Canadian Stocks Fall as Commodities Slide on Fed Stimulus Bets

Canadian stocks fell the most in six weeks, led lower by commodities producers as gold and oil extended declines amid speculation the U.S. Federal Reserve will pull back on stimulus.

Barrick Gold Corp. and Yamana Gold Inc. retreated 6.5 percent as the precious metal fell, capping the longest slump in 11 weeks. Athabasca Oil Corp. and Canadian Natural Resources Ltd. slid at least 2.1 percent as oil prices dropped for a third day. Paladin Energy Ltd. sank 5.6 percent to extend losses a second day after the uranium producer agreed to sell new shares at a discount. Ritchie Bros. Auctioneers Inc. jumped 7.4 percent after raising its dividend and reporting better-than-estimated earnings.

The Standard & Poor’s/TSX Composite Index fell 133.93 points, or 1.1 percent, to 12,469.32 at 4 p.m. in Toronto, snapping two days of gains. Today’s drop, the biggest since June 24, trimmed the gauge’s advance for the year to 0.3 percent. Trading volume was in line with the 30-day average. Canadian markets were closed yesterday for a holiday.

“The commodities are weak and it affects us more than the U.S. market,” said John Kinsey, fund manager with Caldwell Securities Ltd. in Toronto. The firm manages about $1 billion. “Gold looked like it was starting to form a bottom for a while there but now it’s breaking down. It’s been a big disappointment for an awful lot of people. The Fed really gave all the wrong signals and they’ve been trying to repair the damage ever since.”

Federal Reserve Chairman Ben S. Bernanke said last month that it’s too early to decide whether to begin paring asset purchases in September. The comments helped gold rise 7.3 percent in July, the biggest monthly gain since January 2012.

Stimulus Cuts

The S&P 500 fell 0.6 percent today, giving the benchmark U.S. equity gauge its biggest drop in six weeks as speculation the central bank would pull back on stimulus escalated. Fed Bank of Chicago President Charles Evans, who has been among the strongest proponents of record monetary accommodation, said he “would clearly not rule” out a decision to begin dialing back the purchases in September.

Nine of 10 industries in the S&P/TSX retreated. Producers of raw materials fell the most, declining 3.6 percent to the lowest since June. Energy shares slid 1.2 percent.

Barrick Gold, the world’s largest producer of the metal, tumbled 6.5 percent to C$16.25 and Yamana Gold plunged 6.5 percent to C$9.31, pacing declines in the S&P/TSX Gold Index. The gauge lost 5.9 percent, the most since June 26, with 23 of its 24 members retreating. Gold futures for December delivery declined 1.5 percent in New York for the longest losing streak since mid-May.

Oil Slides

Athabasca Oil slumped 3.5 percent to C$7.37 and Canadian Natural Resources retreated 2.1 percent to C$32.02. Crude for September delivery fell for a third day amid speculation the Fed will reduce stimulus, losing 1.2 percent in New York.

Francisco Blanch, head of commodities research with Bank of America, said in a Bloomberg Radio interview with Tom Keene West Texas Intermediate crude could slide $8 to $10 “unless there is a major geopolitical event” to drive prices higher.

Crude jumped 8.8 percent in July for the biggest monthly gain since August 2012, as U.S. inventories dropped and on concern political instability in Egypt would disrupt exports from the Middle East.

Paladin Energy sank 5.6 percent to 68 Canadian cents, the lowest since the shares began trading in 2005. The stock plunged 22 percent on Aug. 2 after the company said it failed to sell part of the Langer Heinrich mine in Namibia. That prompted the uranium miner to sell shares at a 30 percent discount to its previous closing price in Australia to raise about $78 million.

Ritchie, based in Burnaby, British Columbia, jumped 7.4 percent to C$20.74, the most since May 2009. The industrial equipment auctioneers posted second-quarter adjusted earnings of 28 cents a share, ahead of the average estimate of 27 cents according to analysts surveyed by Bloomberg.

The company increased its quarterly dividend to 13 cents a share, from 12.25 cents previously.

Before it's here, it's on the Bloomberg Terminal.