Canada Stocks Edge Higher, Banks Rise Amid Fed Rate Speculation

  • Equities waver as investors parse Yellen, Fischer Comments
  • Torstar jumps as Fairfax boosts stake with share purchase

Canadian stocks edged higher, as speculation the U.S. Federal Reserve could raise interest rates as soon as September lifted banks, offsetting declines in raw-materials producers.

The S&P/TSX Composite Index rose 0.1 percent to 14,639.88 at 4 p.m. in Toronto, paring a second-straight weekly decline. Trading volume today was in line with the 30-day average.

The case to raise interest rates is getting stronger in the U.S. as the economy approaches the central bank’s goals, Fed Chair Janet Yellen said in the text of a speech Friday in Jackson Hole, Wyoming. Fed Vice Chairman Stanley Fischer said Yellen’s comments leave the door open for an interest-rate hike in September, which helped boost the dollar and weighed on commodities.

Raw-materials stocks ended 0.4 percent lower after wiping out a 2.2 percent climb. Commodities producers from Potash Corp. of Saskatchewan Inc. and Methanex Corp. declined at least 1.8 percent, while precious metals companies held onto gains. Detour Gold Corp. added 1.8 percent. The group rose Thursday after capping a four-day slide and the biggest drop in more than three months on Aug. 24. Energy companies pared gains after rising 1.1 percent. Gold futures in New York settled little changed after swinging between gains and losses.

“Rates aren’t going to above 2 percent, so even if there is a hike, they’re retaining maximum flexibility for the rest of the year and into the next,” said Frank Maeba, managing partner at Breton Hill Capital in Toronto. His firm manages C$1.4 billion. “What she’s doing is quelling future uncertainty. Even if we do hike, you guys are being a little bit myopic.”

Canadian Imperial Bank of Commerce added 0.5 percent for a sixth-straight gain, the longest streak in more than two months, as financial services stocks increased 0.2 percent, one of five industries to advance in the S&P/TSX.

CIBC, Toronto-Dominion Bank, Royal Bank of Canada and Bank of Montreal all topped analysts’ expectations this week, driving a 1.5 percent weekly advance for financial service stocks that’s the most in six weeks. Bank of Nova Scotia, the nation’s third-largest lender, is on deck to report on Aug. 30.

After a first-half rally, raw-materials producers have lost steam in August, with the group the worst performer among 10 industries in the S&P/TSX, slumping 8.5 percent. Meanwhile health-care stocks are up 19 percent for the biggest advance, led by Valeant Pharmaceuticals International Inc.’s 38 percent rally in August. The drugmaker affirmed its 2016 outlook earlier this month, restoring some confidence in analysts and investors in its turnaround strategy.

The materials group remains on track for the first annual advance in six years, up 47 percent this year, an increase that would halt the longest yearly losing streak since 1988. Energy producers have gained 21 percent in the same period, on pace for the strongest in seven years.

That’s boosted the Canadian equity benchmark to a more than 12 percent jump in 2016, rebounding from a slump last year that was the worst for the S&P/TSX since the 2008 financial crisis. The rally has made Canadian stocks more expensive than their U.S. peers, with a price-earnings ratio of 23.2 for the S&P/TSX, opening up a 14 percent premium over the S&P 500 Index.

Torstar Corp., owner of the Toronto Star, Canada’s largest circulation newspaper, jumped 7.7 percent, the biggest increase in a month. Fairfax Financial Holdings Ltd. bought 3.5 million shares of the company, boosting its stake to more than 27 percent.

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