TSX confirms correction as investors fret about inflation outlook

·2 min read
FILE PHOTO: The facade of the original Toronto Stock Exchange building is seen in Toronto

By Fergal Smith

TORONTO (Reuters) - Canada's main stock index fell into correction territory on Wednesday as investor worries about the outlook for inflation offset higher commodity prices.

The Toronto Stock Exchange's S&P/TSX composite index ended down 52.81 points, or 0.3%, at 19,837.25, its lowest closing level since July 2021.

It took the TSX's losses since the March 29 closing record high to 10.2%. A correction is confirmed when an index closes 10% or more below its record closing level.

U.S. stocks fell more sharply after U.S. consumer price index data did little to ease investor worries over the outlook for inflation and interest rates.

"Canadian and U.S. economies are closely linked. Therefore, I think you can expect the market to use the U.S. release as a pointer for the Canadian figure next week," said Stuart Cole, head macroeconomist at Equiti Capital.

Canada's inflation report for April is due next Wednesday. Money markets expect the Bank of Canada to hike by half a percentage point for a second straight policy meeting on June 1 to help cool price pressures.

The Toronto market's consumer discretionary sector fell 2.5%, while information technology ended 1.6% lower.

Higher interest rates reduce the value to investors of the future cash flows that technology and other high-growth sectors are expected to produce.

In contrast, the energy sector rallied 1.5%, helped by a rebound in crude oil as flows of Russian gas to Europe fell. U.S. crude oil futures settled nearly 6% higher at $105.71 a barrel.

Shares of Endeavour Silver Corp rose 7.7% after the company reported upbeat first-quarter results. That helped the materials group, which includes precious and base metals miners and fertilizer companies, to post a modest gain, advancing 0.3%.

Gold was up 0.8% at about $1,853 per ounce.

(Reporting by Fergal Smith in Toronto; Additional reporting by Amal S in Bengaluru; Editing by Matthew Lewis)