TSX Closer: Down For Third Session In Four On Profit Taking, Easing In Gold Price and Rates Uncertainty

04:21 PM EDT, 10/21/2025 (MT Newswires) -- The Toronto Stock Exchange closed lower on Tuesday for the third time in four sessions as the pace of profit taking increases, the gold price eases and a September inflation report only muddied the water further for the Bank of Canada in terms of whether or not it should cut its benchmark interest rate again before the end of this month.

Today, the S&P/TSX Composite Index dropped 527.62 points, or 1.7%, to 29,888.82, representing a rare close these days below the 30,000 mark, and big drop from last Wednesday's record finish at 30,637.12. Most sectors were lower, led by Base Metals down near 4.5% on lower gold. Also, Health Care was down near 1.7% and Info Tech was 1.25% lower. The Battery Metals Index was up 2.5%.

It wasn't all bad news on the economic front. Prime Minister Mark Carney confirmed there is a possibility for a new sectoral tariff deal with the United States by the end of this month, even if he is cautioning against being overly optimistic, CTV News reported. On his way into a cabinet meeting Tuesday morning whether Canada can expect a deal with the United States on sectoral tariffs by APEC, Carney said "we'll see", before adding: "We're in ongoing discussions with the Americans, and you know ... I wouldn't overplay it." Government sources, meanwhile, told CTV News they are hopeful there could be movement on a steel and aluminum deal with the United States this week.

But Derek Holt, Head of Capital Markets Economics at Scotiabank, in his analysis of today's other big economic news; the release of September inflation numbers, said if the Bank of Canada again moves to cut interest rate next week, "it should be a careful, hawkish sounding cut."

The key, Holt said, is that each of the main core measures of inflation were "well within" the flexible 1-3% headline inflation target range and were "likely overstated by mechanistic seasonal adjustments that may not be appropriate".

Holt cited one chart showing the trimmed mean and weighted median core measures that were both 2.8% m/m at a seasonally adjusted and annualized rate (SAAR), a second chart showing the traditional core CPI measure that only excludes food and energy and was 2.3% m/m SAAR, and a third chart showing the pattern over 2025 for all three measures. "They've generally been trending within the target range for a while now," he said.

Holt also cited a chart showing core goods inflation was weak as the pressure came from the services side of the picture, saying the BoC will "mostly welcome the breadth reading". They show that the share of the CPI basket that is cruising above 3% or 4% m/m SAAR is between roughly one-third and 40%, he noted.

Holt said another chart demonstrates that traditional core CPI was among the lowest on record for like months of September over time, adding what propped up the SA reading for traditional core in m/m SA terms was a high seasonal adjustment factor. "Statcan will say that the SA factor is just a mechanistic outcome of applying standard X12A seasonal adjustment methodologies that are commonly used by many data agencies. That's not the same as saying we should take it at face value."

Another chart applies different SA factors drawn from the history of SA factors for months of September to show how core CPI would have changed. At most other SA factors in time, traditional core CPI would have been weaker than reported and possibly even negative, he said.

According to Holt, there is plenty of precedence to cut after the average of Trimmed Mean and Weighted median CPI landed at about 2.75% m/m SAAR. "In fact," he said, "they've done so a half dozen or so times in the past," before he added: "I think the BoC will work the flexible inflation target range that [BoC Governor] Macklem keeps emphasizing and deliver easing next Wednesday but with a hawkish sounding and noncommittal feel."

Elsewhere, David Doyle, head of economics at Macquarie Group, said underlying inflation measures are likely to moderate further ahead, noting the output gap is "sizeable" with mounting evidence of labour market softness. Doyle noted the BoC's Business Outlook Survey (BoS) released Monday suggested a subdued outlook, soft growth expectations, and weak demand. He also noted shelter disinflation has further to run, while weak market rents, soft housing activity, and challenged home prices should feed through into measured inflation over time. "Base effects suggest YoY measures are likely to moderate ahead," he added.

Macquarie continues to see a 25 bps cut ahead next week. While the OIS market implied probability fell to 65%, Macquarie sees odds of this as higher at 80%." Beyond this," Doyle said, "the outlook becomes murkier in our view. While our base case remains that next week will mark the final cut, risks lie in the direction of further easing with another 25 bps cut possible in either December or January."

Of commodities, gold fell off a record high Tuesday amid profit taking and a rising dollar. Gold for December delivery was last seen down $230.40 per ounce to US$4,129.00 per ounce, dropping off from Monday's record close.

But West Texas Intermediate crude oil closed higher, rebounding from the lowest level in more than five months even as concerns that production is outpacing demand persist. WTI crude oil for November delivery closed up $0.30 to settle at $57.82 per barrel after falling to the lowest since May 7 a day earlier, while December Brent crude was last seen up $0.30 to $61.31.

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