Canadian Stocks Rise Second Day With S&P/TSX Set for Bull Market

  • Gold prices soar against dollar as U.S. jobs data disappoints
  • Valeant declines after default notice over earnings delay

Canadian stocks rose a second day, with the S&P/TSX Composite Index poised to enter a bull market, as a rally by gold producers offset declines in the nation’s largest lenders after the U.S. added fewer jobs than forecast, pushing back expectations for a Federal Reserve rate hike.

The S&P/TSX Composite Index rose 0.6 percent to 14,227.07 at 2:33 p.m. in Toronto, after fluctuating in the morning. The index is up 20 percent from its Jan. 20 low, which would meet the definition of a bull market should the gauge cap that advance at the close. Trading volume on Wednesday was 6 percent lower than the 30-day average. The index is set for a fourth weekly rally, the longest stretch since November 2014.

The rally has maintained Canadian shares’ more expensive valuation relative to their U.S. peers. The S&P/TSX now trades at 21.6 times earnings, about 11 percent higher than the 19.4 times valuation of the S&P 500 Index.

The S&P 500 lost 0.4 percent as employers added 38,000 workers in May, the fewest number in almost six years, data Friday showed. Economists surveyed by Bloomberg had forecast a 160,000 gain. The jobless rate dropped to 4.7 percent as Americans left the labor force.

The disappointing jobs figures raise concerns about the growth trajectory of the U.S. economy, potentially pushing a possible interest rate increase from the Fed beyond the summer. Traders are pricing in a 29 percent chance for an increase in July, down from better than 50 percent odds Thursday, according to data compiled by Bloomberg.

In Canada, raw-materials producers surged 5.8 percent. The nation’s largest lenders lost 0.3 percent to offset gains. Manulife Financial Corp., the nation’s largest insurer, dropped 1.7 percent.

Commodities prices stood on the brink of a bull market. The Bloomberg Commodity Index, which tracks returns from 22 raw materials from oil to soybeans, is up 0.5 percent to 87.15 in New York. A close above 87.45 would mark a 20 percent advance and meet the common definition of a bull market.

Barrick Gold Corp. and Kinross Gold Corp. jumped at least 10 percent as gold futures surged after the U.S. jobs data. Weakness in the dollar makes gold more attractive as a store of value. A gauge of gold producers soared 7.6 percent, poised for the biggest jump since October.

The rally in Canadian equities, fueled by a rebound in commodities prices and financials, sputtered earlier this week amid renewed concerns weak global growth will constrain demand for basic materials amid disappointing manufacturing data from Japan to Europe, while the prospect of higher U.S. interest rates has sent the dollar higher.

Valeant Pharmaceuticals International Inc. lost 2.5 percent for a second straight decline after the drugmaker received a notice of default from some bondholders due to the delay in filing its quarterly financial results with regulators. Valeant reiterated it expects to file on or before June 10.

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