Canadian equities extended their recent winning streak on Friday, bolstered by cooling concerns regarding U.S. Federal Reserve interest rate hikes. Following weaker-than-expected U.S. nonfarm payrolls data, investor sentiment shifted toward gold-linked metals, sparking a surge in the materials sector that drove the broader market higher.
The benchmark S&s/TSX Composite Index maintained positive momentum throughout the session, eventually settling at 35,274.84, representing an increase of 308.17 points, or 0.88%.
Market performance was widespread, with ten of the eleven sectors posting gains. The materials sector led the rally, fueled by strength in precious metals.
Geopolitical developments also influenced market sentiment. A Memorandum of Understanding signed between the U.S. and Iran on June 17 has paved the way for a 60-day ceasefire and the reopening of the Strait of Hormuz. While tensions briefly escalated over recent maritime incidents, both nations have since reconciled and halted direct attacks. Market optimism has been further bolstered by reports that the U.S. administration is prioritizing diplomatic channels to resolve ongoing negotiations.
The economic backdrop was shaped by U.S. labor market data released prior to the July 4th holiday. The nonfarm payrolls report showed only 57,000 jobs were added in June, falling significantly short of the 110,000 forecasted and the 129,000 reported in May. This softer-than-anticipated employment data led investors to scale back bets on aggressive interest rate hikes, providing a tailwind for gold prices.
According to the CME Group’s FedWatch Tool, market participants currently see a 21.90% probability of a quarter-basis-point rate hike at the upcoming July 28-29 Federal Reserve meeting, while there is a 78.10% probability that rates will remain within the current 3.50% to 3.75% range.
Domestically, Canadian investors are closely monitoring the U.S. administration’s decision regarding the renewal of the Canada-United States-Mexico Agreement. On July 1, the U.S. declined to renew the trilateral pact for a new 16-year term, citing trade deficits and structural concerns. U.S. Trade Representative Jamieson Greer indicated concerns regarding Canada’s growing economic ties with China, suggesting the U.S. may prefer bilateral negotiations with Canada and Mexico individually.
While the CUSMA framework remains in effect and subject to annual reviews until its expiration in 2036, formal bilateral negotiations between the U.S. and Canada have yet to commence.
On the economic front, Canada saw a quiet trading day with no major data releases.
Leading the sector gains were Materials (2.44%), Healthcare (1.29%), Industrials (0.90%), IT (0.79%), Consumer Discretionary (0.76%), and Energy (0.62%). Real Estate, Utilities, Financials, and Communication Services also saw modest increases ranging from 0.10% to 0.60%.
Notable individual gainers included Southern Cross Gold Consolidated Ltd (9.56%), Discovery Silver Corp (9.09%), Wesdome Gold Mines Ltd (8.11%), 5N Plus Inc (6.57%), Sienna Senior Living Inc (2.29%), and Gfl Environmental Inc (7.60%).
The Consumer Staples sector was the lone major decliner, with Empire Company Ltd (1.40%), Western George (0.99%), Metro Inc (0.81%), Loblaw CO (0.67%), and The North West Company Inc (0.12%) among the notable losers.