Canada's main stock market in Toronto on Wednesday soared more than 200 points for a second consecutive day as the U.S. Federal Reserve announced its decision to raise interest rates, which is in line with investors' expectation. The Toronto Stock Exchange's benchmark Standard & Poor's/TSX Composite Index jumped 246.51 points, or 1.91 percent, to 13,166. 08 points on the closing bell.
All the major sectors gained momentum except Energy, which edged down 0.64 percent over the falling oil prices,as the market digested in advance the impact of the Fed's interest rate increase, which was generally considered as a negative drag on the equities market.
As near-universally expected, the Federal Open Market Committee (FOMC), the policy-setting arm of the Fed, on Wednesday announced an increase of 25 basis points in the federal funds target rate, according to James Marple, a senior economist and director from TD Economics.
"The important part of this statement was not the rise in interest rates, which came as a surprise to no one, but the message it gave to financial participants on the path of future rate hikes," said the Fed, reaffirming that the pace of rate hikes would be slow and gradual. Meanwhile, the Canadian equities market gained strength when investors showed more confidence in the U.S. economic growth.
The Fed's expectations for rate hikes next year are set alongside a relatively cautious and entirely achievable economic outlook. Even with ongoing drag from the external sector, the fundamentals for domestic demand have improved over last year, James Marple said.
Heavyweights from most of the major sectors in TSX moved higher, as the gold producer Barrick Gold Corporation rallied 7.78 percent to 10.53 Canadian dollars (about 7.64 U.S. dollars) a share, Canada's insurance giant Manulife Financial Corporation advanced 1.69 percent to 21.03 Canadian dollars, and the drug maker Valeant Pharmaceuticals International Inc. also resumed the rising streak to soar 9.23 percent to 163.57 Canadian dollars per share.
On the currency front, the U.S. central bank rate increase shows divergence in monetary policies between the U.S. and Canada. "Due to the high debt ratio in Canada, Bank of Canada (BOC) will keep interest low, which will help drag down the loonie (the Canadian currency).
And weaker Canadian dollar will boost export and stimulate Canadian economy, this might be the hidden agenda of BOC, especially considering the worsening domestic economic data," Fan Yang, Fellowship of Canadian Securities Institute (FCSI), told Xinhua Monday.
The FCSI is the most senior credential in Canadian financial services. The Canadian dollar on Wednesday lost ground to be traded at 0. 7254 U.S. dollar, when compared with 0.7282 U.S. dollar Tuesday.
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