TSX slides as inflation, stronger loonie cloud sentiment

TORONTO (Reuters) - Canada’s main stock index fell on Friday, led lower by bank and gold mining shares, as concerns about the impact of a stronger Canadian dollar and higher inflation on the economy clouded sentiment.

A sign board displaying Toronto Stock Exchange (TSX) stock information is seen in Toronto June 23, 2014.REUTERS/Mark Blinch

Domestic data showed that Canada’s annual inflation rate ticked higher in July, suggesting price pressures are picking up after June’s subdued reading and clearing the way for the Bank of Canada to raise interest rates in the fall. The news helped lift the Canadian dollar. [CAD/]

“As the inflation rate ticks up, the Bank of Canada can be more aggressive in terms of raising rates” and that could slow the economy, said Manash Goswami, a portfolio manager at investment firm First Asset, adding that a stronger currency could also pose a headwind for the country’s exporters.

The index’s losses stood in contrast to U.S. stocks, which rebounded in a volatile session on reports that President Donald Trump fired his controversial chief strategist Steve Bannon. [MKTS/GLOB]

The Toronto Stock Exchange’s S&P/TSX composite index finished down 81.31 points, or 0.54 percent, at 14,952.33.

Healthcare was the only sector that advanced.

Manulife Financial Corp fell 2.4 percent to C$24.50, while the overall financials group declined 0.5 percent.

The materials group gave up 1.1 percent, hurt by gold mining stocks that reversed course after the price of gold cooled. Prices had jumped to their highest in more than nine months on geopolitical worries, but came under pressure following news of Bannon’s firing.

Barrick Gold fell 1.9 percent to C$20.95, while Goldcorp Inc slumped 3 percent to C$16.20.

Technology stocks retreated 0.9 percent with CGI Group Inc down 1.3 percent at C$62.67. Absolute Software Corp slumped 6.6 percent to C$7.46 after it reported fourth quarter results that missed expectations.

The broader energy group was off 0.1 percent, even as the price of oil jumped 3 percent. U.S. crude prices settled at $48.51 a barrel. [O/R]

“I think for the Canadian markets to catch fire you are going to need the energy sector to do a lot better. A lot of foreign investors don’t want to be in Canada unless they see energy recovering,” said Goswami.

Industrials fell 1 percent, as Canadian National Railway Co fell 1.2 percent to C$100.00.

Declining issues outnumbered advancing ones on the TSX by 165 to 76, for a 2.17-to-1 ratio on the downside.

Reporting by Solarina Ho and Fergal Smith; Editing by Meredith Mazzilli