Financials help push index in Toronto to record high, U.S. markets mixed

The TMX Group logo, home of the TSX, is shown in Toronto on June 28, 2013. THE CANADIAN PRESS/Aaron Vincent Elkaim

TORONTO - Canada's main stock index started the week down slightly as North American markets took a pause from recent extreme volatility.

The relatively flat day follows a selloff in August and a steady rebound that brought equity markets near their all-time highs, says Craig Fehr, Canadian markets strategist, Edward Jones.

"I think we're now entering a period where the market has digested both the worrisome news that we saw earlier in August around tariffs and the recession threats and the inverted yield curve and then priced in the realization that it doesn't appear like we're on a crash course for recession and that the trade front might not be simply a one-sided path to a trade war," he said in an interview.

Fehr said it's natural for equity markets to take a pause ahead of the next meaningful data that would see them move up or down.

"I think it's reasonable that we could see equity markets kind of tread a bit of water in anticipation of next week's Fed meeting," he added.

Analysts are expecting the U.S. central bank to cut interest rates by 25 basis points but there's disagreement about whether it would be followed by further cuts.

"The fairly solid jobs report from last week probably took 50 basis points off the table," Fehr said.

"To the extent that we continue to see labour market data that shows sub-four per cent unemployment and that wages are rising at a reasonable pace, I don't think that there's a huge impetus for the Fed to have to embark on a steady and rather aggressive loosening campaign."

The S&P/TSX composite index closed down 40.24 points at 16,495.09 after hitting an intraday high of 16,566.74.

Eight of the 11 major sectors of the TSX moved lower. The key materials sector decreased 1.8 per cent with shares of Kinross Gold Corp. and Barrick Gold Corp. falling.

The December gold contract was down US$4.40 at US$1,511.10 an ounce and the December copper contract was down 0.65 of a cent at US$2.63 a pound.

Technology shares fell on both sides of the border. Shopify Inc. was down 5.9 per cent while Blackberry Ltd. was 3.4 per cent lower.

In the U.S., tech shares fell on intensifying antitrust actions by the government on big firms including Google.

"Nothing concrete at this stage but I think the markets are a little bit skittish on tech in anticipation of more clarity around what potential action might be coming from the Department of Justice as they probe into the practices of some of the country's largest tech companies," said Fehr.

The energy sector gained 2.3 per cent as Encana Corp., Crescent Point Energy Corp. and Canadian Natural Resources each gained more than three per cent.

The October crude contract was up US$1.33 at US$57.85 per barrel and the October natural gas contract was up 8.9 cents at US$2.59 per mmBTU.

Crude prices rose after Saudi Arabia's new energy minister confirmed that there would be no radical change in his country's oil policy.

The heavyweight financials sector rose as the inverted yield curve wasn't getting worse.

In New York, the Dow Jones industrial average was up 38.05 points at 26,835.51. The S&P 500 index was down 0.28 points at 2,978.43, while the Nasdaq composite was down 15.64 points at 8,087.44.

The Canadian dollar traded for an average of 76.02 cents US compared with an average of 75.91 cents US on Friday.

Companies in this story: (TSX:ECA, TSX:CPG, TSX:CNQ, TSX:SHOP, TSX:BB, TSX:K, TSX:ABX, TSX:GSPTSE, TSX:CADUSD=X)

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