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Canadian stocks lower as market concerned with U.S. rate hike

Xinhua, May 20, 2016 Adjust font size:

Canada's main stock market in Toronto went lower Thursday as market watchers attributed to continuing fallout from Wednesday's surprise news about a possible rate hike by the U.S. Federal Reserve at its June meeting.

The Toronto Stock Exchange's benchmark Standard & Poor's/TSX Composite Index lost 8.69 point, or 0.06 percent, to close at 13,817.32 points. Five of the TSX index's eight main sub-sectors were lower.

In commodities, the June contract for gold bullion was down 19.60 U.S. dollars, or 1.54 percent, to settle at 1,254.80 dollars per ounce, while July copper shed a penny to 2.07 U.S. dollars a pound.

Crude oil was down for a second day, with the June deliver for North American benchmark crude losing 3 cents to 48.16 U.S. dollars a barrel, while June natural gas rallied 4 cents to 2.04 U.S. dollars per mmBtu.

TSX financials and industrials stocks, down 0.52 percent and 0.79 percent respectively, led the downturn in the wake of suggestions in minutes of the last meeting of the Fed in April that it might raise interest rates at its next meeting in June.

"After the minutes were released the probability for a U.S. interest rate hike in June went from 14% to 32% this morning and as a result the U.S. Dollar has jumped considerably," said Michael J Smith, a Toronto currency expert at AFEX, a global non-bank provider of foreign currency services.

However, the Bank of Canada is expected to strike a more dovish tone in its May policy statement, partly due to a still-raging wildfire in Alberta that has disrupted oil production, but a poll suggests it will not cut interest rates again.

The survey of more than 40 economists this week showed the Canadian central bank will probably not move to adjust rates again until the third quarter of next year, when it is expected to raise rates by 25 basis points to 0.75 percent.

The central bank is almost unanimously expected to leave rates unchanged when it makes its policy announcement on May 25, with most of those polled arguing a rate cut was not the right remedy for a likely temporary setback for the economy.

Meanwhile, the National Energy Board has recommended that the Canadian federal government approve the contentious 6.8-billion Trans Mountain pipeline expansion with 157 conditions.

The federal regulator issued its long-awaited report Thursday on the project after a two-year debate that cost millions, galvanized aboriginal and environmental protests and prompted mass arrests.

A three-member review panel recommended Ottawa approve Kinder Morgan Canada's proposal to triple the capacity of the pipeline, which carries crude from oilsands near Edmonton to Burnaby, B.C.

The positive recommendation has cleared a major hurdle for the project, with Prime Minister Justin Trudeau's cabinet set to make a final decision by the end of the year.

The commodity-sensitive Canadian dollar was lower for a third straight session amid a drop in the price of oil, coupled with a higher U.S. dollar.

The Canadian dollar traded lower at 0.7631 U.S. dollar, compared with Wednesday's closing rate of 0.7679 U.S. dollar. Endit