Canada’s largest stock index finished in the red for a third consecutive trading session on Friday, as banks and insurance companies lost ground.
The Toronto Stock Exchange’s S&P/TSX composite index fell 42.83 points to 16,039.26, with the financial sector down about three-quarters of a percentage point.
All the big banks reported losses as did major insurers including Fairfax Financial Holdings, which saw its shares fall $13.76 or 1.98% to $680.46 at the closing of markets.
“The bank group is kind of taking a breather this week in particular after having a pretty good year to date. I think most bank shares are up 10% this year,” said Cavan Yie, a portfolio manager at Manulife Asset Management.
“But what I think you’re seeing is investors kind of taking money off the table ahead of 2018, potentially ahead of some mortgage rule changes in Canada which are likely to impact loan growth for 2018. You’ll see lower mortgage originations and potentially lower-than-expected bank earnings.”
Canada’s banking regulator reported last month it’s going ahead with a new stress test for home buyers who don’t need mortgage insurance but who will soon have to prove they can make their payments if interest rates rise.
The move is expected to reduce the maximum amount buyers will be able to borrow to buy a home, even if they have a down payment of 20% or more, starting in January.
South of the border, markets were mixed and relatively flat a day after Wall Street was caught off guard by a proposed delay in President Donald Trump’s proposed tax plans. On Wednesday, Senate Republicans said they’re rolling out their own tax bill, which would delay Trump’s corporate tax rate cut until 2019, instead of 2018 under the House bill.
“There’s a lot of uncertainty surrounding the current regime in the U.S.,” Yie said. “Investors are taking a wait-and-see approach and not reacting right away.”
The Dow Jones industrial average declined 39.73 points to 23,422.21 and the S&P 500 index edged down 2.32 points to 2,582.30. The Nasdaq composite index eked out a 0.89 of a point rise to 6,750.94.
In currency markets, the Canadian dollar was trading at an average price of US78.85¢, up 0.06 of a U.S. cent. That marks the loonie’s third straight day of gains against a weakening greenback.
On the commodities front, the December crude contract gave back US43¢ at US$56.74 per barrel and the December natural gas contract was up a cent at US$3.21 per mmBTU.
The December gold contract fell US$13.30 to US$1,274.20 an ounce and the December copper contract was down a cent to US$3.08 a pound.