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Canadian stocks rise as central bank expects interest rates to remain low

Xinhua, September 21, 2016 Adjust font size:

Canada's main stock market Tuesday closed higher for the second day after Bank of Canada Governor Stephen Poloz suggested adopting a low interest rate in the immediate future.

The Toronto Stock Exchange's benchmark Standard & Poor's/TSX Composite Index gained 25.75 points, or 0.18 percent, to close at 14,521.98 points. Seven of the index's ten sub-sectors rose during the trading day.

The market was anxiously waiting for the result of the U.S. Federal Reserve's two-day meeting due to conclude on Wednesday to determine if an interest rate raise is warranted.

During his Tuesday afternoon speech titled 'Living with Lower for Longer' in Quebec City, Poloz wanted individuals and businesses to plan for a long period of lower interest rate, which has not exceeded 1.0 percent since 2009.

"We need to prepare for lower (interest rates) for longer," Poloz said. "Individuals need to plan for retirement with different assumptions about longevity, interest rates and growth."

"Businesses need to make sure their expectations about investment returns reflect the current and future reality and reconfigure their investment plans accordingly," he added.

Brian DePratto, economist at TD Bank, agreed with Poloz's remarks.

"We are inclined to agree with the governor. Aging population and slower productivity growth mean that the 'cruising speed' of the Canadian economy will continue to tick lower in coming years," said DePratto.

"We think the Bank of Canada is unlikely to increase interest rates until early 2019. Today's comments only reinforce this view," he added.

The Information Technology sector gained 1.28 percent on Tuesday. Constellation Software Inc. shares increased 2.04 percent to 584.88 Canadian dollars (442.70 U.S. dollars), while shares of Waterloo-based Blackberry Limited rose 3.10 percent to 9.98 Canadian dollars (7.55 U.S. dollars).

The TSX IT group is up 3.79 percent over the last seven trading days

TSX energy group fell 1.03 percent as Encana Corporation shares slumped 7.6 percent to 12.04 Canadian dollars (9.11 U.S. dollars) after the Calgary-based firm announced the intent to sell 1 billion U.S. dollars of shares to repay debt and fund drilling operations in Texas.

The Canadian dollar was slightly down to close at 0.7569 U.S. dollars on Tuesday compared to Monday's closing rate of 0.7574 dollars. Endit