Canada’s main stock index hit a new record high on Thursday, as the latest U.S. inflation data did little to shift expectations that an interest rate cut by the U.S. Federal Reserve is likely next week.
The Toronto Stock Exchange’s S&P/TSX composite index was up 0.41% at 29,305.85 points, eclipsing previous session’s record level.
Data showed on Thursday that U.S. consumer prices rose more than expected in August, but a surge in first-time applications for unemployment aid last week kept the Fed on track to cut interest rates next Wednesday.
This follows the recent economic indicators that have showed continued labor market weakness, which prompted traders to fully price in at least a 25-basis-point rate cut at the Fed’s September 16–17 meeting.
Pricing now reflects bets on three straight quarter-point cuts, one at each meeting left this year.
“The Fed is going to focus on the weakness in jobs above the inflation and they will cut rates,” said Allan Small, senior investment advisor of the Allan Small Financial Group with iA Private Wealth.
“The Bank of Canada is going to have to follow along with the Fed …. the BoC should be even more aggressive because they have perhaps an inflationary issue, a small one, and we don’t have one at all.”
Money markets expect an 81% chance of a 25 basis-point interest-rate cut by the BoC on September 17, according to data compiled by LSEG
TSX’s consumer discretionary subindex led sectoral gains on Thursday, climbing 1.2% after Magna International rose 1.8%. The Canadian auto parts supplier said on Thursday it had appointed Philip D. Fracassa as its new Chief Financial Officer.
Rate sensitive real estate stocks rose modestly.
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