Canadian stocks rose, led by gold producers, as China’s markets reopened after the Lunar New Year and its central bank raised two key interest rates, boosting precious-metal prices.
Barrick Gold Corp., the world’s largest producer, advanced 2.5 percent as the metal increased to a two-week high. First Quantum Minerals Ltd., the country’s second-largest publicly traded copper producer, climbed 3.2 percent as an analyst raised his share-price estimate and stockpiles of the metal declined for a third day. Telus Corp., Canada’s third-largest wireless carrier, slumped 1.6 percent after Vince Valentini, an analyst at Toronto-Dominion Bank, cut his rating on the shares.
The Standard & Poor’s/TSX Composite Index advanced 80.59 points, or 0.6 percent, to close at 13,892.52 in Toronto, the highest level since July 2008.
When the Chinese “raise rates, usually, the U.S. dollar goes down, and you can see gold’s running pretty decent today,” said Marcus Xu, director of equity investments at Genus Capital Management in Vancouver, which manages C$1.7 billion ($1.72 billion). “Investors in China want to buy gold to hedge against inflation, too.”
The S&P/TSX gained 4 percent in the two weeks ending Feb. 4, the biggest two-week increase in 11 months, as economic data indicated an expanding global economy and the conflict in Egypt boosted energy and precious-metals stocks. For the year, the equity benchmark had climbed 2.7 percent through yesterday.
China’s Interest Rates
The People’s Bank of China today raised the one-year lending rate by a quarter point to 6.06 percent and the one-year deposit rate an equivalent amount to 3 percent. That’s the third increase in rates since mid-October. The deposit rate remains almost 2 percentage points less than the pace of consumer-price gains, giving savers an incentive to buy goods and assets.
Gold futures rose 1.2 percent to settle at $1,364.10 an ounce in New York after the weeklong Chinese holiday. Silver gained 3.2 percent. Precious metals tend to move in an opposite direction from the U.S. dollar, which retreated against 10 of 16 other major currencies today.
“The Chinese are fighting the resurgence of inflation,” Eric Sprott, chairman of money manager Sprott Inc., said in a note to clients published yesterday. “To protect their wealth, the populace is turning to gold and silver as a store of value.”
Barrick advanced 2.5 percent to C$48.45. Goldcorp Inc., the world’s second-largest gold producer by market value, increased 4.8 percent to C$42.76. Silver reseller Silver Wheaton Corp. climbed 3.3 percent to C$34.92.
Centerra Gold Inc., which mines in Kyrgyzstan and Mongolia, surged 10 percent, the most since Nov. 26, to C$18.60. Brian MacArthur, an analyst at UBS AG, raised his rating on the shares to “buy” from “neutral.”
Nine of 15 S&P/TSX base metals and coal producers rose. First Quantum gained for a seventh day, advancing 3.2 percent to C$137.30. John Hughes, an analyst at Desjardins Securities, raised his share-price estimate to C$163.25 from C$139 after a tour of the country’s projects in Zambia.
Uranium One Inc., a producer of the nuclear fuel that’s controlled by Moscow-based ARMZ Uranium Holding, increased 2.4 percent to C$6.54 after John Redstone, a Desjardins analyst, boosted the shares to “buy” from “hold.” In a note to clients, Redstone cited a higher forecast for uranium prices.
Telus fell 1.6 percent to C$48.89 after Valentini reduced his rating on the shares to “hold” from “buy.” In a note to clients, the analyst cited the shares’ 21 percent price increase in the six months ending yesterday.
Energy stocks dropped for the third straight day as natural gas declined to the lowest price in almost 12 weeks as the U.S. National Weather Service forecast warmer-than-normal temperature for next week in much of the country. Crude oil retreated for a fourth day.
Encana Corp., Canada’s largest natural gas producer, lost 1.2 percent to C$31.25. Penn West Petroleum Ltd., which produces oil and gas in western Canada, decreased for a sixth day, slipping 0.9 percent to C$25.96. Ivanhoe Energy, Inc., which operates in China, slumped 3.3 percent to C$3.20.
SNC-Lavalin Group Inc., Canada’s largest construction and engineering company, climbed 1.8 percent to C$61.92. The stock has gained 4.2 percent in two days after Claude Proulx, an analyst at Bank of Montreal, raised his share-price estimate to C$70 from C$60 in a note dated Feb. 6.
In the note to clients, Proulx said SNC should trade at a premium to Fluor Corp. and Jacobs Engineering Group Inc. because it “has better earnings prospects, is more diversified and outperformed the two companies during the recent downturn.”