Canadian Stocks Fall, Led by Gold Producers, Magna; Bank of Montreal Rises
Canadian stocks fell for a second day, led by gold producers as the metal’s price declined from a record.
Barrick Gold Corp., the world’s biggest producer, fell 1.5 percent as gains in U.S. and European equity markets curbed demand for precious metals as a hedge. Magna International Inc., Canada’s largest auto-parts maker, lost 4.5 percent after JPMorgan Chase & Co. lowered its rating on the shares. Bank of Montreal, the country’s fourth-largest lender, advanced 1.7 percent after the Bank of Canada signaled caution in further interest rate increases.
The Standard & Poor’s/TSX Composite Index decreased 59.72 points, or 0.5 percent, to 12,042.26 as of 4 p.m. in Toronto, while the S&P 500 gained 0.6 percent in New York, spurred by improved demand for Portuguese and Polish government bonds. The main benchmark for Canadian equities closed at an almost three- month high of 12,144.92 on Sept. 3.
“The Portuguese debt auction was a little bit better than expected -- that caused gold to fall,” said Greg Taylor, who helps manage about C$4.5 billion ($4.3 billion) at Aurion Capital Management in Toronto. “The more optimism in the U.S. market -- that is taking away some of the demand for some of the hiding places, like gold, which is dragging down Toronto.”
The S&P/TSX retreated 0.4 percent yesterday after rising for eight straight days. The index had climbed 4.7 percent from Aug. 24 through yesterday as data on U.S. economic growth, manufacturing, home sales and employment eased concern the recovery would weaken in the U.S., which accounted for 75 percent of Canadian exports last year.
Portugal’s Bonds
Portugal’s bond-yield spreads over bunds narrowed as the nation sold 1.04 billion euros ($1.32 billion) of 2013 and 2021 debt.
Barrick Gold fell 1.5 percent to C$47.20 and was the biggest drag on the S&P/TSX as the metal retreated 0.1 percent to $1,257.50 an ounce on the Comex in New York. Goldcorp Inc., the world’s second-biggest producer by market value, fell 1.5 percent to C$43.66. Materials producers account for 22 percent of the market value of the S&P/TSX.
Teck Resources rose 1.3 percent to C$39.25. Industrial metals prices advanced as improved demand for Portuguese and Polish bonds tempered speculation Europe’s debt crisis will trigger another recession.
Magna International fell 4.5 percent to C$82.61, the biggest drop in the S&P/TSX. Himanshu Patel at JPMorgan lowered his rating to “neutral” from “overweight.” Patel also cut ratings on eight other companies in the industry citing recent weakness in auto sales.
Banks Advance
Bank of Montreal, Canada’s fourth-largest lender, gained 1.7 percent to C$60.13. Royal Bank of Canada, the biggest, advanced 0.2 percent to C$52.51. Toronto-Dominion, the second- largest, rose 0.5 percent to C$73.92.
The Bank of Canada bank raised its target rate for overnight loans between commercial banks to 1 percent from 0.75 percent, its third rate increase since June. Further increases would need to be “carefully considered” given a weaker outlook for the U.S. economy, policy makers said in a statement.
Canada’s increases are the first among Group of Seven countries after last year’s global recession. The country has recovered from the slump faster than the U.S., having already returned to pre-recession levels of employment. Consumption and investment have “evolved” as anticipated and are expected to remain buoyant, the bank said today.
Ivey Index
A gauge of Canadian business spending, the Ivey Purchasing Managers Index, climbed to 65.9 last month from 54 in July. The average forecast of economics surveyed by Bloomberg was 55.5. Readings above 50 mean purchasing increased.
Canada’s biggest banks may resume paying dividends as early as December, based on the Bloomberg Dividend Forecast, which had an accuracy rate of 81 percent in the second quarter.
A rebound in earnings and new capital rules that may be set following a Group of 20 meeting in November will allow Canada’s six biggest lenders to raise their quarterly dividends for the first time since August 2008. The banks have been preserving cash as the Basel Committee on Banking Supervision revises rules that will require lenders to increase capital to strengthen against future financial calamities.
To contact the reporter on this story: Matt Walcoff in Toronto at mwalcoff1@bloomberg.net
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