports dropped.

Battery Metals (+1.7%) and Telecoms (+0.7%) are the biggest gainers.

West Texas Intermediate crude oil dropped for a second-straight session as further weak economic data from China, the end of the U.S. summer driving season and next month's likely return of some shut-in supply from OPEC offset falling supply from Libya. WTI crude for October delivery closed down US$3.21 to settle at US$70.34 per barrel, the lowest since December 12. November Brent crude, the global benchmark, closed down US$3.77 to US$73.75.

Gold edged lower mid-afternoon on Tuesday, falling for a second session from Thursday's record despite narrowing treasury yields as the dollar rose. Gold for December delivery was last seen down US$6.70 to US$2,520.90 per ounce.

The weak outlook for commodities comes ahead of another expected cut to interest rates, when the Bank of Canada makes its next rate decision on Wednesday. Desjardins economist Royce Mendes last Friday noted his shop earlier this year said the Bank of Canada was "in a race against time to lower interest rates ahead of the mortgage renewal wall" over the next two years.

The Globe and Mail newspaper reported last month only around half of all homeowners with mortgages saw their monthly payments rise since the BoC started raising rates in 2022. The paper noted the other half will see their mortgages reset over the next two years, "and many are in for a shock," having taken out large mortgages to get into the market in 2020 and 2021 when interest rates were at rock bottom.

Mendes said further cooling of inflationary pressures and a rise in the unemployment rate means that central bankers need to continue cutting rates at each of their fixed announcement dates at least until the policy rate returns to a more neutral range, now estimated to be between 2.25% and 3.25%.

"While that won't guarantee a soft landing with population growth set to slow, lenders tightening credit conditions and trade wars heating back up, it offers the best shot at avoiding unnecessary pain from mortgage renewals," he added.

Mendes said the danger now is that the BoC falls behind the curve if policymakers remain too focused on the slightly above-target inflation. "Following previous tightening cycles, central banks have often responded too late to signs of economic deterioration. Achieving a soft landing in this cycle is an even taller order given Canada's vulnerabilities and the headwinds it will be facing in quarters ahead. Policymakers will need to be alert and nimble to avoid repeating mistakes of the past."

Meanwhile, in terms of the rates outlook for the U.S. Federal Reserve, BMO Economics after noting today that ISM manufacturing PMI climbed in August said the bottom line is that though it held in the contraction zone, the details reinforced slowing demand. BMO noted the Fed is expected to cut rates in September, but it said the manufacturing index will likely stay subdued until rates come down "meaningfully."

TD Economics for its part said the "light at the end of the tunnel is starting to emerge" for U.S. manufacturers. But, it added, with the pace of cuts likely to be gradual, the recovery will likely proceed in fits and starts.

In terms of individual stocks, National Bank published an update for the second half of 2024 on what it calls its 'Dividend All-Stars.' As background, National Bank analysts collectively cover near 303 TSX-listed equities, of which more than half offer dividends or distributions. The bank has put together a portfolio that contains 18 of its favorite yield ideas, spanning a variety of industries, sizes and liquidity, but sharing three investment criteria: Dividend/distribution yield of approximately 5% or greater; and a good chance for growth in the payout, with a low risk of a cut; and a positive bias regarding the prospects of the company and/or share price.

For investors seeking "stable and elevated" income, National said this portfolio reflects its best ideas for the second half of 2024.

In Pipeline/Utilities and Energy National cited AltaGas ( ATGFF ) , Brookfield Renewable Partners (BEP-UN.TO) , Capital Power ( CPXWF ) , Gibson Energy ( GBNXF ) , TC Energy ( TRP ) and Topaz Energy ( TPZEF ) . In Real Estate it cited Dream Industrial REIT, RioCan REIT (DIR-UN.TO) and Sienna Senior Living ( LWSCF ) . In Transportation it noted Exchange Income ( EIFZF ). and Mullen Group ( MLLGF ) . In Financials, it noted Alaris Equity Partners (AD-UN.TO), CIBC (CM.TO) and IGM Financial ( IGIFF ) . And in Diversified it cited Chemtrade (CHE-UN.TO), Dexterra Group ( HZNOF ) , Doman Building Materials ( CWXZF ) and Transcontinental (TCL-B.TO).