Rate Decision Uncertainty Weighs on Canadian Equities; Banks Exercise Caution Ahead of Central Bank Announcements

Canadian equities retreated on Tuesday as market participants adopted a defensive posture, awaiting critical monetary policy decisions from both the Bank of Canada and the U.S. Federal Reserve. The S&P/TSX Composite Index declined 52.50 points to close at 31,049.28, representing a 0.17% decrease from Monday’s finish.

Policy Signals and Market Sentiment

The hesitancy permeating trading floors stems primarily from differing signals regarding future rate trajectories. On October 29, the Bank of Canada reduced its overnight rate target by 25 basis points to 2.25%, establishing the bank rate at 2.5% and the deposit rate at 2.20%. However, third-quarter GDP data revealing a 2.6% annualized expansion has complicated expectations for another December rate cut, prompting investors to exercise instruments of caution rather than commit to aggressive positioning ahead of the central bank’s December 10 announcement.

South of the border, speculation about Kevin Hassett potentially succeeding Jerome Powell as Federal Reserve Chair has garnered optimistic market responses, given Hassett’s known preference for accommodative monetary policy.

Sectoral Performance and Economic Backdrop

Only two of eleven sectors posted positive returns, with financials leading gainers at 0.70% and technology advancing 0.29%. Conversely, materials (-1.81%), energy (-1.59%), healthcare (-1.41%), and consumer staples (-1.29%) experienced notable headwinds.

The domestic economy faces concurrent headwinds from external trade pressures. The Canada-U.S.-Mexico Agreement underwent scrutiny following August’s U.S. tariff implementations on non-CUSMA Canadian exports, impacting automobile, steel, aluminum, and lumber sectors. In response, Canadian leadership has pivoted toward diversification, with Canada recently joining the European Union’s Security Action for Europe (SAFE) defense initiative—a $170 billion rearmament program established following geopolitical tensions in Eastern Europe.

Individual Stock Movements

Banking sector strength appeared concentrated among specific institutions. Bank of Nova Scotia reported fourth-quarter 2025 earnings of $1.39 per share with $7.06 billion in quarterly revenue and $2.2 billion net income for the October-ending period, gaining 2.80%. National Bank of Canada (+1.79%), Canadian Imperial Bank of Commerce (+1.48%), and Laurentian Bank (+18.39%) recorded notable appreciation.

Technology exhibited mixed performance, with Shopify advancing 4.90% and Docebo rising 3.37%, while Energy Fuels contributed 6.97% gains. Conversely, precious metals miners faced significant selling pressure—Kinross Gold (-3.13%), Triple Flag Precious Metals (-3.14%), and SSR Mining (-3.50%) led declines amid subdued gold valuations. Imperial Oil (-3.51%) and Advantage Oil & Gas (-3.21%) suffered alongside broader energy weakness, while Curaleaf Holdings retreated 4.42%.

Market participants now await earnings announcements from remaining major Canadian banks—Royal Bank of Canada, TD Bank, BMO, and National Bank—which may influence near-term positioning and sentiment dynamics heading into the final weeks of the year.