Commodities, banks drag TSX lower after jumbo rate hike


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Canada’s main stock index fell on Thursday as weak oil and metal prices weighed on commodity stocks and banks slid on fears that Wednesday’s surprise 100-basis-point interest hike by the central bank could hit mortgage growth.

At 10:02 a.m. ET (14:02 GMT), the Toronto Stock Exchange’s S&P/TSX composite index was down 391.4 points, or 2.1%, at 18,223.79.

Piling pressure on the commodity-heavy index, energy and materials stocks fell 4.1% and 4.4%, respectively, tracking the drop in commodity prices due to a stronger dollar and fears of a recession from aggressive monetary policy tightening across countries.

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The S&P/TSX index headed to its fifth straight session of losses after extending its losing streak on Wednesday following a full percentage point rate hike by the Bank of Canada and as data showed U.S. inflation soaring more than expected.

The financials sector fell 2.6% as investors worried that the central bank’s supersized hike could put the brakes on the country’s once-frothy housing market and weigh on banks’ profits.

“Banks do better when short term rates are lower than long term rates, so one of the impacts of that increase of 100 basis points is that it makes the yield curve flat or inverted,” said Lorne Steinberg, president of Lorne Steinberg Wealth Management Inc.

“One of two things will happen. Either we will get a recession, then the Bank of Canada at some point can start cutting rates and that will normalize the yield curve or we will escape recession and long term rates will probably rise.”

Barrick Gold Corp fell 5.8% after the miner said it expected lower realized copper prices in the second quarter.

Brookfield slid 2.8% after Deutsche Telekom agreed to sell 51% of its tower business to a consortium of the Canadian company and U.S. private equity firm DigitalBridge.

(Reporting by Bansari Mayur Kamdar in Bengaluru; Editing by Anil D’Silva)



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