Canadian Stocks Fall as Fed Minutes Spark Selloff in Commodities

  • Traders now pricing in 30 percent odds for June Fed rate hike
  • Copper slides to 3-month low as dollar surges to 7-week high

Canadian stocks fell from a two-week high after the Federal Reserve policy makers indicated that a June interest-rate increase was likely if the economy continued to improve, sparking a rout in resource prices that sank commodities producers.

The benchmark S&P/TSX Composite Index fell 0.7 percent to 13,826.01 at 4 p.m. in Toronto, with all of the decline coming after Fed meeting minutes signaled higher rates may come sooner than traders and investors had been anticipating. Trading volume jumped 18 percent above the 30-day average.

A gauge of gold producers sank 7.4 percent, the most since August. Barrick Gold Corp. sank 8.2 percent. First Quantum Minerals Ltd. and Teck Resources Ltd. dropped at least 5.3 percent to lead broader raw-materials producers lower. Cenovus Energy Inc. and Suncor Energy Inc. lost more than 1.8 percent as energy producers fell.

Copper sank to a three-month low and gold retreated for the first time in four days as the dollar climbed to a seven-week high. If incoming data suggested second-quarter economic growth, labor market conditions continued to strengthen and inflation made further progress toward the central bank’s 2 percent objective, then Fed officials would consider the economic climate “appropriate” for an interest-rate increase in June, according to minutes of the April 26-27 meeting released Wednesday in Washington.

Traders are now pricing in a 30 percent chance of a Federal Reserve interest-rate hike in June, up from 4 percent on Monday. Economic data Tuesday on housing starts and the cost of living topped forecasts, renewing speculation for higher borrowing costs.

Energy and raw-materials industries account for about 33 percent of the broader benchmark by market capitalization and have led gains this year, with the materials group surging as much as 43 percent for its best year-to-date performance in three decades. That’s helped the S&P/TSX post one of the best performances this year among developed economies, behind only New Zealand out of 24 markets.

Financial shares helped offset losses in resource producers, rising 0.9 percent amid higher bond yields. Royal Bank of Canada added 1.7 percent for the biggest gain in five weeks.

Valeant Pharmaceuticals International Inc. fell 3.8 percent after a three-day gain. The embattled drugmaker is said to be exploring the sale of some of its smaller cosmetic and pharmaceutical assets to raise cash and reduce debt, according to people familiar with the matter. The stock has slumped almost 90 percent from an August peak amid scrutiny over its business practices.

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