Canada Stocks Decline, Led by Mining Shares, After Fed MinutesEric Lam
Canadian stocks fell from a nine-month high, led by declines among gold mining companies, after Federal Reserve policy makers said they will probably end their $85 billion monthly bond purchases in 2013.
Barrick Gold Corp. and Goldcorp Inc., the world’s two largest gold producers, slumped at least 2.9 percent as the price of the metal fell. Silvercorp Metals Inc. declined 6.8 percent as silver fell for the first time in three days. Reitmans Canada Ltd. dropped 4.2 percent after the clothing retailer reported falling sales during December.
The Standard & Poor’s/TSX Composite Index fell 70.33 points, or 0.6 percent, to 1,2470.44 in Toronto. The benchmark gauge has risen 1.3 percent this week as U.S. lawmakers reached a budget deal averting automatic spending cuts and tax increases.
“We’re all concerned about the amount of money they’re printing,” said Keith Richards, fund manager with ValueTrend Wealth Management in Barrie, Ontario, referring to the Fed’s stimulus programs since the 2008 financial crisis. The firm manages about C$100 million ($101.4 million). “It’s not a bad thing if they stop it when they should, but if they stop it before they should, that is a bad thing.”
Four years after cutting the main interest rate to near zero, policy makers are expanding their third round of so-called quantitative easing to boost economic growth and cut the jobless rate, now at 7.7 percent. In prior rounds of bond purchases, the central bank bought $2.3 trillion in securities.
“A few members expressed the view that ongoing asset purchases would likely be warranted until about the end of 2013” while a few others specified no time frame, according to the record of the Federal Open Market Committee’s Dec. 11-12 gathering released today in Washington.
Gold mining stocks contributed the most to losses in the S&P/TSX as seven of 10 industries retreated. Trading volume was 8.7 percent lower than the 30-day average.
All 31 members of the S&P/TSX Gold subindex declined as the industry gauge fell the most, 4 percent, since November 2012.
Rubicon Minerals Corp., which explores for gold in the Red Lake gold camp in northwestern Ontario, plunged 8.4 percent to C$2.41 to pace losses in the S&P/TSX. Goldcorp lost 4.7 percent to C$35.22 and Barrick declined 2.9 percent to C$34.08.
Gold for February delivery lost 1.4 percent to $1,665.50 an ounce in electronic trading in New York.
Silvercorp fell 6.8 percent to C$4.83 and Silver Wheaton Corp. dropped 3.1 percent to C$35.24. Silver for March delivery slipped 1.8 percent to $30.455 an ounce in electronic trading.
Reitmans slumped 4.2 percent to C$11.98. The Montreal-based fashion retailer said sales for the five weeks ended Dec. 29 dropped 5.4 percent. Same-store sales fell 3.4 percent.
Africa Oil Corp., which is exploring for oil and gas in Kenya, Ethiopia and Somalia, declined 4.8 percent to C$6.99 after Christopher Brown, director of research in international oil and gas with Canaccord Genuity Corp., downgraded the stock’s rating to hold from speculative buy. He also reduced his price target to C$8 a share from C$13.50.
The stock is at risk due to several near-term potentially negative events relating to well results, flow tests, elections in Kenya and possible changes to existing contracts, Brown said in a note to clients today.
’’A previously high-risk, high-reward story has devolved into a high-risk, medium-reward opportunity,’’ he said.