Update: TSX Declines 30 Points as Gold Prices Fall; Loonie Surges as BoC Surprises with Rate Hike

Canada's main stock market declined modestly Wednesday as the Bank of Canada surprised investors with a 25 basis point rate hike. The S&P/TSX Composite Index lost 30 points or 0.2% to close at 15,159.

The materials sector led decliners, falling 1.3% as gold and silver prices fell. Financials were also in the red, off 0.2%, while energy helped offset losses with a 1% increase on stronger crude oil prices (also up +1%).

In stock news, Hudson's Bay Company (HBC.TO) shares gained more than 7% in a late-day surge even after reporting a net loss of $201 million in its last fiscal quarter, as the department store struggles to adapt to shifting industry trends. Alimentation Couche-Tard (ATD-B.TO) was up 2.5% after the convenience store chain reported adjusted earnings of $364 million, up 17% from the same period in fiscal 2017. Centerra Gold (CG.TO) climbed 6% on reports the miner is close to a deal with the Kyrgyz Republic government related to the company's gold mine in the central Asian nation. Heavily traded Precision Drilling (PD.TO) gained 8%. Barrick Gold (ABX.TO), one of the day's most influential stocks, fell 3%.

In economic news, the Bank of Canada raised rates 25 bps to 1.00%, upending widespread expectations for a steady 0.75% setting. The announcement noted that recent data have been stronger than expected, which has in turn supported the Bank's view that growth is becoming more broad-based and self-sustaining. Consumer spending remains robust, while more widespread strength in business investment and exports is evident, the Bank said, adding that they still see a moderation in growth in the second half but the level of GDP is now higher than they had expected. As for inflation, while it remains below target, "it has evolved largely as expected in July." Future monetary policy decisions are not predetermined, they said, and will be guided by "incoming economic data and financial market developments as they inform the outlook for inflation." Meanwhile, Canada's trade deficit narrowed to -$3.0 billion in July from a revised -$3.8 billion shortfall in June (was -$3.6 billion). But that is where the good news ends. Exports tumbled 4.9% m/m in July after the 5.0% decline in June. Imports plunged 6.0% in July. The drop in imports was broad-based across sectors, and was driven by a pull-back in prices. Weaker exports were also largely due to falling prices. The trade balance with the U.S. widened to $2.9 billion in July from $1.8 billion in June. Exports to the U.S. fell 3.2% while imports from the U.S. plunged 6.7%.

The loonie gained more than a full cent on the Bank of Canada's rate hike to 81.79 US.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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