Canada Stocks Pare Loss as U.S. Jobs Fuels Rate Hike Speculation

  • Odds of an icnrease now 68% as payrolls rise most this year
  • TransCanada tumbles 4.3% after U.S. rejects Keystone pipeline

Canadian stocks almost erased losses in the final hour of trading as financial services shares rallied after strong jobs data in the U.S. intensified speculation the Federal Reserve will increase rates at its December meeting.

Equities ended little changed after nearly wiping out a 0.6 percent, as financials rallied on the prospects for higher lending rates. TransCanada Corp. led energy shares lower after the U.S. government rejected the Keystone XL pipeline. U.S., payrolls climbed the most this year, wage growth accelerated and the unemployment rate fell to 5 percent. Canadian employment rose more than economists forecast.

“We clearly see the Canadian economy is back to expansion mode after a brutal summer. It’s a good sign,” said Barry Schwartz, fund manager at Baskin Wealth Management in Toronto. His firm manages about C$825 million. The Fed raising rates is “probably a done deal,” he said. “It was bound to happen, it’s years in the making.”

The Standard & Poor’s/TSX Composite Index fell 5.48 points to 13,553.30 at 4 p.m. in Toronto. The index climbed 1.7 percent in October, the most since April. It was nevertheless the worst performance among 24 developed-nation markets in that time, as a gauge of global equities capped its best month in four years.

Manulife Financial Corp. climbed 3.7 percent, the most in more than two months, and Sun Life Financial Inc. added 2.7 percent as financial services stocks increased 0.7 percent as a group. Insurers typically carry long-duration investments that benefit in times of higher interest rates.

Keystone Rejection

TransCanada declined 4.3 percent after President Barack Obama ended seven years of debate over the Keystone pipeline by rejecting an infrastructure project that swelled into one of the most contentious environmental issues of his presidency.

TransCanada has slumped 24 percent this year, amid a 17 percent retreat in the S&P/TSX Energy Index. The proposed cross-border pipeline, which would have carried Canadian oil sands to U.S. refineries near the Gulf of Mexico, soured diplomatic relations between Obama and Canada’s previous prime minister Stephen Harper. The incoming Liberal government led by Justin Trudeau is much less wedded to the project.

Baskin Wealth, Schwartz’s firm, has been expanding its U.S. positions throughout the year with few options for earnings growth in Canada, he said. Schwartz prefers U.S. health-care companies involved in distribution, including pharmacies CVS Health Corp. and Express Scripts Holding Co., as well as financials and technology firms.

With the U.S. dollar rising on the latest jobs data, Schwartz is hesitant to add U.S. names Friday, and is instead considering Canadian stocks that have shown recent weakness such as Telus Corp. and Magna International Inc.

“Some of the names that got hurt yesterday, names like Telus and Magna, have attractive entry points,” he said. “I liked the earnings from TMX Group, and if commodity prices recover this thing is going to be on fire.”

TMX Group Ltd., owner of the Toronto Stock Exchange, added 4.5 percent after reporting better-than-expected third-quarter revenue. Magna, the largest North American auto-parts supplier, slumped the most since 2011 yesterday on weaker quarterly sales. Telus retreated after declaring it will cut 1,500 jobs to reduce costs.

Valeant Pharmaceuticals International Inc. jumped 5.6 percent, rebounding from a 2013 low. The drugmaker has lost 68 percent from an Aug. 5 high amid pressure over how it prices its drugs.

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