Canada’s main stock index is expected to open on a softer note

The S&P/TSX Composite Index is expected to open on a softer note as rising geopolitical tensions weigh on investor sentiment and encourage a cautious market tone. In the current session, strength in the energy sector helped support the index, limiting deeper declines.

From a technical perspective, the index continues to trade above a key rising trendline support near 32,400, a level crucial for maintaining the broader bullish structure. A sustained move below this zone could trigger short-term consolidation. On the upside, 33,500 remains the immediate resistance level, and a decisive breakout above it, backed by strong volumes, could restore bullish momentum and support further gains.

Global macro backdrop

Global markets are starting the week on a mixed note as investors continue to evaluate the outlook for interest rates and economic growth. Recent data from major economies has pointed to resilient activity but with signs of gradual moderation, keeping central banks cautious about the pace of potential policy easing.

Bond yields remain an important driver of sentiment across equity markets. Investors are closely watching whether recent economic indicators reinforce expectations that central banks could begin easing policy later this year, or whether persistent inflation pressures may keep rates higher for longer.

Asian markets ended the session with mixed performance overnight, while European equities traded cautiously in early action as investors digested economic updates and prepared for a busy week of data. 

Canada-specific themes

For Canadian investors, developments in the U.S. economy continue to play a key role in shaping market sentiment. The latest labour market data reinforced the view of a relatively resilient economy, which could influence expectations around the timing of interest rate cuts.

The Bank of Canada has signalled it will remain data dependent, closely monitoring inflation trends, wage growth and consumer demand before adjusting its policy stance. 

Commodity view — what to watch

• Crude oil: Oil prices remain a key catalyst for Canadian equities. Market participants are monitoring supply signals from major producers and the outlook for global demand. Strength in crude typically provides support to the energy sector, one of the largest components of the TSX.
• Gold: Gold prices have held near recent levels as investors maintain some defensive positioning amid economic uncertainty. Continued firmness in bullion could support shares of gold mining companies listed in Toronto.
• Base metals: Copper and other industrial metals are moving in response to global growth expectations and demand signals from China. These developments are closely watched by investors in Canada’s large mining sector.

Sector highlights

• Energy: Energy stocks are expected to be among the most active sectors, responding directly to crude oil price movements.
• Materials: Gold producers could see gains if bullion prices remain firm, while base metal miners will follow global industrial metal trends.
• Financials: Canada’s major banks may trade in line with bond yield movements and broader expectations for economic growth and lending activity.
• Technology: Technology shares could take cues from U.S. tech stocks and remain sensitive to changes in interest rate expectations.

FX and rates snapshot

The Canadian dollar is likely to track movements in crude oil and the broader direction of the U.S. dollar. Meanwhile, fluctuations in North American bond yields will continue to influence equity market valuations and sector performance.

Bottom line:

The TSX is set for a cautious start to the week as investors digest economic signals and monitor commodity prices. Energy and materials stocks are expected to play a key role in shaping the market’s early direction.