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Canadian Inflation Cools Beyond Expectations as Energy Stocks Drag TSX

In a surprising turn of events, the annual inflation rate in Canada slowed down more than anticipated in October. This unexpected cooldown has fueled speculation that the Bank of Canada’s (BoC) interest rates may have peaked. Furthermore, weak crude prices have taken a toll on heavyweight energy shares, contributing to the decline in Toronto stocks.

At 10:04 a.m. ET (1504 GMT), the Toronto Stock Exchange’s S&P/TSX composite index (.GSPTSE) was down 0.17% or 35.37 points. Energy stocks (.SPTTEN) experienced a sectoral decline of 1.0% as oil prices dipped, reversing the gains made in recent trading sessions. Worries over deeper supply cuts led investors to show caution.

However, the spotlight was on Canada’s annual inflation rate, which dropped more than anticipated to 3.1% in October. Additionally, core inflation measures reached their lowest levels in about two years. These figures have closed the door to the possibility of further rate hikes.

Analysts surveyed by Reuters had predicted inflation to settle at 3.2% after September’s rate of 3.8%. According to Doug Porter, the chief economist at BMO Capital Markets, the inflation figures are generally encouraging and may be perceived positively by the Bank of Canada. Porter adds that this data is indeed a step in the right direction for the central bank.

The cooling inflation could pave the way for potential rate cuts in the future. Rate-sensitive stocks typically benefit from declining inflation. Nonetheless, cautious sentiment prevailed among investors ahead of the release of the U.S. Federal Reserve’s minutes from its November meeting, where they hope to gain insight into the future interest rate trajectory.

Technology and real estate stocks also experienced slight declines of 0.3% and 0.5%, respectively, mirroring the sentiment on Wall Street. On a positive note, the Canadian dollar strengthened by 0.3% against the U.S. dollar.

In company news, Capital Power (CPX.TO) saw its shares plummet by 6.3% after announcing its acquisition of two natural gas-fired generation facilities in California and Arizona for $1.1 billion.

Despite the market fluctuations and weakening energy stocks, the unexpected drop in inflation rates has opened up discussions about the future of Canadian monetary policy. As investors continue to assess the overall economic landscape, the Bank of Canada will need to carefully consider its next steps in light of these developments.


What was the annual inflation rate in Canada in October?

The annual inflation rate in Canada in October was 3.1%.