The TSX composite closed at 35,950.37 Tuesday, down 0.9%, as rising global bond yields pressured financials and gold miners even as energy names extended a rally that has now pushed Brent crude to $95.70 in early Wednesday trading. Two catalysts are driving today’s session: the Bank of Canada’s rate decision at 9:45 a.m. ET, and a fresh leg higher in oil after a U.S. strike on Iranian positions tied to a threat against the Strait of Hormuz.
Energy Extends Its Rally While Banks and Miners Retreat
Canadian Natural Resources, Suncor and Cenovus each added roughly 2% Tuesday as Brent extended its August climb. Royal Bank of Canada fell 0.92%, TD Bank dropped 1.84% and Bank of Montreal declined 0.86% as investors reassessed the path for interest rates. Shopify fell more than 3.5%, extending technology’s underperformance. Agnico Eagle fell nearly 3%, and Barrick, Wheaton Precious Metals and Franco-Nevada each lost roughly 2% as gold gave back part of its August gain.
The TSX composite’s daily close over the past month shows the same shape as gold’s: a steady climb to a summer high on August 25, followed by a retreat as bond yields moved higher.
Daily close data. The August 25 high coincided with peaks in gold and Brent crude on the same trading day; the subsequent retreat tracks a broad reassessment of interest rate expectations.
What Today’s Two Catalysts Mean for the Index
A seventh consecutive Bank of Canada hold at 2.25%, the outcome markets are pricing for this morning’s decision, would be unlikely to move the index much on its own. The bigger swing factor is oil. Brent’s climb to $95.70 following the August 30 strike on Iran’s Larak Island extends a rally that has already pushed Canadian energy names higher through August, and further escalation would widen the gap between the index’s energy weighting and everything else.
That divergence, energy higher, financials and miners lower, is the setup investors are trading into today’s open. The index’s direction from here depends less on the Bank of Canada’s decision, which is close to fully priced, than on whether the Hormuz situation continues to escalate or stabilizes.