Canada Stocks Drop as Energy Shares Fall Amid Economic Concerns

Updated on
  • Energy, financials and industrials drop at least 1.5 percent
  • Crude retreats a 2nd day after Fed warns of global growth

Canadian stocks fell, halting a three-day advance, as commodity and financial shares tumbled amid a selloff in developed-nation equities after the U.S. Federal Reserve’s decision to keep interest rates unchanged.

Stocks slid 1 percent, led by a 1.8 percent decline among industrials companies as railway operators Canadian National Railway Co. and Canadian Pacific Railway Ltd. tumbled.

Crude fell for a second day in New York, dropping 4.7 percent to settle at $44.68 a barrel, after Fed Chair Janet Yellen sounded caution over slowing growth in China, the second-biggest oil-consuming country after the U.S. China is also Canada’s second-largest trading partner.

The Standard & Poor’s/TSX Composite Index fell 140.26 points to 13,646.90 at 4 p.m. in Toronto. The benchmark Canadian equity gauge pared a 1.4 percent gain for the week, and remains down 1.5 percent in September.

“Janet Yellen made it very clear that emerging markets in general, and China in particular, were the primary reasons that the Fed held its fire,” said David Rosenberg, chief economist and strategist at Gluskin Sheff & Associates Inc., in a report to clients.

Financial, industrial and raw-materials companies sank as the Fed’s refusal to raise rates spurred concerns about the strength of the global economy. Royal Bank of Canada and Toronto-Dominion Bank, the nation’s largest lenders, sank at least 1.9 percent.

Canadian Natural Resources Ltd. and Encana Corp. retreated more than 3.6 percent to lead energy stocks lower. The industry has decreased 6.5 percent this month, headed for a fifth straight month of losses.

First Quantum Minerals Ltd. slumped 8.4 percent and Teck Resources Ltd. retreated 6.8 percent after Freeport-McMoRan Inc., the world’s largest publicly traded copper producer, said it may sell an additional $1 billion in common stock in response to a drop in copper prices.

Energy and raw-materials producers are the worst-performing industries in the S&P/TSX this year, tumbling at least 19 percent as oil has plunged more than 25 percent from this year’s closing peak in June.

Fed officials said yesterday in a statement that “recent global economic and financial developments may restrain economic activity somewhat and are likely to put further downward pressure on inflation in the near term.” The S&P 500 Index lost 1 percent with European stocks as a gauge of global developed and developing markets retreated 0.7 percent. 

Data today showed Canadian consumer prices rose 1.3 percent in August, matching the fastest pace this year as higher costs for food, shelter and clothing offset cheaper gasoline.

Sherritt International Corp. sank 5.1 percent, to the lowest level since 1983, after the mining company suspended its dividend to cut operating costs and capital spending.

Kinross Gold Corp. surged 8 percent, for a third straight advance, after the company raised the lower end of its production outlook for the year.