Tuesday, February 27

TSX shares fall after jobs data reinforces aggressive rate hike bets

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Canada’s main stock index slipped on Friday as easing metal prices weighed on the resource-heavy index, while a record drop in monthly jobless rate reinforced the case for a 75-basis-point rate hike by the country’s central bank next week.

At 10:09 am ET (14:09 GMT), the Toronto Stock Exchange’s S&P/TSX composite index was down 142.57 points, or 0.75%, at 18,920.6.

Canada’s unemployment rate unexpectedly fell to a new record low of 4.9% in June, even as the economy posted a surprise decline in jobs, while wages accelerated sharply, official data showed.

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The Bank of Canada is widely expected to raise its overnight rate by a 75 basis points at its meeting next week and by another 50 basis points in September, according to a recent Reuters survey, as it looks to curb hot inflation, currently running at a near 40-year high.

“It appears in the short term that the Bank of Canada is going to follow through with a hefty rate increase because they’re more concerned about inflation,” said Lorne Steinberg, president of Lorne Steinberg Wealth Management Inc.

“Commodities have sold off due to fears of recession as the central banks keep on raising interest rates and that is what is driving the decline over the last couple of months in the Canadian stock market.”

The materials sector, which includes precious and base metals miners and fertilizer companies, lost 2% as a stronger dollar weighed on metal prices, while worries about demand in top consumer China further pressured copper prices.

Recession worries have battered equity markets globally in recent months, as central banks take aggressive measures to control inflation. The Toronto market is down 10.9% so far this year.

The financials sector slipped 0.4%.

The Toronto Stock Exchange’s S&P/TSX composite index is, however, on course to end the week higher following a rally on Thursday. (Reporting by Bansari Mayur Kamdar in Bengaluru; Editing by Anil D’Silva)