The Canadian dollar soared on news that the country’s annual inflation rate accelerated to 2.1% last month to reach its highest mark in nearly a year, as the Toronto stock index hit another record high.
The loonie closed at an average trading price of US78.53¢, up 0.66 of a U.S. cent as Statistics Canada said Thursday that its inflation reading for November came in hotter than the 1.4% number for October compared with a year earlier.
The surprising result — boosted by higher costs for gasoline and air transportation — means the annual pace of inflation, which had slowed to a two-year low of 1% in June, has now climbed above the Bank of Canada’s ideal target of 2%.
Economists said the inflation reading reinforced their expectations that Bank of Canada governor Stephen Poloz will resume raising rates over the coming months — the next one is scheduled for Jan. 17.
“The prediction now is three interest rate hikes in Canada next year after two this year,” said Michael Currie, vice-president of TD Wealth Private Investment Advice. “There’s not concern of more than three rate hikes but there is worry they might come sooner than later.”
On Bay Street, the S&P/TSX composite index was up 22.96 points to 16,182.63, led by gains in the energy and health-care sectors. It’s the second consecutive trading session that the commodity-heavy TSX has reached an all-time high.
“Utilities and REITs ironically are the weakest sectors today,” noted Currie. “They’re not down by much but those two are the sectors most affected by rates going up. So I think people are playing a little bit of that on the stock side as well on the economic side.”
South of the border, U.S. stocks closed higher, erasing modest losses from a day earlier. U.S. market indexes have risen over the past few weeks as Washington moved closer to passing its tax overhaul, but they haven’t done much over the last several days as Congress voted on the bill.
In New York, the Dow Jones industrial average was up 55.64 points to 24,782.29. The S&P 500 index added 5.32 points to 2,684.57 and the Nasdaq composite index was up 4.40 points to 6,965.36.
“The bears are having a hard time getting any traction in the States,” said Currie. “We saw a microscopic pullback yesterday and it looks like we’re right back on the upward trajectory again. It almost seems like no news is going to pull back the U.S. markets.”
In Canadian corporate news, shares of Bombardier Inc. were up 5¢, or 1.66%, to $3.07. The company has signed a deal with Mercitalia Rail, a major freight rail operator in Italy valued at approximately $316.8 million. Also, Toronto regional transit agency Metrolinx says it is cutting more than half of the light rail vehicles from a $770-million supply order with Bombardier.
On the commodities front, the February crude contract was up US27¢ to US$58.36 per barrel and the January natural gas contract was down US4¢ to US$2.60 per mmBTU.
The February gold contract added US$1.00 to US$1,270.60 an ounce and the March copper contract was up US2¢ to US$3.22 a pound.