TSX gives back much of weekly gain on Fed rate hike jitters

·2 min read
The Toronto Stock Exchange sing is seen in Toronto

By Fergal Smith

TORONTO (Reuters) - Canada's main stock index fell on Friday, pulling back from its highest level in nearly one month the day before, as robust U.S. jobs data bolstered expectations for aggressive interest rate hikes by the Federal Reserve.

The Toronto Stock Exchange's S&P/TSX composite index ended down 241.08 points, or 1.2%, at 20,790.73, after posting on Thursday its highest closing level since May 4.

For the week, the index was up 0.2%, its third straight weekly advance.

U.S. stock indexes also fell on Friday after U.S. data showed that nonfarm payrolls rose by 390,000 jobs last month, while the unemployment rate held steady at 3.6%, signaling a tight labor market.

"With nonfarm payrolls indicating continuing job growth, and average hourly earnings indicating high wage inflation, investors don't appear to be seeing any reason for the Fed to slow its monetary tightening program," said Colin Cieszynski, chief market strategist at SIA Wealth Management.

Canada's central bank on Wednesday raised interest rates by half a percentage point for the second straight policy meeting.

Higher rates reduce the value of future cash flows to investors, which is a particular headwind for high-growth technology companies.

On the Toronto market, shares of e-commerce giant Shopify Inc tumbled 11.2%, while the technology sector ended 3.7% lower.

The consumer discretionary group fell 2.5%, while heavily-weighted financials were down 1.1%.

The materials group, which includes precious and base metals miners and fertilizer companies, lost 1.8% as gold prices fell.

Among the few sectors that gained ground was energy. It ended up 0.3% as oil prices rose.

U.S. crude prices settled 1.7% higher at $118.87 a barrel on expectations that OPEC's decision to increase production targets by slightly more than planned will not much affect tight global supply.

(Reporting by Fergal Smith; Additional reporting by Amal S in Bengaluru; Editing by Sandra Maler)

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