Toronto stocks subdued after US jobs data

Canada’s main stock index Toronto Stock Exchange was flat on Friday as the markets speculated the extent of US. interest rate cut in September after mixed jobs data.

At 10:16 a.m. ET (14:16 GMT), the Toronto Stock Exchange’s S&P/TSX composite index was down 7.92 points, or 0.03%, at 22,980.36, and looked to register a weekly decline.

US nonfarm payrolls increased less than expected in August, while the unemployment rate slipped to 4.2%, pointing to an orderly labor market slowdown that does not warrant a hefty rate cut by the Federal Reserve.

While this data could push the case for a rate cut, but it does not signal a deterioration in labor market conditions.

“We’re seeing what the Fed wants to see, which is a gradual slowdown,” said Allan Small, senior investment advisor at Allan Small Financial Group with iA Private Wealth.

Recession and labor market coming apart are not the base case here, “the soft landing is the base case,” Allan Small added.

Investors remain conflicted between a 25-basis-point cut and a mighty 50-bps in September, odds of which are 53% and 47%, respectively.

In Canada, the unemployment rate rose to 6.6% in August, surging past a seven-year high excluding the pandemic years of 2020 and 2021.

Meanwhile, the Canada Ivey Purchasing Managers seasonally adjusted index fell to 48.2 in August from 57.6 in July, showing a contraction in economic activity.

These data show the domestic economy has slowed under higher interest rates, which might push the Bank of Canada to further reduce its benchmark rate after the Wednesday’s 25-basis-point cut.

Canada’s materials sector lagged its peers and fell 0.9% as it tracked losses in gold and copper prices.

The capped communications sector rose 0.9%, supported by a 1.4% rise in communications firm Quebecor.

Among individual stocks, Enghouse Systems climbed 3.3% to top the TSX index after the software and services company posted better-than-expected third-quarter results.