Banks, energy firms weigh on Toronto index

Financials and energy sectors dragged down Canada’s main stock index Wednesday, while the loonie shone as investors took solace in a slightly more upbeat tone from the latest Bank of Canada decision.

In Toronto, the S&P/TSX composite index fell 57.45 points to 15,419.49, as the Bank of Montreal (TSX:BMO) kicked off a busy earnings week as the first of the big six Canadian banks to report its quarterly results.

BMO said higher profits from its wealth management and capital markets divisions helped it grow its second-quarter net income by 28 per cent to $1.25 billion.

Analysts noted that the results were generally in line with expectations, but that BMO’s personal and commercial banking segments in Canada and the U.S. are not showing strong earnings growth.

Its shares lost more than three per cent, or $3.15, to $91.98. The weak results also seemed to spill over to the rest of the financials sector, which fell 0.83 per cent on the TSX.

In currency markets, the loonie gained 0.16 of a U.S. cent at an average price of 74.29 cents US amid an announcement that the central bank was holding its key interest rate steady at 0.5 per cent.

The bank said there was strong economic growth in the first quarter, but noted there’s still uncertainty moving forward.

The tone was more optimistic than its last rate announcement in April, and caught analysts by surprise, said Candice Bangsund, a portfolio manager at Fiera Capital.

“All in all it was encouraging to see that they acknowledged some of that recent economic strength,” she said from Montreal. “Because they’ve largely been looking through it until now.”

Bangsund said the bank seems to have reversed their position on the possibility of cutting rates.

“I think they’re starting to prepare the market for an inevitable rate hike likely in the next year,” she said, especially if the U.S. Federal Reserve continues with their planned rate increases south of the border.