Canada Stocks Drop as Metals Producers Fall With Gold, Copper

Updated on
  • Oil rally stalls as Saudi Arabia, Iran spar on output freeze
  • Copper prices slide a 7th day, capping worst run in 2 years

Canadian stocks fell a third day, to the lowest level in almost a month, as a rally led by raw-material producers in the first quarter has faltered in April.

The Standard & Poor’s/TSX Composite Index fell 0.8 percent to 13,336.15 at 4 p.m. in Toronto. While the Canadian benchmark equity gauge has lost 1.2 percent in a three-day slide, it’s still up 2.5 percent this year and remains one of the best-performing developed markets in the world.

The resource-fueled rally through February and March that propelled the S&P/TSX in the first quarter of the year has not continued, as commodities from gold to copper and crude have retreated. The broader S&P/TSX’s valuation has slipped from last month’s high of 21.9 times reported earnings to 21.2 times. That’s 13 percent more expensive than the 18.8 times multiple of the S&P 500 Index, data compiled by Bloomberg show. 

“Are global portfolio managers ready to underweight Canada again? The answer to this question is yes,” Javed Mirza, a technical analyst with RBC Capital Markets, said in a research note. “Given the larger weighting of energy in the TSX, deterioration in energy will be an additional headwind for the S&P/TSX Composite relative to other resource-light equity indexes.”

Mirza says the potential that energy stocks have peaked and will now decline provides an opportunity to buy into the industry at a more attractive level in the summer. The S&P/TSX Energy Index is up 4.1 percent this year.

Crude fell to a one-month low on Monday, dropping 3 percent in New York amid speculation whether major OPEC producers will be able to come to an output freeze agreement. Gold sank for a second day while copper is down seven days in a row, its worst run since February 2014. 

Canadian raw-materials producers dropped 2 percent Monday, for the biggest drag on the S&P/TSX, while financials and energy producers also retreated. Trading volume was 37 percent lower than the 30-day average.

BlackBerry Ltd. lost 2.4 percent for a second day of losses, slipping to a seven-week low. The smartphone maker reported fourth-quarter sales short of analysts’ estimates on April 1, as it works to shift its business towards software and services.

Valeant Pharmaceuticals International Inc. dropped 6.1 percent, trading near a 2011 low. The drugmaker is facing push back from some of its lenders as it seeks to waive a default and loosen restrictions on its debt, according to people with knowledge of the matter. Valeant has been seeking relief from a technical default that arose when it didn’t file its 10-K before March 15.

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