04:25 PM EST, 12/02/2024 (MT Newswires) -- The Toronto Stock Exchange started December with a whimper on Monday, closing lower following November's rally ahead of the beginning of fiscal fourth-quarter results from Canada's banks, starting Tuesday with the Bank of Nova Scotia ( BNS ) .

The S&P/TSX Composite Index closed down 57.67 points from Friday's record high to close at 25,590.33. Telecoms were the biggest gainer on the day, up 0.57%, while Health Care, down 3.27%, was the biggest decliner, followed by Information Technology, down 0.63%.

West Texas Intermediate (WTI) crude oil closed with a small gain on Monday as China reported factory activity rose the most in five months in November while fresh violence in the Middle East added to geopolitical risk ahead of Thursday's OPEC+ meeting. WTI crude for January delivery closed up US$0.10 to settle at US$68.10 per barrel, while February Brent crude, the global benchmark, closed down US$0.01 to US$71.83.

Gold traded lower late afternoon as the dollar climbed on rising expectations the Federal Reserve may not lower interest rates when the central bank's policy committee meets later this month. Gold for February delivery was last seen down US$19.30 to US$2,661.70 per ounce.

The exchange's drop comes ahead of the start of fiscal fourth-quarter results from Canada's bank. The Bank of Nova Scotia ( BNS ) starts the season on Tuesday morning. National Bank Financial in a Nov.19 note said it expects ScotiaBank to report a earnings per share of $1.59 versus a consensus around $1.60 -- adjusted to reflect OSFI loan filings as of September; FX movements (US$ strengthening); and U.S. Call report data. National Bank doesn't expect a dividend increase and cited as three key themes it will be watching for: corporate NII drag is expected to lessen, Scotia's international credit performance will be in focus, and it will be listening for cues on 2025 guidance.

National, which has a Sector Perform rating and $78 target price on Scotia, said its top-line is expected to benefit from rate cuts, mainly via lower wholesale funding costs. Its Corporate segment has been reporting negative NII in the $400-500 million quarterly range over the past year. The bank has guided to a lesser drag during Q4 2024, reflecting 125bps of rate cuts so far this year.

National noted that at the 2023 Investor Day, management stated that its full-year outlook assumed 175bps of rate cuts in Canada over the course of fiscal 2024. As such, National expects the bulk of benefits from lower rates on funding costs will materialize in 2025.

On International credit performance in focus, National Bank noted the International segment PCL ratio hit 139bps last quarter, a "high water mark" for the year. National believes the business could report a slightly higher loss ratio during Q4 2024, reflecting ongoing weakness in Peru and Colombia. As such, it said, guidance for fiscal 2025 will be of interest, considering the outlook for improvement in markets that have been acting as a drag and changes to the bank's portfolio over time (e.g., sale of Crediscotia Financiera in Peru to Banco Santander).

On listening for cues on 2025 guidance -- at its 2023 Investor Day, National noted BNS re-set the bar for expectations, "an important step considering a track record of shortfalls versus expectations in prior years." The bank guided to flat growth in 2024 that, so far, has been delivered. Thereafter, BNS had guided to 5-7% EPS growth during fiscal 2025, moving to 7%+ between 2026 and 2028.

National expects management to reiterate the 2025 outlook, a positive surprise could be delivered, National said.

The Globe & Mail news site on Monday reported the exchange is expected to add three new companies to the Composite Index this month, including construction and engineering company Aecon Group (ARE.TO) while removing Algonquin Power and Utilities (AQN.TO) from the S&P/TSX 60 index of the country's largest companies. S&P Global is scheduled to update the indices on Dec. 6.