Markets

Update: TSX Sheds 72 Points on Weaker Commodity Prices as Bank of Canada Stands Pat on Rates

Canada's main stock market was lower Wednesday, tracking alongside weakness in the Dow, as commodity prices declined, including oil and gold, and the Bank of Canada kept interest rates on hold. The S&P/TSX Composite Index shed 72 points or 0.5% to close at 15,472. The Dow lost 79 points whiel the S&P500 was flat.

The TSX healthcare sector led decliners, losing 2% as cannabis stocks declined. Materials and energy were also weaker as gold shed 0.6% and crude oil was down 2.3%. Financials were flat, while tech was the only sector in the green, up 0.9%.

In stock news, heavily traded Aurora Cannabis (ACB.TO) shed 4% while Canopy Growth (WEED.TO) was also off 4%. Bombardier (BBD-B.TO), also among the most active stocks today, lost 2%. Transcanada (TRP.TO) lost 2% while Great Canadian Gaming (GC.TO) surged 12% on a positive report from RBC.

In economic news, there were few surprises from the Bank of Canada today as the central bank maintained its overnight rate target at 1.25% and presented another cautious statement, which financial markets had been mostly braced for. The statement adopted an appropriately cautious and data-dependent tone, as expected. On trade, they say policy developments are "an important and growing source of uncertainty for the global and Canadian outlooks," in light of disappointments on NAFTA re-negotiations and recently proposed U.S. trade tariffs on steel and aluminum. In the wake of the recent federal budget, the Bank has made no specific changes for the outlook for growth and inflation (to be incorporated in the Bank's April projection). However, with few significant new measures adopted and deficit projections largely unchanged, any adjustments should be modest.

Canada productivity improved 0.2% in Q4 (q/q, sa) after a revised 0.5% decline in Q3 (was -0.6%). Hours worked grew 0.2% in Q4 (q/q, sa) after the 0.8% run-up in Q3. GDP expanded 0.4% in Q4 following a 0.2% gain in Q3. Unit labour costs jumped 1.5% in Q4 after a matching 1.5% bounce in Q3, contrasting with the declines in Q1 (-0.3%) and Q2 (-0.7%). This report is largely as expected, with the firmness in until labor costs tracking the pick-up in compensation costs revealed in the employment report. For 2017, productivity improved 2.1% after 0.6% gain in 2016. Meanwhile, Canada's trade deficit narrowed to -$1.91 billion in January from a revised -$3.05 billion shortfall in December (was -$3.19 billion). But that is where the good news ends, as exports contracted 2.1% in January (m/m) while imports tumbled 4.3%. The decline in imports was paced by a 11.3% plunge in industrial machinery, equipment and parts. Imports declines across all subsectors. Exports were led lower by a 5.7% drop in motor vehicles and parts, with Statistics Canada citing "atypical plant closures" as driving the decline in January. This is a disappointing report that adds to the recent data supportive of no change in BoC rates through mid-year, or perhaps for all of 2018, according to some economists.

The Canadian dollar shed about a fifth of a cent to 77.48 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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