Canada Stocks Erase 2016 Losses as Oil, Materials Producers Gain

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  • S&P/TSX is the only developed market in positive territory
  • First Quantum, Teck Resources surge higher with copper

Canadian stocks staged an afternoon comeback to close higher, erasing a loss for the year that reached 9.9 percent at its trough, as a raw-materials and energy producers rebounded with commodities prices.

The Standard & Poor’s/TSX Composite Index rose 0.3 percent to 13,017.93 at 4 p.m. in Toronto, reversing losses of 1 percent to cap a five-day rally that is the longest this year. The Canadian benchmark is the only market in the developed world to end Wednesday in positive territory. New Zealand’s index is flat for the year as the two measures vie for the top spot and outpace returns from markets in the U.S., U.K. and Germany.

“The downdraft was quite overdone given what the fundamentals suggested,” said Craig Fehr, Canada market strategist at Edward Jones, in an interview last week as the S&P/TSX neared positive territory. His firm manages $876 billion. “The short-term rebound we’re seeing is quite warranted. We were getting volatility begetting volatility even when it wasn’t warranted. The rebound in crude has provided a nice floor. The worries have abated a bit.”

Shares in the Canadian benchmark trade at about 20 times earnings, roughly 14 percent more expensive than the valuation of the Standard & Poor’s 500 Index, data compiled by Bloomberg show. Canada’s resource-rich index has benefited from a surge in the price of gold and crude’s rebound from a 12-year low.

Canadian stocks have shown signs of breaking away from their lock-step relationship to crude oil, outperforming global peers this year after being among the worst performers in 2015. Energy producers rose 1.1 Wednesday as New York crude settled at a two-month high after a government report showed U.S. refineries boosted their use of oil.

CCL Industries Inc., a packaging and label-maker, jumped 12 percent to a record after agreeing to buy Checkpoint Systems Inc. in a friendly deal worth about C$556 million. Checkpoint makes label products for the retail and apparel industry.

Base metals producers First Quantum Minerals Ltd. and Teck Resources Ltd. surged at least 19 percent as raw-materials producers soared 3.9 percent as a group. Copper climbed to a three-month high. The industry is the best-performing group in the S&P/TSX this year with a 17 percent advance.

Valeant Pharmaceuticals International Inc. rose 3.2 percent, snapping a four-day slide to rebound from a 2013 low. Shares of the drugmaker pared losses of as much as 11 percent yesterday after Nomura analyst Shibani Malhotra said Valeant was viewed with more confidence after conversations with the company. Malhotra maintained a buy rating on the stock. Shares of the drugmaker have plunged 74 percent from an August high amid intense scrutiny from investors and lawmakers over its pricing practices.

Brookfield Asset Management Inc. and Manulife Financial Corp. slipped at least 1.3 percent to lead financial services stocks lower. Toronto-Dominion Bank and Bank of Nova Scotia each lost 0.3 percent.

Canadian banks’ exposure to the struggling oil-and gas industry totals C$107 billion when including untapped credit lines with outstanding loans, double the C$50 billion generally highlighted by the big banks in quarterly earnings calls and presentations. The nation’s largest lenders reported mixed first-quarter earnings over the past week, with Royal Bank and Toronto-Dominion bank missing analysts’ estimates.