Canada Stocks Extend Rally as Oil Gains Offset Valeant’s Slideby
Crude producers gain with WTI oil above $50 a barrel
Valeant plunges to lowest since 2011 as year forecasts slashed
Canadian stocks rose a fourth day, extending a rally to near 10-month highs, as energy producers advanced with crude to offset a slump in Valeant Pharmaceuticals International Inc.
The S&P/TSX Composite Index added 0.6 percent to 14,365.61 at 4 p.m. in Toronto, its highest close since Aug. 11. The index is up 21 percent from its Jan. 20 low, after climbing out of a bear market on Friday, amid its longest winning streak in almost eight weeks. Trading volume today was about 2.6 percent higher than the 30-day average.
The recent rally has added to Canadian shares’ more expensive valuation relative to their U.S. peers. The S&P/TSX now trades at 21.9 times earnings, about 12 percent higher than the 19.6 times valuation of the S&P 500 Index.
Canadian equities have been one of the top-performing markets this year, second only to New Zealand among developed nations with a 10 percent advance, a sharp rebound after falling the most in 2015 since the 2008 financial crisis. Raw-materials producers have led the broader rally, soaring 43 percent this year for the best year-to-date performance since 1993.
Global stocks advanced for a fourth session, with the S&P 500 rising to a 10-month high. The dollar weakened to the lowest in a month after Federal Reserve Chair Janet Yellen said Monday she expects to raise interest rates gradually and held off from specifying any timeframe. Traders are pricing in a 20 percent chance for an increase in July, down from better than 50 percent odds before the U.S. jobs report last week, according to data compiled by Bloomberg.
In Canada, Baytex Energy Corp. and MEG Energy Corp. climbed more than 12 percent to lead a 2.1 percent gain in energy producers. Crude extended a climb with futures settling above $50 a barrel in New York for the first time in more than 10 months. U.S. government data Wednesday is forecast to show stockpiles dropped for a third week, helping to ease the oil supply glut that’s roiled prices for the past year.
Penn West Petroleum Ltd. soared 13 percent for a third day of gains. The oil and gas producer has jumped 41 percent in that time, after Bloomberg first reported on Friday Penn West hired Royal Bank of Canada to sell its Dodsland Viking light oil assets in Saskatchewan, according to people familiar with the deal.
Cott Corp. added 10 percent, to the highest level in more than 10 years, after the water and pop beverage bottler agreed to buy European home and office services business Eden Springs in a 470 million euro ($534 million) deal.
Valeant sank 15 percent to the lowest level since January 2011, after the drugmaker’s delayed first-quarter earnings were short of analysts’ expectations, and the company slashed forecasts. Earnings for 2016 are now expected to be $6.60 to $7 a share, excluding some items, down from March estimates of $8.50 to $9.50. Revenue in two key categories, dermatology and prescription ophthalmology, slumped by 43 percent and 30 percent, respectively.