Financials buoyed by inflation report
A report showing Canada’s inflation rate declined in December gave financials issues a boost on Friday, but not enough to outweigh declines in the energy sector, which made for a choppy trading day in Toronto.
Canada’s benchmark S& P/ TSX composite index spent the better part of the day in negative territory, but managed a late afternoon rally to close at 12,397.10, up 16.41 points, or 0.13% — a 1.35% gain on the week.
Seven of the 10 sub- indexes declined on Friday, with financials ( 0.87%), telecommunications ( 0.13%) and utilities ( 0.07%) the only advancers.
Bank stocks gained with the inflation report, which said consumer prices rose 2.3% in December from a year earlier, short of economists’ expectations of 2.7% and down from 2.9% in November. The year- over- year decline was largely due to a drop in gasoline prices, Statistics Canada said. Core inflation, which strips out volatile items including some food and energy products, was 1.9%.
“This is the inflation report that the Bank of Canada had been dreaming about in light of what had been its aggressive inflation view from the October Monetary Policy Report that was then revised higher in this week’s MPR,” said Scotia Capital Economists Derek Holt and Dov Zigler. “Inflation ended the year slightly softer than the Boc’s revised MPR forecasts, but is generally tracking in line with BOC expectations.”
Royal Bank of Canada’s share price rose 1.41% to $ 53.85 on Friday, while TorontoDominion Bank gained 1.19% to $ 79.15.
The Canadian dollar erased some of its earlier losses but ended the day down 18 basis points, at US98.70¢, as the inflation report was read to mean that the Bank of Canada would be unlikely to raise its key rate in the near term.
The price of crude oil slipped US$ 2.19 to US$ 98.20 a barrel on Friday due to reports showing that manufacturing in China has contracted, and as Greek debt talks entered a third day, giving rise to fears that the European economy will slow. Gold gained US$ 9.50 to US$ 1,664.00 an ounce.
In the U. S., the Dow Jones industrial average advanced 96.50 points, or 0.76%, to 12,720.48 after a report showed existing home sales rose 5% in December, and as analysts responded positively to earnings results from IBM, Microsoft and
Intel. The Nasdaq composite index was just below flat with a loss of 1.63 points, or 0.06%, to 2,786.70.
“Earnings growth is going to decline, but that’s already built into the market to a certain extent. If earnings don’t collapse, it won’t be a problem,” Bruce Bittles, chief investment strategist at Milwaukee- based Robert W. Baird & Co., told Bloomberg.