TSX Falls as Banks and Miners Retreat

The S&P/TSX Composite Index fell more than 1% below 35,500 on Wednesday amid elevated oil prices and rising bond yields. Crude oil climbed on persistent risks to Middle Eastern energy flows, raising inflation concerns and reinforcing expectations of a prolonged higher-interest-rate environment. The move compounded the impact of higher US deficit spending on elevated domestic yields. Canadian sovereign bonds fell, further pressuring credit-sensitive stocks. RBC shed more than 1.5%, while TD Bank, BMO, Scotiabank and CIBC lost about 2% each. Markets are pricing in at least one 25-basis-point Bank of Canada rate hike by year-end. Meanwhile, gold prices declined, weighing on miners, with Agnico Eagle, Barrick, WPM and Franco-Nevada falling around 3% each. In contrast, energy producers gained as the oil rally resumed, with Suncor, Imperial Oil and Cenovus up more than 1% each.

Futures tracking Canada’s stock market fell on Wednesday amid elevated oil prices and rising bond yields. Crude oil climbed on persistent risks to Middle Eastern energy flows, raising inflation concerns, and reinforcing expectations of a prolonged higher-interest-rate environment. This worsened the impact that higher deficit spending in the US has on elevated domestic yields. Canadian sovereign bonds fell and further pressured credit-sensitive stocks. Markets are pricing in at least one 25-basis-point Bank of Canada rate hike by year-end. Meanwhile, gold prices declined, weighing on mining stocks.

The S&P/TSX Composite Index rose 0.4% to close at 35,649 on Tuesday, nearing a one-year high as the recent global bond sell-off eased. Yields retreated from multi-year highs, offering some respite to credit-sensitive markets. RBC gained 0.6%, TD Bank added 0.5%, BMO rose 0.7% and CIBC advanced 0.9%. Utilities also gained as lower yields increased the appeal of high-dividend-paying stocks. Miners advanced as gold prices rebounded, with Agnico Eagle up 1.2% and Barrick adding 1.6%. The tech sector rose, tracking gains on Wall Street, with Shopify up 2.4%. Meanwhile, Emera (-2.9%) said it would acquire Canadian Utilities (-1.9%) in a deal that would create one of Canada’s largest power providers. ATCO (+9.2%), which holds nearly 37% of Canadian Utilities’ outstanding non-voting shares and all outstanding voting shares, said it would separate into a publicly traded industrial services company.