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Canadian Stocks Drop; Miners Slide as Gold Falls Most in 3 Weeks

Canadian stocks fell, after closing yesterday at a more than two-year high, as a drop in gold prices dragged mining companies lower while energy and consumer discretionary shares advanced.

Gold miners slid 0.8 percent as a group with Detour Gold Corp. and NovaGold Resources Inc. decreasing at least 2.6 percent as the metal fell the most in three weeks. Talisman Energy Inc. declined 1.1 percent on reports GDF Suez SA (GSZ) hadn’t placed a bid for the company. Raging River Exploration Inc. rose 3.7 percent after it raised its outlook for fourth-quarter oil production.

The Standard & Poor’s/TSX Composite Index (SPTSX) decreased 38.52 points, or 0.3 percent, to 13,951.77 at 4 p.m. in Toronto. The gauge is 2 percent lower than in April 2011, when it climbed to the highest level since 2008. Trading in S&P/TSX stocks was 29 percent higher than the 30-day average at the close.

“There was some good news out of recent earnings reports, especially financials, and that’s given the index a relief rally,” Paul Gardner, portfolio manager at Avenue Investment Management, said by phone from Toronto. He helps manage C$300 million ($290 million). ’’That being said, Canada is under pressure because gold as an underlying commodity is selling out on speculation the Fed may taper sooner rather than later, which will affect gold rates.’’

Gold Drops

Gold for immediate delivery fell 1 percent to $1,241.90 an ounce, the biggest loss for the precious metal in three weeks. Bullion slid 28 percent last year, the most since 1981, as some investors lost faith in the metal as a store of value.

The Canadian dollar weakened to C$1.10 for the first time in more than four years amid speculation the U.S. Federal Reserve will slow its monetary stimulus as the Bank of Canada signals more may be on its way. The Canadian central bank will release a policy statement on rates tomorrow, while the Federal Open Market Committee is scheduled to meet Jan. 28-29.

Canadian factory sales rose to a two-year high in November, while domestic wholesale sales held steady at a record high in the same period, Statistics Canada said today in Ottawa.

Eight of the 10 main industries in the S&P/TSX declined as producers of raw materials slid 0.9 percent. Energy and consumer discretionary companies in the index gained less than 0.1 percent.

The S&P/TSX Gold Index retreated 0.8 percent. Detour dropped 4.7 percent to C$6.30 and NovaGold slipped 2.6 percent to C$3.43.

Argonaut plunged 8.9 percent, the biggest drop since June, to C$5.31. Macquarie Capital Markets analyst Michael Siperco cut the gold producer to neutral from outperform, citing a weaker-than-expected outlook for 2014 and concerns regarding ongoing development projects.

Talisman Energy

Talisman decreased 1.1 percent to C$12.69. GDF Chief Executive Officer Gerard Mestrallet said at a press conference in Paris that GDF hadn’t bid to buy the Canadian oil and gas producer.

GDF has “no plans” for large acquisitions and development plans outside Europe will be achieved mostly through organic growth, Mestrallet said.

Raging River increased 3.7 percent to C$7.39, an all-time high. The oil explorer reported a 148 percent increase in year-end reserves for 2013 and said fourth-quarter production will be higher than previously forecast.

Capital Power Corp. jumped 3.3 percent to C$22.41, the highest level since May. Scotia Capital Inc. analyst Matthew Akman raised the company to sector outperform from outperform yesterday with a target price of $26 a share.

To contact the reporter on this story: Callie Bost in New York at cbost2@bloomberg.net

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

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