Toronto stocks rise as soft inflation data boosts rate cut hopes

TORONTO: Canada’s main index edged up on Tuesday, helped by gains in industrials and telecom stocks, as cooler-than-expected domestic inflation data kept the door open for the Bank of Canada to cut interest rates.

At 9:44 a.m. ET (1344 GMT), the Toronto Stock Exchange’s S&P/TSX composite index was up 0.12% at 27,956.08 points, hovering near record levels.

A Reuters poll released on Tuesday found

the index is set to extend its record-setting run this year and next as lower borrowing costs and potential greater clarity on US tariffs offset expected pressure on corporate profits.

Canada’s annual inflation rate eased to 1.7% in July from 1.9% in the prior month as lower year-on-year gasoline prices kept the consumer price index low, but core measures of inflation stayed sticky, data showed on Tuesday.

The annual rate of consumer price inflation moved further below the midpoint of the Bank of Canada’s 1% to 3% target range.

Two-year government bond yields, influenced by short-term policy expectations, were down about 3.5 basis points at 2.704%.

Odds for a quarter-point rate cut by the BoC next month stood at about 40%, above 31.4% seen earlier in the day. Allan Small, senior investment advisor at Allan Small Financial Group with iA Private Wealth, said that the inflation being well below the BoC’s target and hits to the economy due to tariffs support the case for a rate cut.

Meanwhile, Air Canada rose 2% after its unionized flight attendants reached an agreement with the country’s largest carrier to end a strike.

Sector-wise, capped communications and industrials led the gains, rising 0.5% and 0.4%, respectively.

Information technology and healthcare lost around 0.6% each. Heavyweight energy fell 0.2%, as crude prices fell on the rising chances of an end to sanctions on Russian crude.