Canadian Stocks Fall as Gold Producers Sink on Fed Speculation

Canadian stocks fell the most in two weeks as precious metals plunged on speculation the U.S. Federal Reserve will taper stimulus when policy makers meet next week.

Goldcorp Inc. (G) and Eldorado Gold Corp. sank at least 6.2 percent as the price of gold slumped the most in nine weeks. Endeavour Silver Corp. retreated 9 percent. Teck Resources Ltd. lost 3.5 percent as copper touched a five-week low. Reitmans Canada Ltd. (RET) tumbled 13 percent to a nine-year low after reporting weaker-than-estimated profits yesterday.

The Standard & Poor’s/TSX Composite Index (SPTSX) fell 124.37 points, or 1 percent, to 12,701.05 at 4 p.m. in Toronto, the biggest decline since Aug. 27. The benchmark Canadian equity gauge has risen 2.2 percent this year.

“All across Canada you can see gold and the resource sector are down quite aggressively today,” said John Tsagarelis, a fund manager with Manulife Asset Management Ltd. in Toronto. He manages C$550 million ($533 million). “If tapering happens, yields go up, the U.S. dollar strengthens and gold sells off. Somebody was being very aggressive with gold this morning. The Syrian situation is probably the story getting the most headlines.”

U.S. Federal Reserve officials, set to meet Sept. 17-18, are watching economic data to determine when to begin scaling back the central bank’s $85 billion in monthly asset purchases.

The U.S. and Russia met today to discuss a plan for Syria to surrender its chemical weapons, potentially averting a military strike. Syrian President Bashar al-Assad said negotiating a deal must be a “two-way street” in which the Obama administration drops its military threats and stops arming Syrian rebels. Last month, gold gained 6.3 percent on escalating tensions in the Middle Eastern country.

Gold Slump

Raw-materials stocks sank 3.5 percent as a group, leading declines as all 10 groups in the S&P/TSX retreated. Trading volume was in line with the 30-day average.

Goldcorp slumped 6.3 percent to C$26.81 and Eldorado Gold fell 7.5 percent to C$7.19 as all 24 members of the S&P/TSX Gold Index declined. The index is down 5.3 percent, the lowest close in a month.

Gold for December delivery lost 2.4 percent to settle at $1,330.60 an ounce in New York, the biggest drop since July 5.

Endeavour Silver sank 9 percent to C$4.36 and Silvercorp Metals Inc. tumbled 8.2 percent to C$3.48 as silver futures plunged 4.4 percent in New York. The metal has slumped 27 percent this year.

Raw Materials

Teck Resources, Canada’s largest diversified miner, declined 3.5 percent to C$28.43 and First Quantum Minerals Ltd. slipped 2.2 percent to C$18.59 as the price of copper slid 1.4 percent. Wholesale prices dropped the most since 2009 last month in Germany, the world’s third-biggest copper consumer, official statistics showed today.

Reitmans Canada, a women’s apparel retailer, slumped 13 percent to C$8.03, the lowest since 2004. The company posted adjusted earnings of 16 Canadian cents a share, short of the 36 cents mean estimate of analysts surveyed by Bloomberg. Same-store sales, a measure of revenue from outlets open at least a year, sank 6.8 percent in the second quarter.

Transat A.T. Inc., the travel services company, jumped 6 percent to C$9.90, the highest since August 2011, after reporting higher-than-estimated third-quarter earnings and forecasting better results than last year for the fourth quarter.

“We are on our way to a profitable year,” Jean-Marc Eustache, chief executive officer with Transat, said in the release.

Asset Sales

Encana Corp. (ECA) gained 3.8 percent to C$18.61, the highest close since June, after signaling potential asset sales in a strategy update. The company has more inventory, particularly in dry natural gas, than can be optimally developed, and must focus its portfolio, Encana said in a statement.

“Encana appears to be back on the road to winning again,” said Greg Pardy, co-head of global energy research with RBC Capital Markets, in a note to clients today. Pardy upgraded his rating for the stock to outperform, the equivalent of a buy, from sector perform. “Encana’s efforts to re-engineer its strategic game plan appear to be nearing completion sooner than its target of year-end 2013.”

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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