04:14 PM EDT, 06/28/2024 (MT Newswires) -- The Toronto Stock Exchange - which was up almost 100 points in early trading - took a nosedive to end the week with the S&P/TSX Composite Index closing at 21,875.79, down 66.37 points on Friday.

Markets will be closed for the Canada Day holiday on Monday.

All sectors were down on the day, with Battery Metals (-0.9%) and Healthcare and Utilities (each -0.7%) the biggest decliners.

West Texas Intermediate (WTI) closed lower on Friday even as a report showing U.S. inflation slowed last month revived hopes the Federal Reserve will be able to speed expected cuts to interest rates, while the threat of a spreading Middle East war is rising. West Texas Intermediate crude for August delivery closed down US$0.20 to settle at US$81.54 per barrel, after earlier touching US$82.72. August Brent crude, the global benchmark, closed up US$0.02 to US$86.41.

Gold edged down late afternoon as the dollar dropped after a report showed U.S. inflation slowed last month, while treasury yields rose. Gold for August delivery was last seen down US$0.20 to US$2,336.40 per ounce, after earlier touching US$2.350.60.

Douglas Porter over at BMO Economics in his weekly 'Talking Points' note said Canadian markets had a "different tone" this week, as was the case through much of the first six months of the year. Porter noted the TSX managed to "grind" out a "solid" 2% rise, but that left its first half of the year advance at a "modest" 5%. He also noted the bigger contrast was in bonds, where Canadian yields rose sharply across the curve this week, after seeing milder increases earlier in the year.

According to Porter, the 'X' factor was Canada's CPI "clunker" on Tuesday. After a series of "surprisingly tame" results to start the year, Porter said May came in hot, with seasonally adjusted prices up more than 0.3% on both headline and core. Suddenly, he added, after seemingly separating itself from the U.S. on the core inflation front, there's "now no daylight" between the two nations - at least on the measures the two central banks prefer: median CPI for the Bank of Canada, core PCE for the Fed.

Porter noted no one is talking about the BoC needing to reverse course after the CPI results. But he said the surprise inflation increase doused expectations for a follow-up rate cut in July. He added: "The door has not been completely shut, but we will need to see some spectacular results for June inflation the week before the July 24 decision."

Porter noted the Bank's Business Outlook Survey and next week's jobs data will also feed into the deliberations, but it's gone from a case of the data needing to dissuade the Bank from cutting, to it needing to convince the Bank to cut.

Porter also noted the latest Canadian GDP results did little to help the rate cut cause, with April growth matching consensus at +0.3%, and May expected to print +0.1%. This leaves growth on track for almost 2% a.r. for Q2, or roughly in line with the Q1 actual of 1.7%.

Porter said: "There's no debate that overall growth remains generally lacklustre, but the economy has shown a bit more life so far in 2024 than the near-zero growth of the last nine months of 2023."

And he noted that after "woefully trailing" the U.S. last year, Canada's GDP may be on the verge of posting somewhat faster growth than stateside for the second quarter in a row. Porter added: "Just as Canada's apparently milder core inflation results are reverting to U.S. trends, we may also be on the cusp of seeing the prior North American growth gap close as well. Now, about closing that gap in relative equity market performance... well, that's something completely different."