TORONTO — Canada’s main stock index soared as the loonie fell after the governor of the Bank of Canada signalled in a speech it would be taking a more cautious approach on any future rate hikes.
The Toronto Stock Exchange’s S&P/TSX composite index climbed 135.54 points to 15,609.66 on the strength of broad-based gain that saw all major sectors, excluding gold, push ahead.
The Canadian dollar was trading at an average price of 80.57 cents US, down 0.27 of a cent.
Central bank governor Stephen Poloz stressed Wednesday there’s no prearranged route for further interest rate hikes after the sizzling national economy motivated him to raise the rate once in July and again earlier this month.
The speech marked the first public comments by Poloz since the bank drew criticism for its communications approach ahead of the September hike, which caught many forecasters off guard.
“So the major changes in his tone were that he’s going to monitor very closely movements in the long-term rates,” said Macan Nia, a senior investment strategist at Manulife Investments.
“And I think the one line that really stuck out for market participants was that he said there’s no predetermined path for interest rates. As a result you saw the Canadian dollar sell off and you saw the TSX rally.”
Nia said Poloz’s announcement was a primary driver for financials in particular. Also helping the TSX, he added, was the continuation of positive news about oil markets and a “bullish oil sentiment” over the past couple of weeks.
The November crude contract was up 26 cents to US$52.14 per barrel.
On the corporate front, Bombardier Inc.’s (TSX:BBD.B) shares lost more than seven per cent to close at $2.10 as investors weighed the prospect of a 220 per cent duty on U.S. sales of its flagship CSeries passenger jets and the European merger of two railway rivals.
South of the border, New York stock indices jumped after a U.S. Labor Department report showed business investment rose in August for the second month in a row. Investors hope that means U.S. manufacturing is getting stronger as the global economy continues to improve.
The Dow Jones industrial average was up 56.39 points to 22,340.71. The S&P 500 index added 10.20 points to 2,507.04 and the Nasdaq composite index advanced 73.10 points to 6,453.26.
Investors also eyed a proposed tax plan by President Donald Trump and congressional Republicans that cuts tax rates for individuals and corporations, reduces the number of personal tax brackets, and nearly doubles the standard deduction used by most Americans. They propose to cut the top corporate tax rate to 25 per cent from its current 35 per cent.
However, with months of negotiations likely ahead and many key details missing, it’s not clear what kind of plan might ultimately pass.
“With the long-anticipated Trump tax reform package, you saw markets didn’t react either way immediately,” said Nia. “It’s short on details.”
Elsewhere in commodities, the December gold contract was down $13.90 to US$1,287.80 an ounce.
The November natural gas contract gained six cents to US$3.06 per mmBTU and the December copper contract edged up a penny at US$2.93 a pound.
– With files from The Associated Press.
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David Hodges, The Canadian Press