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CANADA STOCKS-TSX 'proves its worth' as inflation hedge, paring weekly decline

(Adds investor quotes and details throughout, updates prices)

* TSX ends up 39.46 points, or 0.2%, at 21,874.35

* For the week, the TSX dips 0.4%

* Energy gains 2.1% as oil prices rise

* Financials advance 0.5%

TORONTO, April 8 (Reuters) - Canada’s main stock index rose on Friday, clawing back some of this week’s decline, as investors turned to resource and financial shares for protection against rising inflation and higher interest rates.

The Toronto Stock Exchange’s S&P/TSX composite index ended up 39.46 points, or 0.2%, at 21,874.35.

For the week, the TSX dipped 0.4%. Still, it has advanced 3.1% since the start of the year, one of few major benchmarks to post gains.

“The TSX is really proving its worth at the present time when inflation is a big concern,” said Elvis Picardo, portfolio manager at Luft Financial, iA Private Wealth. “Allied to that is the expectation that rates are going to rise quite rapidly.”

As Russia’s invasion of Ukraine disrupts the global economy and drives up oil, gold and industrial metal prices, investors are embracing Canada’s commodity-linked stock market to protect their portfolios from the impact of supply shortages and soaring inflation.

Resource shares have a 27% weighting on the Toronto market, while financials account for 30%.

The Bank of Canada has vowed to fight inflation, which reached a 30-year high of 5.7% in February. Chances that the central bank would hike interest rates by the larger than usual increment of a half-percentage-point climbed to 90% as data showed Canada’s unemployment rate falling to 5.3% in March, the lowest level on record.

“This overweight that we have in the financials and commodities space, that’s benefiting the TSX,” Picardo said.

Financials, which tend to benefit from rising interest rates, rose 0.5%, while the energy group added 2.1% as oil prices climbed. U.S. crude oil futures settled 2.3% higher at $98.26 a barrel.

The materials group, which includes precious and base metals miners and fertilizer companies, rose 1.6%. Technology shares were a drag, falling 3.2%. (Reporting by Fergal Smith; Additional reporting by Devik Jain in Bengaluru)

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