Canadian equities sank further on Red Tuesday as investors expected what was expected to be a very large Bank of Canada interest rate hike and the latest US inflation data on Wednesday.
The S & P / TSX Composite Index closed Tuesday’s session at 138.16 points, or 0.73 percent, down from 18,678.64. It is the third consecutive day of losses for the TSX.
Energy stocks suffered a blow with U.S. benchmark oil that fell to a three-month low due to concerns about how demand could be affected by an economic slowdown. West Texas Intermediate sank between $ 8.25 and $ 95.84 a barrel.
New Gold was the worst performing stock on the TSX. Shares fell 26.4 percent, or $ 0.33, to $ 0.92 after the miner cut its production outlook for that year and warned of higher costs and expenses amid a retreat to its Rainy River operations.
It was a hectic trading session for US markets, which spent part of the day in positive territory, only to record general declines in closing. The S&P 500 lost 0.92%, the Dow fell 0.62% and the Nasdaq fell 0.95%.
The latest US inflation is due to be released on Wednesday and Wall Street expects June prices to rise 8.8% year-on-year, the biggest jump since 1981.
“No one really wants to touch this market. And as you say, there’s a tug-of-war between recessions and soft landing and what will happen to inflation,” said Pierre Ouimet, chief investment strategist at UBS Canada. in an interview Tuesday.
Right now it’s kind of a race to the finish line: who will blink first? Will it be inflation or will it be the Fed? So we are in no man’s land and until there is more clarity on this, probably the best thing to do is to remain prudent. “
He said he is positioning the client portfolio to be defensive.
“We were a bit positive in the whole commodity spectrum, but this is starting to relax quite substantially. There is also a great inclination of value towards portfolios in general, which brings cyclical stocks and commodity stocks, which are extremely cheap, ”Ouimet said.
“And most of our portfolios have a lot of alternative investments, which aren’t largely correlated: private equity, hedge funds, real estate, things like that, structured products, for example. It’s kind of safe place to be “.
The Canadian dollar was trading lower at 76.82 US cents
On Tuesday earlier, the slight fell about a quarter of a cent against the green dollar, on a second consecutive day of selling pressure amid the strength of the US dollar. This is despite expectations that the Bank of Canada will raise its policy rate by three quarters of a point on Wednesday.
“The question now is whether Canada can afford 75 basis points, given our heavy reliance on the housing market, financial assets and the like to basically drive consumer spending?” Lyle Stein, president of Forvest Global Wealth Management Inc., said in an interview Tuesday.
“I agree with the view that we need to reduce inflation, but this could be much more painful than it could be 75 basis points in the US,” Stein said.
Despite the recent weakness of the Canadian dollar against the world reserve currency, Stein said it has not fallen as far as other currencies, such as the euro, due to an aggressive central bank.
“The bad news is that the Canadian dollar is at a 52-week low. However, compared to the rest of the world, we look pretty smart,” Stein said.