TSX closes higher as Trump delays tariffs on EU

Canadian stocks closed higher, mirroring Monday's results and furthering a record high, after President Trump delayed EU tariffs, easing trade war fears; the S&P/TSX gained 0.75%. Scotiabank reported mixed earnings, while Hudson's Bay announced significant layoffs and store closures. Telus announced a C$70 billion investment in network upgrades. U.S. markets also surged, driven by the tariff news, while investors are closely watching NVIDIA's upcoming earnings as a key indicator for the AI and semiconductor sectors.

Analysis

Global equity markets, particularly in Canada and the U.S., experienced a significant uplift following U.S. President Donald Trump's decision to delay proposed 50% tariffs on European Union goods until July 9, alleviating immediate trade war concerns. Canada's S&P/TSX Composite index gained 0.75%, or 195.9 points, reaching a new record high, while the S&P/TSX 60 index rose 0.9% or 13.2 points. In Canadian corporate news, Scotiabank (TSX:BNS) reported mixed results with a 9% year-over-year revenue increase but a decline in EPS, though its stock closed 1.6% higher. Conversely, Hudson's Bay (NYSE:HUD) announced the termination of over 8,300 employees and upcoming store closures by June 1, following its liquidation sale. In a significant development, Telus Corp (TSX:T) unveiled a C$70 billion investment plan over the next five years, targeting network and operational upgrades in fibre, 5G, AI, and rural access. The positive sentiment also permeated U.S. markets, which were closed on Monday for Memorial Day; the S&P 500 surged 2.1% (118.7 points), the Nasdaq Composite climbed 2.5% (462 points), and the Dow Jones Industrial Average increased 1.8% (740.6 points), recovering from losses of 2% or more in the previous week. This rally occurred despite a reported 6.3% drop in U.S. durable goods orders for the last month, following a revised 7.6% gain in March. Investor attention is keenly focused on NVIDIA’s (NASDAQ:NVDA) upcoming earnings, viewed as a critical indicator for the AI and semiconductor industries. In commodity markets, oil prices edged lower, with WTI Crude down 0.7% to $61.08 a barrel and Brent Crude down 0.03% to $63.70, as traders awaited an OPEC+ meeting discussing output adjustments. Gold prices also declined, with Gold Spot dropping 1.2% to $3,300.71/oz and Gold Futures falling 2% to $3,327.30/oz, as the tariff delay reduced demand for safe-haven assets. The article also noted King Charles III opening Canada's Parliament, affirming national stability.

Key Decisions for Investors

• Investors should recognize the current market rally is primarily driven by temporary tariff relief, and therefore monitor ongoing trade negotiations closely, as the U.S. tariff delay on EU goods is set only until July 9.
• For Scotiabank (BNS), the dichotomy of 9% YoY revenue growth alongside declining EPS warrants careful scrutiny of underlying profitability drivers and future earnings guidance, despite the positive short-term stock reaction.
• Telus's (T) C$70 billion five-year investment plan in advanced technologies like 5G and AI suggests significant long-term growth potential, but investors should also assess the potential impact of this substantial capital expenditure on near-term free cash flow and leverage.
• NVIDIA's (NVDA) upcoming earnings are a crucial catalyst to watch, as they will likely provide key insights into the health and trajectory of the broader AI and semiconductor sectors, potentially influencing tech market sentiment significantly.
• The decline in gold prices indicates a shift towards risk-on sentiment, while cautious trading in oil ahead of the OPEC+ meeting suggests ongoing uncertainty in energy markets; these trends should be monitored for broader asset allocation considerations.
• The impending closure of Hudson's Bay stores and substantial layoffs mark a significant contraction in the retail sector; investors should consider potential impacts on commercial real estate, competitors, and regional employment.