TSX hits two-week low as financials track bond yields lower

Thu Apr 13, 2017 5:12pm EDT
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By Fergal Smith

TORONTO (Reuters) - Canada's main stock index fell on Thursday to the lowest in more than two weeks as declining bond yields pressured the heavyweight financials group, while resource shares also lost ground.

Canada's 10-year yield dropped below the 1.50 percent threshold for the first time in nearly five months, tracking a drop in U.S. Treasury yields as U.S. President Donald Trump's favorable view of low interest rates intensified a bond market rally that was underpinned by geopolitical tensions in Syria and North Korea.

News of a massive bomb dropped by the United States in eastern Afghanistan added to uncertainty ahead of a holiday weekend in the United States and Canada.

"Long-term interest rates have moved down, meaning there is a squeeze on margins (of banks) here," said Ian Nakamoto, equity specialist at MacDougall, MacDougall & MacTier, a division of Raymond James.

Royal Bank of Canada (RY.TO: Quote) fell 1.5 percent to C$94.67, while the overall financials group lost 1 percent.

Wall Street also closed lower as investors weighed earnings from big U.S. banks, while investors have scaled back hopes for quick implementation of market-friendly policies by the Trump administration, including financial sector deregulation and tax reform.

"I think we got ahead of ourselves thinking things were going to be done quicker," Nakamoto said.

The Toronto Stock Exchange's S&P/TSX composite index .GSPTSE closed down 112.92 points, or 0.72 percent, at 15,535.48, its lowest close since March 27.   Continued...

A man walks past an old Toronto Stock Exchange (TSX) sign in Toronto, June 23, 2014. REUTERS/Mark Blinch