Canada’s main stock index fell on Tuesday, led by declines in the materials sector, after hotter-than-expected inflation figures prompted investors to scale back bets for an imminent interest rate cut by the Bank of Canada.
At 10:07 a.m. ET, Toronto’s S&P/TSX composite index was down 1.5% at 29,968.95 points. The index is set for its worst day since April 10.
Canada’s annual inflation rate increased to 2.4% in September. Analysts polled by Reuters had forecast the annual inflation would rise to 2.3% in September from 1.9% in August.
“With the data pause that we still have because of the U.S. government shutdown…we do have to focus a lot on the Canadian economic data and, unfortunately, the news about inflation was not great,” said Douglas Porter, chief economist at BMO Capital Markets.
This was the most crucial data point to be released ahead of the Bank of Canada’s upcoming monetary policy decision later this month.
Money market expectations for a 25-basis-point cut went down to 74% from over 86% before the data was released.
On the TSX, materials took the hardest hit, falling 6.9% as gold prices retreated more than 3%, with investors booking profits after the precious metal reached a record high in the previous session.
“It is fairly clear that the material sector is going to take it on the chin today, given what’s happening in gold and silver prices,” Porter said.
Heavyweight financials gained 0.2%, benefitting from the tempered rate-cut expectations.
Rate-sensitive utilities dropped 0.7%.
On the trade front, the Globe and Mail reported that a U.S.-Canada trade deal covering steel, aluminum and energy could be ready for Prime Minister Mark Carney and U.S. President Donald Trump to sign at the Asia-Pacific Economic Cooperation summit later this month.
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