Canada Stocks Drop, Capping a Weekly Loss as Gold Price Slumps

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  • Underperforming S&P/TSX poised to top U.S. in 2016: Belski
  • Investors overly pessimistic on Canada, strategist says

Canadian stocks fell, capping a weekly loss, as raw-materials producers retreated with gold prices tumbling to a five-year low amid increasing bets the Federal Reserve will raise interest rates next month.

The Canadian equity market, one of the worst-performing in the world this year amid a slump in commodities prices, is poised to beat its U.S. peers for the first time since 2010 next year as investors have gotten overly pessimistic, according to BMO Capital Markets Chief Investment Strategist Brian Belski.

“Canada is down, but not out,” Belski said in a 2016 market outlook report to clients Nov. 25. “The recovery we expected in the fourth quarter has only been delayed and is one of the main reasons we believe Canada will be a surprise outperformer in 2016. Any positive news stemming from emerging markets, Europe and commodity prices will likely be a strong positive tailwind for Canadian stocks.”

The Standard & Poor’s/TSX Composite Index fell 56.95 points, or 0.4 percent, to 13,368.24 at 4 p.m. in Toronto. It has dropped 8.6 percent this year, trailed only by Singapore and Greece among developed markets. 

Belski forecasts the S&P/TSX to close 2016 at 15,300, a 14 percent increase from current levels. Most global managers are now “grossly underweight” Canadian equities, he said.

“The ‘Eeyore’ market continues, as most Canadian-centric investors continue to focus on the doom-and-gloom trade while dictating their investment conclusions with fear and emotion,” Belski said.

Energy and raw-materials producers, along with health-care stocks, have fallen at least 22 percent this year to lead declines in the S&P/TSX. A combination of slowing economic growth in China and a rally in the U.S. dollar due to impending interest-rate increases from the Fed as soon as December have crimped commodities prices.

Barrick Gold Corp. and Goldcorp Inc. dropped at least 2.6 percent as raw-materials producers lost 2.1 percent as a group, the most in the benchmark equity gauge. Gold futures fell 1.3 percent to settle at $1,056.20 an ounce in New York. Gold posted its sixth straight week of losses, the longest such run in two years.

Canadian Oil Sands Ltd. retreated 5.6 percent for the worst loss in almost two months. Suncor Energy Inc. yesterday said it may scrap its $4.5 billion hostile bid for the company if Alberta regulators endorse a poison pill that would give the target company more time to find other bidders. Oil producers tumbled 1.3 percent as crude futures fell 3.1 percent in New York, paring a weekly advance.