Canada currency falls but stocks edge higher after Trump win

By Alastair Sharp and Fergal Smith

TORONTO (Reuters) - Canada's currency ended lower on Wednesday while shares of energy producers and financials pushed the country's stock market slightly higher, as investors saw a Donald Trump presidency favoring the oil sector and possibly boosting growth.

Some financial players talked about increased prospects of a Bank of Canada interest rate cut to underpin growth, which might be threatened by Trump's stance on trade. The chances of a cut by mid-2017 faded throughout the session, though, dropping to just one in five.

Energy stocks jumped 2 percent as bets that Trump might revive the Keystone XL pipeline boosted TransCanada Corp (Toronto:TRP.TO - News) and the broader oil sands industry.

"I think this (Trump presidency) could be an overall benefit to the Canadian economy and Canadian stock market," said Philip Petursson, chief investment strategist at Manulife Investments.

Trump has promised to cut taxes and spend on infrastructure, which could be good news for some Canadian companies.

"Start with Keystone and then we can go from there," Petursson said.

The materials sector, which includes gold miners, advanced 1.7 percent, although some gains were pared as the safe-haven rally in gold faded, while the heavyweight financials group rose just under 0.6 percent.

The Toronto Stock Exchange's S&P/TSX composite index (.GSPTSE) closed up 103.07 points, or 0.7 percent, at 14,759.91.

But some sectors of the market saw heavy losses, including auto parts makers, which depend on supply chains that cross borders. Trump has repeatedly attacked the outsourcing of U.S.auto jobs and the North American Free Trade Agreement (NAFTA).

Shares of Canada's Magna International Inc (Toronto:MG.TO - News), whose Mexican operations account for about 14 percent of sales, fell 3.9 percent. Linamar Corp (Toronto:LNR.TO - News) shed nearly 5 percent and Martinrea International Inc (Toronto:MRE.TO - News) fell more than 6 percent.

Forestry stocks also fell. The sector has been a significant source of trade disputes and Trump is not expected to be a flexible negotiator. West Fraser Timber Co Ltd (Toronto:WFT.TO - News) fell 6.6 percent.

Sectors such as utilities and telecom, which have benefited from the low interest rate environment, lost ground as bond yields surged.

Canadian government bond prices were lower across a steeper yield curve in sympathy with U.S. Treasuries as investors bet that Trump would enact policies that will increase inflation. The 10-year yield touched its highest since late May at 1.388 percent.

"That indicates that the bond market is scared about his fiscal agenda," said Taylor.

CURRENCY STILL WEAKER

The Canadian dollar pared some losses after hitting an eight-month low against its U.S. counterpart on uncertainty about the implications of a Trump win. [CAD/]

Trump has pledged to renegotiate or scrap NAFTA, which could threaten parts of Canada's trade-intensive economy.

"From a G10 perspective Canada is bearing the brunt of this Trump victory," said Jack Spitz, managing director of foreign exchange at National Bank Financial.

The Canadian dollar ended at C$1.3378 to the greenback, or 74.75 U.S. cents, much weaker than Tuesday's close of C$1.3305, or 75.16 U.S. cents. It touched its weakest since March at C$1.3525.

(Reporting by Fergal Smith, Alastair Sharp, Solarina Ho, Allison Martell and Jeffrey Hodgson; Editing by Andrew Hay and Tom Brown)