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.
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."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%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.
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