Canadian Stocks Fall as Gold Slumps on U.S. Debt Deal Discussion

Canadian stocks fell, after climbing the most since July yesterday, as the jobless rate unexpectedly slipped to a five-year low while gold producers sank amid speculation the U.S. will avoid a default.

Goldcorp Inc. and Barrick Gold Corp. slumped at least 3.1 percent as the price of the metal sank to the lowest since July. Potash Corp. of Saskatchewan Inc. lost 1.6 percent after cutting its profit forecast after buyer estimates of lower prices delayed sales. Peregrine Diamonds Ltd. plunged 35 percent after De Beers told the company it wouldn’t exercise its right to acquire control of Peregrine’s Chidliak project in the Arctic. Tricon Capital Group Inc. jumped 8 percent after being named a “top pick” by an analyst at RBC Capital Markets.

The Standard & Poor’s/TSX Composite Index fell 2.30 points, or less than 0.1 percent, to 12,892.11 at 4 p.m. in Toronto, for a weekly gain of 1.1 percent. The index is up 3.7 percent this year. Trading volume was 23 percent lower compared with the 30-day average.

“Now that the chances of a deal getting done have risen, the demand for actual gold is weakening,” said Anish Chopra, fund manager with TD Asset Management Inc. in Toronto. He helps manage C$216 billion ($208 billion). “They’re talking now, but we don’t know the details. If over a shorter time frame there are no announcements of anything concrete, the market will take that as a negative. There needs to be follow-through.”

Unemployment in Canada declined to 6.9 percent in September from 7.1 percent a month earlier, the lowest since December 2008, as young people dropped out of the labor market, Statistics Canada said. Job creation slowed to 11,900 from 59,200 in August. Economists surveyed by Bloomberg had projected a 10,000 job increase and an unchanged jobless rate.

Debt Deal

U.S. President Barack Obama met with Senate Republicans today as the two sides move closer to a deal to raise the debt limit ahead of a potential default on Oct. 17. Senator Orrin Hatch of Utah said Obama is open to changing a tax on medical devices in the future. Both sides are weighing a potential short-term increase in the debt limit that would postpone a default to Nov. 22.

Barrick Gold dropped 3.9 percent to C$17.81 and Goldcorp lost 3.1 percent to C$24.48 as raw-materials producers sank 1.8 percent as a group, most in the S&P/TSX.

The S&P/TSX Gold Index retreated 3.4 percent to a three-month low as all 24 stocks in the measure declined. Gold for December delivery fell 2.2 percent to $1,268.20 an ounce in New York, the lowest since July 10. Gold, seen as a safe haven for investors in volatile markets, has plunged 24 percent this year and fell for a second straight week.

Potash Forecast

Potash Corp., North America’s largest producer of the fertilizer, slid 1.6 percent to C$32.46. The company said yesterday that third-quarter earnings would be about 41 cents a share, down from the 45 to 60 cents estimated in July. The company is expected to officially release its earnings on Oct. 24.

TMX Group Ltd., owner of the Toronto Stock Exchange, tumbled 6.2 percent to C$43.15, the most since at least September 2012. Jeff Fenwick, analyst with Cormark Securities Inc., lowered his rating for the stock to reduce, the equivalent of sell, on continued weak trading volumes and financing in the third quarter.

“We have yet to see evidence of any cyclical improvement in TMX’s various operating segments,” Fenwick said in a report.

Peregrine Diamonds sank 35 percent to 43 Canadian cents, its biggest loss ever, after being notified by De Beers of its decision not to form a joint venture at Chidliak, the company said. De Beers would have helped fund a feasibility study of the diamond project in Nunavut.

Tricon Rating

Tricon Capital, a residential real estate asset manager, soared 8 percent to C$7.27, its highest ever close, after Royal Bank analyst Geoffrey Kwan rated the stock a top pick with a price target of C$9.50. Tricon has four buys, according to data compiled by Bloomberg.

Air Canada, the nation’s largest airline, climbed 1.6 percent to C$4.97 for a third day of gains and extended a five-year high. Air Canada is the best-performing stock in the S&P/TSX this year, soaring 184 percent after cutting costs and reporting better-than-forecast earnings.