TSX falls near 1% as traders dial back rate cut expectations

Canada’s main stock index fell nearly 1% on Wednesday after the Bank of Canada (BoC) ruled out rate cuts until there were visible signs of sustained inflation drop, while a hot inflation report in the U.S. further dampened the sentiment.

At 10:14 a.m. ET (14:14 GMT), the Toronto Stock Exchange’s S&P/TSX composite index was down 207.18 points, or 0.93%, at 22,154.6.

The index is on track to log its worst day in nearly two months if declines hold.

BoC held its key rate at a near 23-year high of 5%, while Governor Tiff Macklem gave no sense of a timeline.

TSX pulls back from record highs to trade flat

Traders quickly dialed back their expectations for the timing of the next rate cut. Before the announcement, they saw an 84% chance of it coming in June but that fell to around 40%

Yield on the benchmark Canadian bond touched its highest since February at 4.35%.

Across the border, U.S. consumer prices increased more than
expected in March, data showed on Wednesday, casting further
doubt on the timing of rate cuts by the Federal Reserve.

The U.S. central bank will now wait until September before
starting to cut interest rates, traders bet after the hot data.

“Markets are nervous because we came into the year expecting
a lot of rate cuts and now reality’s setting in that there are
not going to be (as many”, said Greg Taylor, chief investment
officer at Purpose Investments.

The TSX saw a broad sell-off on Wednesday, with 10 out of 11
sectors trading in the red, and energy shares the only outliers with a 0.9% rise, tracking higher oil prices.