Bay Street Seen Opening Higher Again

Canadian shares are poised to extend gains following President Trump's tariff delay on EU goods, though weaker crude oil and metal prices may limit upside for energy and materials stocks. Bank of Nova Scotia reported a slight decrease in net income for Q2, while Canadian wholesale sales saw a decrease in April. The S&P/TSX Composite Index closed at a new high on Monday, driven by gains in technology, real estate, industrials, and consumer discretionary sectors.

Analysis

The Canadian equity market is poised for continued positive momentum, buoyed by the U.S. deferral of 50% tariffs on EU imports until July 9th. This development contributed to the S&P/TSX Composite Index achieving a new closing high of 26,073.13 (+0.75%) and an intraday record of 26,123.23 on the preceding trading day, with technology, real estate, industrials, and consumer discretionary sectors exhibiting notable strength. However, this optimism faces headwinds from declining commodity prices: West Texas Intermediate crude oil futures fell 0.57% to $61.18 per barrel, gold futures dropped 2.17% to $3,292.60 per ounce, and silver futures decreased 1.54% to $33.090 per ounce, which may suppress performance in the energy and materials sectors. Corporately, Bank of Nova Scotia (BNS.TO) reported a marginal year-over-year decline in its second-quarter net income to $2.03 billion from $2.09 billion, and its adjusted net income decreased to $2.07 billion from $2.10 billion. Concurrently, Canadian economic indicators revealed a 0.9% contraction in wholesale sales for April, a downturn from the 0.2% growth observed in March of 2025, suggesting potential moderation in domestic economic activity.

Key Decisions for Investors

• Investors may find continued near-term support for Canadian equities, especially in sectors like technology and consumer discretionary, following the U.S. tariff deferral on EU goods, but should closely track trade developments approaching the July 9th deadline.
• Exercise caution regarding investments in the energy and materials sectors due to significant recent declines in crude oil, gold, and silver prices, which could pressure sector earnings and valuations.
• Scrutinize financial sector holdings, particularly Bank of Nova Scotia, following its reported slight decrease in Q2 earnings, and factor in the contraction in Canadian wholesale sales as a potential indicator of broader domestic economic trends.