© Reuters. FILE PHOTO: The Art Deco exterior of the original Toronto Stock Exchange building is seen on Bay Street in Toronto, Ontario, Canada January 23, 2019. REUTERS/Chris Helgren
(Reuters) – Canada’s main stock index was on track to snap a seven-day winning streak on Tuesday, as the prospect of aggressive monetary tightening by the central bank raised fears of a global economic slowdown.
Record inflation in the euro zone and hawkish comments from Federal Reserve governors have fueled bets that central banks may have to tighten monetary policy sooner or earlier, leaving investors worried about the hit to economic growth.
The Bank of Canada is expected to raise its overnight interest rate by 50 basis points to 1.5% on Wednesday in an effort to rein in soaring inflation, which hit a more than three-year high in April.
The Toronto Stock Exchange’s S&P/TSX composite index fell 212.29 points, or 1.01%, to 20,707.11 after gaining 4% over the past seven sessions.
“The Fed is going to have to raise rates more than the market expects to lower inflation. It’s going to be negative,” said Bill Harris, partner and portfolio manager at Avenue Investment Management in Toronto.
“In the fall, earnings do take a hit because we’re going to be facing more recessionary economies than the market predicts.”
Data on Tuesday showed Canada’s economy grew less than expected in the first quarter, weighed down by a drop in exports.
The tech and health care sectors were the biggest losers, both falling more than 2%, while the energy sector was down 1.1% despite higher oil prices.
The biggest gainers on the TSX were Yamana Gold (NYSE:) Inc shares rose 4.4% after South Africa’s Gold Fields (NYSE:) Ltd bought the gold miner for $6.7 billion.
Cenovus Energy (NYSE:) Inc rose 1.6% after announcing that the West White Rose oilfield project offshore Newfoundland and Labrador, Canada, will restart in 2023. It quickly gave up gains and caught up with a broader decline.