TORONTO – Canada’s main stock index ended Tuesday down nearly a percent across the board, similar to losses in US stock markets a day before the Federal Reserve’s latest interest rate decision.
The S&P/TSX Composite index closed up 193.69 points at 19,368.69 after trading as low as 19,246.77 in the afternoon.
The falls in the Toronto market came despite Statistics Canada’s August inflation data coming in below analysts’ expectations, slightly dampening expectations for the Bank of Canada’s next rate hike. However, the Canadian data was overshadowed by events in other markets, said Portfolio Management Corp. chief executive Anish Chopra.
“US markets and what is happening in Europe are driving much of the action. You still get high inflation readings across Europe. If you look at the United States, investors are waiting for the Fed’s policy decision.”
The Fed has long been expected to hike interest rates by three-quarters of a percentage point on Wednesday, but the chances of an even higher hike have increased following last week’s better-than-expected US inflation data, Chopra said.
“The more inflation data comes in, the more likely we are to go up 100 basis points tomorrow.”
Expectations of upcoming rate hikes put pressure on a number of sectors and key commodities such as oil, gold and copper on Tuesday.
The declines included sharper declines in growth-oriented stocks such as Shopify Inc., down 5.2 percent, and the broader S&P/TSX information technology index, down 2.2 percent, while the base metals index fell 1.6 percent and the financials index 0.9 percent.
In New York, the Dow Jones Industrial Average closed up 313.45 points at 30,706.23. The S&P 500 Index fell 43.96 points to 3,855.93, while the Nasdaq Composite fell 109.97 points to 11,425.05.
Canadian inflation data, which came in at 7.0 percent last month, came in below consensus expectations of 7.3 percent, slightly lowering expectations of a half-a-point rate hike next month, Chopra said.
Easing expectations for Canadian rate hikes coupled with rising expectations in the US helped push the loonie further lower, which traded at 74.93 US cents compared to 75.26 US cents on Monday.
“There is a problem in that the Bank of Canada might slow rate hikes but the US will continue to cut its interest rate path and that is putting pressure on the Canadian dollar,” Chopra said.
The loonie slipped from around 78 US cents in mid-August on interest rate expectations and falling commodity prices.
On Tuesday, the November crude oil contract fell $1.42 to $83.94 a barrel and the October natural gas contract fell 3.5 cents to $7.72 a mmBTU.
The December gold contract fell $7.10 to $1,671.10 an ounce and the December copper contract fell a penny to $3.50 a pound.
This report from The Canadian Press was first published on September 20, 2022.
Company in this story: (TSX:GSPTSE, TSX:CADUSD=X)