TSX hits 2-week low as rising interest rates hit sentiment

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TSX hits 2-week low as rising interest rates hit sentiment

TSX hits 2-week low as rising interest rates hit sentiment
Image source: © Rido | Megapixl.com

Highlights

  • The S&P/TSX composite index ended down 228.54 points, or 1.1%, at 20,563.89 on Thursday, June 9.
  • This was the Canadian benchmark index’s lowest closing level since May 26.
  • The TSX's heavily weighted financial services group fell 1.2%, while technology also ended 1.2% lower.

Canada's main stock index fell to a two-week low on Thursday, including declines for financial and resource shares, as the prospect of rising interest rates globally to tackle inflation pressures weighed on investor sentiment.

The Toronto Stock Exchange's S&P/TSX composite index ended down 228.54 points, or 1.1%, at 20,563.89, its lowest closing level since May 26.

One-year price chart (June 9) of S&P/TSX

One-year price chart (June 9) of S&P/TSX. Analysis by © 2022 Kalkine Media®

"I think that (the drop in Canadian shares) is probably a reaction maybe to the reality sinking in that interest rates are on the rise everywhere and that the outlook for stock markets generally will remain subdued," said Stuart Cole, the head macroeconomist at Equiti Capital.

"The ECB in a sense was the last bastion of a loose monetary policy, and now that has gone too."

Also read: TSX soars past 21,000 points despite energy in red, loonie gains

The European Central Bank confirmed it would end a long-running bond-buying scheme on July 1 and signaled a string of interest rate hikes from July as it battles stubbornly high inflation.

US stocks were also solidly lower as investors grew cautious ahead of data on Friday that is expected to show that consumer prices remained high in May.

Bank of Canada Governor Tiff Macklem said inflation would dictate how fast Canadian interest rates go up, reiterating that the bank might need to make more increases in a row or consider a move larger than 50 basis points.

The Toronto market's heavily weighted financial services group fell 1.2%, while technology also ended 1.2% lower.

It included a decline of 8.4% for the shares of enterprise software solutions company Enghouse Systems Ltd, adding to the previous day's sharp slide.

The materials group, which includes precious and base metals miners and fertilizer companies, lost 1.4% as gold and copper prices fell.

Energy gave back some recent, falling 1%, as US crude oil futures settled 0.5% lower at $121.51 a barrel.

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