Canada’s Stock Index Rally

By Sanchayaita Roy

(Reuters) – Canada’s main stock index extended its record rally for the fifth straight session on Friday, following unexpected job losses in August and increasing expectations for a potential interest-rate cut by the Bank of Canada this month.

The S&P/TSX composite index rose 0.4% to 29,026.81 points, poised for an all-time closing high if gains were maintained. This marks its fifth consecutive week of growth, setting up for a record weekly close.

Data indicated that there were nearly 1.6 million unemployed individuals in Canada in August, resulting in a significant job loss. The unemployment rate climbed to a nine-year peak, excluding the pandemic years.

In the U.S., job growth also weakened sharply in August and the unemployment rate rose to 4.3%, reinforcing the view that labor market conditions were softening and supporting the case for an interest-rate cut from the Federal Reserve this month.

“A 66k employment decline in Canada in August followed a 41k contraction in July, highlighting the trade war’s impact on Canadian labor markets,” said Claire Fan, senior economist at Royal Bank of Canada.

“The negative job market report today increases the likelihood that the BoC could find it necessary to cut interest rates further.”

Money markets adjusted their expectations for a 25 basis-point interest-rate cut on September 17, raising the odds to nearly 92% following the jobs report, up from 72% previously.

The BoC has kept rates unchanged at 2.75% during its last three meetings since March.

Canada’s 10-year bond yields dipped 6.7 basis points to a two-month low of 3.28%, providing a boost to equities.

Separate data revealed that Canada’s economic activity barely grew in August amid declining employment and cooler prices.

Ten of the TSX’s 11 sectors saw gains, with technology stocks leading, increasing by 2.2%. Electronics manufacturing firm Celestica surged 7.8% to reach a record high.

Conversely, energy stocks fell 1.1% as oil prices continued to decline for a third session.