TSX closes down as economic data points to more rate hikes
Canada's main stock index closed down in a broad-based decline as encouraging economic data in the U.S. renewed fears of rate hikes only a day before Canada's central bank is set to announce its latest rate decision.
The S&P/TSX composite index closed down 182.58 points at 19,088.27 as energy, health care and telecoms led declines on the first day of the shortened trading week.
Markets in the U.S. bounced up and down before ending in the red as key survey data showed the U.S. services sector expanded by more than expected in August, said Candice Bangsund, vice-president and portfolio manager with Fiera Capital.
“Today’s stronger-than-expected ISM services report, when combined with the solid labour market report on Friday, has added to the central bank’s urgency in combating the hottest inflation in four decades,” she said by email.
In New York, the Dow Jones industrial average ended down 173.14 points at 31,145.30. The S&P 500 index was down 16.07 points at 3,908.19, while the Nasdaq composite was down 85.96 points at 11,544.91.
The Canadian dollar traded for 76.11 cents US compared with 76.21 cents US on Friday as rate expectations in the U.S. helped push up the U.S. dollar.
Canadian investors are also worrying about a more immediate rate hike that could give indications of how far the Bank of Canada is willing to go to tame inflation, said Bangsund.
“Investors are bracing for tomorrow’s Bank of Canada gathering, where policymakers are widely expected to hike interest rates by 75 basis points and set the stage for further hikes to come given a worrisome inflationary backdrop that’s showing little sign of letting up.”
The S&P/TSX composite was also weighed down over worries about crude prices under pressure after further pandemic lockdowns in China, said Bangsund, though the October crude contract ended up closing up a penny at US$86.88 per barrel. The October natural gas contract was down 64 cents at US$8.15 per mmBTU.
Concerns around crude pushed the energy index on the TSX down just over two per cent, while health care was down 2.4 per cent and the telecom index was down 1.5 per cent.
A high U.S. dollar also put pressure on gold, with the December contract down US$9.70 at US$1,712.90 an ounce, while the December copper contract was up five cents at US$3.46 a pound.