TSX posts biggest decline in five weeks as inflation heats up

FILE PHOTO: A sign board displaying Toronto Stock Exchange stock information is seen in Toronto

By Fergal Smith

(Reuters) -Canada's main stock index fell on Tuesday by the most since mid-August as the prospect of higher borrowing costs to tackle inflation made it less appealing to make big bets, particularly during a seasonally weak period for the market.

The Toronto Stock Exchange's S&P/TSX composite index ended down 273.94 points, or 1.3%, at 20,218.89, its biggest decline since Aug. 15.

"We're not making big moves right now because we see a lot of crosscurrents," said Joseph Abramson, co-chief investment officer at Northland Wealth Management.

"The seasonality is tough, rising interest rates are leading to valuation compression but it's too early to start talking about reaccelerating growth."

Canada's annual inflation rate in August jumped to 4.0% from 3.3% in July on higher gasoline prices, a sign the Bank of Canada may be forced to raise interest rates yet again after 10 hikes since March of last year.

Wall Street's main indexes also dropped as Treasury yields firmed ahead of the U.S. Federal Reserve's policy decision on Wednesday.

All ten of the TSX's 10 major sectors ended lower, including a decline of 2.1% for technology, its second straight day of steep declines.

Heavily-weighted financials fell 0.8% and the materials group, which includes precious and base metals miners and fertilizer companies, was down 1.9%.

Equinox Gold Corp shares tumbled nearly 20% after the mining company launched a convertible senior notes offering.

Energy lost 1.1% as U.S. oil futures settled 0.3% lower at $91.20 a barrel, giving back a small part of its recent gains.

(Reporting by Fergal Smith in Toronto and Siddarth S in Bengaluru; Editing by Tasim Zahid and Marguerita Choy)