04:25 PM EDT, 05/24/2024 (MT Newswires) -- Canada's main stock market on Friday regained 120 points with the S&P/TSX Composite Index closing at 22,320.87, back above the 22,300 level after recording two successive days of triple-digit losses on weakened commodity prices and some profit taking after rising to a record high around 22,555 on Tuesday..

This all left the Toronto Stock Exchange (TSX) down less than 1% for the week, but up more than 2% for May, to date.

The TSX was buoyed by increasing market confidence the Bank of Canada will start to cut interest rates in early June. Most sectors were higher, but only Base Metals was up by more than 1%. The Battery Metals Index was out of charge, losing more than 2%.

On rates, Desjardins in a note today said it believes lower inflation in April and slightly weaker tracking for first-quarter real GDP growth than the Bank of Canada's (2.2% annualized versus 2.8%, respectively) is supportive of a cut in June. This, it noted, will provide some relief to households. It also noted that after a "mediocre" Q1 for retail sales, Statistics Canada's estimate for April points to a potential rebound. Due to other indicators "coming fairly strong", Desjardins tracking suggests real GDP growth is likely to be in line with the Bank's 1.5% projection in Q2. "Taken together, this points to a respectable first half of 2024, with a possible tailwind from less restrictive monetary policy thereafter," it added.

In his weekly 'Talking Points' note, BMO chief economist Douglas Porter asked: does the Fed on hold with US rates limit or even handcuff others, particularly the BoC? According to Porter, the chances of the Bank trimming rates at its upcoming meeting on June 5 actually rose this week on yet another mild Canadian CPI result and more softness in retail sales. On the latter, he noted, sales fell for the third month in a row in March, and are now up a "paltry" 1.9% from a year ago, or just 0.8% in real terms, and "deeply negative" on a per capita basis. "Sluggish spending is clearly cooling underlying inflation," Holt said, before adding: "All the major measures of core CPI rose just 0.1% m/m in April (seasonally adjusted), holding the annualized increases below the 2% target since the start of the year."

For Porter, the bottom line is that central banks will do what needs to be done for their domestic economies. But, he said, with the Fed standing pat for a long stretch, the Canadian dollar will come under some renewed downward pressure if it appears the Bank will diverge by more than one easing step from the Fed. Any such currency move would reinforce an easier policy stance, which likely means that the BoC will need to do less on the rate front than would otherwise be the case, he added. "So, yes, the potential for a lighter loonie will indeed limit the degree to which the Bank will ease. We continue to pencil in cuts in the June, September and December meetings (i.e., every other 2024 decision), based on the assumption that there will be a line of sight to Fed rate cuts at some point in the second half of the year."

Of commodities, gold traded lower despite a weaker dollar, following on from three days of losses that cut the metal's price by US$102.00 per ounce after the metal closed at a record on Monday. Gold for August delivery was last seen down $1.30 to US$2,358.40 per ounce. The metal hit a record US$2,461.70 per ounce on Monday.

But West Texas Intermediate crude oil rose off a three-month low, climbing for the first time in five sessions even as demand remains light at the start of the U.S. driving season. WTI crude for July delivery closed up $0.85 to settle at US$77.72 per barrel, while July Brent crude, the global benchmark, closed up $0.76 to US$82.12.