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TSX falls on weaker gold prices but loonie rises on strong jobs report

A TSX tote board is pictured in Toronto, on Dec.31, 2012. THE CANADIAN PRESS/Frank Gunn
September 06, 2019 - 2:37 PM

TORONTO - Canada's main stock index was weighed down Friday by weakening gold prices but the loonie climbed to its highest level in more than a month following a strong jobs report.

The Canadian dollar traded at an average of 75.91 cents US, the highest level since July 30, and compared with an average of 75.60 cents US on Thursday, after Statistics Canada reported the economy added 81,100 jobs last month.

The dollar has gained nearly one cent since the Bank of Canada on Wednesday kept its overnight interest rate steady at 1.75 per cent. That was reinforced by the jobs report that exceeded expectations.

"The likeliness of a Bank of Canada rate cut at the next meeting is probably a little bit less than it was prior to the announcement on Wednesday and I think the jobs numbers here continues to support that notion," said Kevin Headland, senior investment Strategist at Manulife Investment Management.

The S&P/TSX composite index closed down 39.48 points at 16,535.33 on a broad-based decline led by materials as gold fell further from its six-year high. The sector decreased 2.3 per cent as shares in miners including Barrick Gold Corp. and Kinross Gold Corp. closed lower.

The December gold contract was down US$10 at US$1,515.50 an ounce and the December copper contract was down 0.8 of a cent at US$2.63 a pound.

Energy was one of seven major sectors on the TSX to lose ground. It decreased despite the price of crude oil rising on hope that a trade deal between the U.S. and China will salvage global demand.

The October crude contract was up 22 cents at US$56.52 per barrel and the October natural gas contract was up 6.1 cents at US$2.50 per mmBTU.

Health care, financials, consumer staples and telecommunications closed higher.

In New York, the Dow Jones industrial average was up 69.31 points at 26,797.46. The S&P 500 index was up 2.71 points at 2,978.71, while the Nasdaq composite was down 13.76 points at 8,103.07.

The Dow and S&P 500 rose on expectations that weaker U.S. jobs numbers would reinforce the move for lower interest rates, added Headland.

He said there was a little worry that a robust jobs report might change the Fed's rate decision.

"The fact that the Fed is going to continue to reduce rates and that this jobs number is not changing that I think that's why the U.S. market is rallying, because the Fed is going to continue on its path."

Federal Reserve chairman Jerome Powell gave no hint about the central bank's rate plans but said in a speech in Zurich that it would "use our tools to support the economy, and that's what we'll continue to do."

Powell added that he doesn't foresee a recession.

"The most likely outlook is still moderate growth, a strong labour market and inflation continuing to move back up.”

While the global economy may not test the technical measure of a recession — at least two consecutive quarters of economic contraction — it has definitely slowed as investors wait for news on the trade war between the U.S. and China, said Headland.

"You got a nice little pop when that news came out that they were going to meet again but I do believe that it's a wait-and-see approach right now," he said.

The situation may be less bad than it was a week-and-a-half ago but a trade deal isn't likely imminent.

"I really don't think that the fundamentals are supporting a market that is just two per cent shy of record highs given some of the news underlining the positivity."

Companies in this story: (TSX:ABX, TSX:K, TSX:GSPTSE, TSX:CADUSD=X)

News from © The Canadian Press, 2019
The Canadian Press

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