Canada Stocks Drop for Second Day as U.S. Manufacturing Declines

Canadian stocks dropped for a second day after U.S. manufacturing unexpectedly contracted in May and Goldman Sachs Group Inc. advised selling shares of Canadian Natural Resources (CNQ) Ltd.

China Gold International Resources Corp. and Dream Unlimited Corp. led losses in the Standard & Poor’s/TSX Composite Index. (SPTSX) Canadian Natural Resources slumped for a third day, losing 2.7 percent. Copper Mountain Mining Corp. gained 6.7 percent as the price of the metal increased the most in almost four weeks. Centerra Gold Inc. and Premier Gold Mines Ltd. advanced at least 4.2 percent as gold rose.

The S&P/TSX fell 73.80 points, or 0.6 percent, to 12,576.62 at 2:59 p.m. in Toronto. The index has climbed 1.1 percent this year. Trading volume was 8.1 percent lower than the 30-day average at this time of the day.

“After the very good first couple of quarters in the U.S. and Canada, people are taking a bit of a pause before seeing where to go from here,” said Brian Huen, managing partner with Red Sky Capital Management Ltd. in Toronto. He helps manage C$220 million ($213 million). “There’s still lots of chatter around the Fed and whether stimulus gets taken out of the market sooner rather than later. Gold is rallying a little bit here as people are looking for protection against the risk-off trade.”

Data today fueled concern that growth in the U.S., the world’s largest economy and Canada’s biggest trading partner, could slow, as a report from the Institute for Supply Management showed manufacturing unexpectedly contracted in May at the fastest pace in four years.

Fed Stimulus

U.S. equities reversed earlier losses after a Federal Reserve official said the central bank remains committed to unprecedented levels of stimulus that have helped fuel a five-year market rally.

Eight out of 10 industries in the S&P/TSX retreated, led by health-care and energy stocks.

Canadian Natural Resources sank 2.7 percent to C$30.08 after Arjun Murti, an analyst with Goldman Sachs, lowered the stock’s rating to sell from neutral. The company has 19 buys, five holds and two sell ratings, according to data compiled by Bloomberg.

Materials stocks fell 0.5 percent, even as the price of gold for August delivery gained 1.4 percent to settle at $1,411.90 an ounce in New York. China Gold International dropped 8.1 percent to C$3.12. Potash Corp. of Saskatchewan Inc. plunged 2.6 percent to C$1.16.

A separate index of gold producers rallied 0.3 percent, on its way to a seven-week high. Centerra Gold jumped 8.1 percent to C$4.13 and Premier Gold Mines rallied 5 percent to C$2.31.

Copper Mountain (CUM) surged 6.7 percent to C$1.68. Copper climbed 1.2 percent to settle at $3.3305 a pound in New York, the biggest gain since May 8. Aluminum, lead, tin and zinc also advanced in London.

To contact the reporter on this story: Eric Lam in Toronto at elam87@bloomberg.net

To contact the editor responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net

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