TORONTO — Canada’s main stock index moved lower, lagging U.S. markets which rose even though inflation numbers hit a 39-year high.
“The worry was that things could be even worse than anticipated,” said Allan Small, senior investment adviser at IA Private Wealth.
Consumer prices jumped 6.8 per cent over the past year in line with expectations. A reading over seven per cent could have rattled markets because it wouldn’t be clear how the Federal Reserve would respond at its meeting next week.
“So I think it’s more just a bit of a relief rally today in that number,” Small said in an interview.
Canada’s inflation report will be released next week. With high inflation, Fed tapering, the Bank of Canada looking to raise interest rates and COVID-19 worries, “you’re getting what you get, which is a jittery, volatile market,” he said.
After a strong morning start, the S&P/TSX composite index closed down 34.87 points to 20,890.62 but ended the week up 1.2 per cent to snap a three-week losing streak.
In New York, the Dow Jones industrial average was up 216.30 points at 35,970.99. The S&P 500 index was up 44.57 points at 4,712.02, while the Nasdaq composite was up 113.23 points at 15,630.60.
The U.S. markets enjoyed a strong performance on the week, gaining between 3.6 and four per cent, largely on the back of a strong performance in the key technology sector.
Canada’s tech sector is smaller and lost ground on Friday with Lightspeed Commerce Inc. down 3.9 per cent, BlackBerry Ltd. off 2.3 per cent and Shopify Inc. 2.2 per cent lower.
Materials was also lower, despite higher metals prices.
The February gold contract was up US$8.10 at US$1,784.80 an ounce and the March copper contract was down nearly 4.7 cents at US$4.29 a pound.
The powerhouse energy sector was up on higher crude oil prices as Enerplus Corp. gained 2.8 per cent and MEG Energy Corp. was up 1.8 per cent.
The January crude contract was up 73 cents at US$71.67 per barrel and the January natural gas contract was up 11.1 cents at US$3.93 per mmBTU.
Crude climbed 7.6 per cent on the week to mark the first positive week after six weeks of losses.
Small said oil prices bounced back following indications that the Omicron variant won’t be as bad as Delta and OPEC and its allies maintained its plan to increase output in January.
The Canadian dollar traded for 78.65 cents US compared with 78.74 cents US on Thursday.
The heavyweight financials sector increased as bank shares rose on the prospect of higher interest rates.
It was led by Laurentian Bank Inc., whose shares increased 5.7 per cent, after raising its dividend and reporting stronger core results.
“Whenever you have a higher interest rate environment, banks are going to win out,” said Small, noting they will be helped by higher net interest margins and lower loan losses.
“As interest rates rise in this country and in the U.S., I definitely think financials is a way to invest in that environment.”
This report by The Canadian Press was first published Dec. 10, 2021.
Companies in this story: (TSX:LB, TSX:LSPD, TSX:BB, TSX:SHOP, TSX:ERF, TSX:MEG, TSX:GSPTSE, TSX:CADUSD=X)
Ross Marowits, The Canadian Press