Canada Stocks Halt Rally, Trim Monthly Advance as Oil Retreats

  • S&P/TSX rises 0.1% in month, slimmest increase since June 2009
  • Economy contracted 1.6% in second quarter due to Alberta fires

Canadian stocks fell for the first time in five sessions, all but wiping out a monthly advance, as energy producers slipped with the price of crude and lenders dropped amid data showing the nation’s economy contracted in the second quarter by the most since 2009.

The S&P/TSX Composite Index fell 0.6 percent to 14,597.15 at 4 p.m. in Toronto, the lowest close in almost four weeks. The equity gauge capped a 0.1 percent climb in August, the narrowest one-month gain since June 2009. Trading volume Wednesday was 32 percent higher than the 30-day average.

The yearlong rally in Canadian equities has lost steam in August as surging commodities producers have faltered. The raw-materials group has been the worst performer among 10 industries this month, slumping 9.9 percent on a decline in gold. The drop cut the group’s rally this year to 45 percent, an increase that would halt the longest yearly losing streak since 1988. Energy producers have gained 19 percent in 2016, on pace for the strongest in seven years.

Meanwhile, health-care stocks surged 14 percent in August, led by Valeant Pharmaceuticals International Inc.’s 31 percent rally. The drugmaker affirmed its 2016 outlook earlier this month, restoring some confidence in analysts and investors in its turnaround strategy.

The rally in the commodity sector has boosted the Canadian equity benchmark to a 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. Canadian stocks are more expensive than their U.S. peers, with a price-earnings ratio of 23.1 for the S&P/TSX, opening up a 14 percent premium over the S&P 500 Index.

A rout in crude prices and data showing that Canada’s economy contracted by a 1.6 percent annualized pace in the second quarter set the tone on the month’s final day. Suncor Energy Inc. and Canadian Natural Resources Ltd. lost at least 1.9 percent, with losses growing after data showed an increase in U.S. oil inventories. 

Energy producers slipped 1.1 percent as a group to lead declines across seven of 10 industries in the S&P/TSX. Raw-materials producers lost 0.7 percent for a second straight decline. Gold capped a monthly decline in August for the first time in seven years, with futures down more than 3 percent this month as the Federal Reserve inches closer to raising interest rates. A U.S. private jobs report showed firms added workers in August in line with estimates.

Financial shares fell 0.5 percent, paring a loss as investors found a glimmer of hope in the economy data. Gross domestic product grew 0.6 percent in June, exceeding expectations of a 0.4 percent expansion. Economists often put more weight on the last month of a quarter as a sign of future growth.

National Bank of Canada dropped 3.1 percent today, the biggest slide in more than two months even after reporting third-quarter results that exceeded expectations. National Bank is the sixth major Canadian lender to beat analysts’ estimates in the current reporting period, joining Bank of Nova Scotia, Canadian Imperial Bank of Commerce, Toronto-Dominion Bank, Royal Bank of Canada and Bank of Montreal.

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