Canada Stocks: TSX rises on telecoms deal hope; inverted yield curve draws caution

Fortis

12/08/2022 16:03

* TSX set to end week with gains of over 2%
    * Rogers, Shaw to sell Freedom Mobile to Quebecor
    * Canadian inflation figures eyed next week

    By Johann M Cherian
    Aug 12 (Reuters) - Canada's main stock index rose on Friday
as the country's two main telecoms firms made headway with their
merger deal, but gains were capped on worries over "soft
landing" challenges for the economy. 
    At 10:26 a.m. ET (1426 GMT), the Toronto Stock Exchange's
S&P/TSX composite index  .GSPTSE  was up 89.76 points, or 0.45%,
at 20,081.64. The index has risen 2.2% for the week, getting a
bump from softer-than-expected inflation data in the United
States.
    Rogers Communications Inc  RCIb.TO  and Shaw Communications
Inc  SJRb.TO  finalised an agreement to sell Freedom Mobile to
Videotron, a unit of Quebecor Inc  QBRb.TO , in a C$2.85 billion
($2.23 billion) deal.  urn:newsml:reuters.com:*:nL4N2ZO22R
    The spinoff comes at a time when Canada's antitrust agency
has kept the Rogers' C$20 billion acquisition of Shaw on hold
since May, citing competition concerns.
    Keeping investors on edge, the Canadian 10-year government
bond yield curve fell some 50 basis points below the 2-year
yield, signaling the Bank of Canada may raise interest rates to
a level that triggers a recession. 
    It is the biggest inversion of Canada's yield curve as per
Reuters data going back to 1994, deeper than the U.S. Treasury
yield curve inversion. Canada's inflation data is set to be
released next week.  urn:newsml:reuters.com:*:nL1N2ZM1PI
    "The market is worried that the Bank of Canada will
over-tighten interest rates and push the economy into a
recession," said Angelo Kourkafas, investment strategist at
Edward Jones Investments.
    "There are clear signs that growth is slowing because the
economy is more interest rate sensitive than the U.S. because of
the housing imbalances in the economy."
    Despite falling 6% this year, Canadian stocks have fared
better than their peers in the developed world. U.S. benchmark
index S&P 500 has shed 11%  .SPX  in the same period.  
    Analysts are saying that the TSX is seen as an inflation
hedge, given the cyclical nature of its composition, and are
overweight on sectors such as financials, energy and materials.

 (Reporting by Johann M Cherian in Bengaluru; Editing by Anil
D'Silva)
 ((Yohann.MCherian@thomsonreuters.com;))