04:25 PM EDT, 08/26/2024 (MT Newswires) -- The Toronto Stock Exchange closed at its second record high in as many sessions on Monday as the country's rail network resumed operations after Canadian Pacific Kansas City ( CP ) (CP.TO, CP) and Canadian National Railway ( CNI ) were ordered into binding arbitration with their locked-out employees, though further labor turmoil for the transportation sector looms.

The S&P/TSX Composite Index closed up 62.89 points to 23,348.97 beating Friday's previous record of 23,286.08.

Battery Metals, up 2.2% and Energy up 1.5%, were the biggest gainers while Information Technology, down 0.5%, was the biggest decliner.

While service has resumed at both CN Rail and CPKC after lockouts and threats of strikes last week, both companies have said it might take several weeks for them to fully recover from related work stoppages. The Canada Industrial Relations Board on Saturday ordered the companies to resume operations and 9,300 workers began returning to their posts at 12:01 a.m. today ahead of binding arbitration this week.

Meanwhile, the federal conciliation process between Air Canada ( ACDVF ) and the union representing its pilots ends Monday. This will be followed by a 21 day cooling off period after which 5,400 pilots will be in a legal position to strike on September 17. The pilots gave their union a strike mandate last week if they are unable to negotiate a deal.

On the outlook for rates, S&P Global Ratings today published a weekly preview of the most important upcoming economic data for the U.S. and Canada. On the U.S. it said the totality of data flow supports Fed Chairman Jerome Powell's remarks at the Jackson Hole Symposium, unambiguously signaling a September rate cut: "The time has come for policy to adjust. The direction of travel is clear, and the timing and pace of rate cuts will depend on incoming data, the evolving outlook, and the balance of risks."

S&P expects a 25 basis points rate cut next month. But, it said, broad-based weakness in August jobs report (out Sept. 6) will increase risk for a 50-basis-point cut.

In terms of coming data, S&P expects the second estimate of second-quarter U.S. GDP on Thursday to be revised up modestly to 2.9%, from 2.8% (advance estimate). Then on Friday, it sees the core PCE price index, excluding food and energy, rising 0.1% month over month, down from 0.2% in June, and 2.6% year over year, unchanged from the previous month.

"This suggests the price momentum continues to decelerate and moving toward the Fed's 2% target," S&P noted.

For Canada, S&P expects real GDP on Friday to have expanded 1.5% in the second quarter on a seasonally adjusted annualized basis after increasing 1.7% in the first quarter. It noted this would mark yet another quarter with contraction on a per-capita basis (seven out of the last eight quarters). Personal spending on services as well as construction likely contributed the largest to growth, it said.

S&P on why it matters said: "The economy held up relatively well in the first half of the year compared with even more sluggish growth in the second half of last year. Still, it should be characterized as weak since it continues to run behind the population growth. That should help to reinforce the Bank of Canada's view that the economy is soft enough to keep inflation on a 2% trajectory."

Looking ahead, S&P expects growth in the second half to "inch up" from the first half as interest-rate cuts help raise consumer and business confidence, and it subsequently filters through the real economy. The ratings agency continues to expect the BoC to cut the overnight rate by another 25 basis points in September.

Still, TD Economics noted the BoC has early established a pace of 25 basis points per meeting, and already gapped 100 basis points to its U.S. counterpart. "The economic bar will be higher to deliver on larger cuts than the current pace," it said.

TD estimates that the current policy rate is 125 bps to 225 bps above what it thinks the economy warrants. This means, the bank added that the BoC, like the Fed, is slated to keep cutting at every meeting, bringing the policy rate to 3.75% by year-end and 2.50% by end-2025.

West Texas Intermediate (WTI) crude oil closed sharply higher on rising geopolitical risk as one of Libya's governments suspended exports while Israel and the Hezbollah militant group ratcheted up attacks, raising familiar concerns over a spreading Middle Eastern war. WTI crude for October delivery closed up US$2.59 to settle at US$77.42 per barrel, while October Brent crude, the global benchmark, closed up US$2.41 to US$81.43 per barrel.

Gold traded at a record high late afternoon on Monday as treasury yields continued to weaken after Federal Reserve Chair Jerome Powell on Friday said the central bank is ready to start lowering interest rates to support a weakening labor market. Gold for December delivery was last seen up US$7.80 to US$2,554.10 per ounce, above last Tuesday's record close of US$2,550.60.