The U.S. Bureau of Labor Statistics delivered April's Producer Price Index at 8:30 AM, and the TSX opened into a number that was significantly hotter than any forecast. PPI rose 1.4% month-over-month, double the 0.5% consensus, pushing the annual rate to 6.0%, the highest since December 2022. The immediate market reaction was not panic. It was differentiation. The stocks that benefit from elevated oil stayed firm. The stocks that benefit from a weaker dollar and lower rates came under pressure. That split is the TSX story this morning.
WTI crude is trading near $101.10 per barrel. Brent is near $107.40. Both are edging modestly lower from Tuesday's close but remain well above the Bank of Canada's Q2 assumption of approximately $90. Canadian energy names, which drove Tuesday's 0.4% TSX gain with Canadian Natural Resources up 4.1%, Imperial Oil up 2.6%, and Cenovus up 3.2%, are carrying their momentum into Wednesday's session. The hot PPI does nothing to reduce the Strait of Hormuz supply risk that underpins every barrel of that premium.
Gold's Problem with the PPI Number
Gold is the inverse of this morning's read. The metal was trading near $4,700 per ounce going into the open, pulled back from its recent highs as U.S. dollar strength — itself a consequence of the inflation data — weighs on the commodity. Barrick Gold fell 2.4% on Tuesday. Wheaton Precious Metals lost 0.5%. The dynamic is not complicated: a strong dollar makes gold more expensive for non-U.S. buyers, reducing demand, and hot inflation data that pushes Fed rate expectations toward a hold rather than a cut reduces the opportunity cost of not holding gold only if rates actually fall. When inflation is high and rates stay elevated, gold loses the tailwind of falling real yields.
Franco-Nevada's Q1 2026 earnings call this morning illustrates the tension. The royalty company reported record quarterly results — record revenue, record operating cash flow, record adjusted EBITDA — built on gold prices that have averaged near all-time highs through the quarter. The stock entered today up approximately 71% over the past year. But the same dollar strength that makes this morning's PPI number a problem for the BoC is a headwind for gold, and a headwind for gold is a headwind for Franco-Nevada's royalty stream valuation even after a record quarter.
The chart above shows the TSX composite's sector composition against the year-to-date performance of its three dominant blocs — energy, financials, and materials — illustrating how differently the Iran war has treated each component of the index.
The TSX's YTD performance is almost entirely explained by two sectors moving in opposite directions for different reasons. Energy is up on Hormuz supply risk. Information Technology is down 27% as rate uncertainty and stagflation fears compress growth multiples. The other eight sectors are broadly flat to modestly positive or negative.
Banks: Reading Both Sides of the Same PPI Print
Canadian bank stocks occupy the most complicated position in today's session. RBC gained 1.0% and TD gained 0.8% on Tuesday, suggesting the market is still treating the banks as beneficiaries of a stable-to-modestly-improving rate environment. But this morning's PPI data cuts both ways for bank earnings. On the positive side, a rate hike scenario — which the PPI number makes more plausible if it passes through to Canadian CPI on May 19 — widens net interest margins and supports bank profitability. On the negative side, a rate hike into a soft Canadian labour market raises credit risk and potentially slows mortgage origination just as fixed-rate renewals are already straining household balance sheets.
BMO's announcement Tuesday of its agreement to sell its transportation and vendor finance businesses to Stonepeak is a separate but related signal: the bank is lightening its balance sheet exposure to rate-sensitive, capital-intensive lending precisely when the rate environment is most uncertain. The CAD/USD opened this morning at 1.3711, the weakest end of its recent range, reflecting the risk-off tone the PPI print introduced. A weaker CAD benefits Canadian exporters — energy companies among them — but raises import costs and adds another channel through which U.S. inflation can transmit to Canadian consumer prices.
The session's dominant catalyst through the afternoon will be the Trump-Xi summit, which opens in Beijing on Thursday morning local time. Any early signal of a substantive Iran discussion between the two leaders, or any leak of a potential Hormuz framework, will move energy names, gold names, and the CAD simultaneously. The TSX's sector composition makes it one of the most direct markets in the world for expressing a view on the summit's outcome. Energy and materials together account for approximately 45% of the index by weight. When both of those sectors are moving in the same direction at the same time — which they rarely do — the composite moves accordingly.