TORONTO — Canada’s resource-linked main stock index fell on Tuesday as the prospect of further interest rate hikes by the Federal Reserve bolstered the U.S. dollar at the expense of commodity prices and added to recent worries about the economic outlook.
The Toronto Stock Exchange’s S&P/TSX composite index ended nearly 1% lower at 19,368.69.
Wall Street also lost ground as investors braced for a three-quarters of a percentage point rate hike by the Fed, led by Chair Jerome Powell, at a policy decision due on Wednesday.
Investors have worried that aggressive tightening by the Fed to tackle inflation could trigger a recession.
“I guess everybody is waiting for Mr Powell’s next move and the uncertainty around that,” said Michael Sprung, president at Sprung Investment Management.
“The real question is, if we are going into a recession how deep is it likely to be?”
The TSX has a weighting of nearly 30% in resource shares, so a global economic downturn could be a particular headwind.
A stronger U.S. dollar could also hurt the index if it weighs on commodity prices, Sprung said.
The greenback was trading near a two-decade high against a basket of major currencies, while gold, copper and oil prices fell. U.S. crude futures settled 1.5% lower at $84.45 a barrel.
The materials group, which includes precious and base metals mining and fertilizer companies, lost 1.1%. Energy was down 0.3% and financials, which are also heavily weighted, ended 0.9% lower.
Canada’s annual inflation rate slowed to 7% in August, below analyst forecasts of 7.3% and down from 7.6% in July, but analysts doubted it would derail further expected rate hikes from the Bank of Canada.
“I think (the BoC) is still going to do at least 50 basis points in October,” said Jimmy Jean, chief economist at Desjardins Group. (Reporting by Fergal Smith; Additional reporting by Sruthi Shankar and Shashwat Chauhan in Bengaluru Editing by Anil D’Silva and Alistair Bell)