By Ketki Saxena
Investing.com -- At the close in Toronto, the S&P/TSX Composite Index was at 18,678.64, down 0.73% in the day’s trading, pressured by the slide in Crude and expectations of a 75 basis point hike from the Bank of Canada tomorrow.
The Canadian central bank is seeking to control out of control inflation, which at 7.7% on the latest domestic reading, remains at a four decade high.
Investors worry that the increasingly aggressive moves by the Canadian central bank, while draining liquidity from markets to combat inflation, will also negatively impact growth as borrowing costs skyrocket, potentially triggering a recession in Canada and causing risk-assets to bottom out.
Some strategists say that there is a chance the central bank moves even more aggressively, hiking by 100 basis points.
The Canadian index was also pressured by a slide in crude and base metals, both declining on news of mass-testing and new covid restrictions in China, the world’s second-largest economy. Gold prices also slipped as the dollar ran strong.
The biggest gainers of the session on the S&P/TSX Composite were Bombardier Inc (TSX:BBDb) (TSX:BBDb), which rose 7.16% or 1.32 points to trade at 19.75 at the close. Canfor (TSX:CFP) Corporation (TSX:CFP) added 5.18% or 1.25 points to end at 25.40 and Air Canada (TSX:AC) was up 5.08% or 0.81 points to 16.76 in late trade.
Biggest losers included New Gold Inc (TSX:NGD), which lost 26.40% or 0.33 points to trade at 0.92 in late trade. Spartan Delta Corp (TSX:SDE) declined 6.27% or 0.72 points to end at 10.77 and ARC Resources Ltd . (TSX:ARX) shed 6.21% or 0.94 points to 14.20.
In New York, the Dow Jones Industrial Average fell 0.62%, while the S&P 500 index lost 0.92%, and the NASDAQ Composite index fell 0.95%, reversing intraday gains as rate-hike bets amp up and recession worries dominate ahead of tomorrow’s inflation data.
In Bonds and Currencies
The Canadian dollar strengthened against the USD today, as Bank of Canada rate-hike bets buoyed the loonie despite the slide in crude, and the greenback’s strength at a 20 year high.
Canadian yields were lower across the curve, tracking moves in U.S, treasuries.
Investors should also note that yields on the Canadian 2 year and 10 year remained inverted for the second day in a row, a sign traditionally considered a harbinger of a recession. Canadian yields have inverted this week for the first time since March 2020.
Canadian government bond yields were lower across the curve, tracking the move in U.S. Treasuries. The 10-year yield eased 7.2 basis points to 3.172 per cent, leaving it about 1 basis point further below the 2-year yield at a gap of 4.4 basis points in favor of the shorter-dated bond.
It is the first time since March 2020 that Canada’s curve has inverted, a phenomenon that some investors see as signaling recession risks ahead.