Canada Stocks Little-Changed as Investors Await Brexit Vote

  • S&P/TSX leapfrogs New Zealand benchmark as world’s top market
  • Retail sales off to best start since 2010 on gas stations

Canadian stocks were little-changed for a second day, with a drop in oil prices offsetting a rally in gold producers, as investors speculated on the outcome of the U.K. referendum on European Union membership Thursday.

The S&P/TSX Composite Index fell 0.1 percent to 14,003.81 at 4 p.m. in Toronto. The index has climbed 0.7 percent this week, poised to halt a two-week slide. The gauge is almost half a percentage point ahead of New Zealand as the top-performing developed market in the world with a 7.6 percent gain for the year, according to data compiled by Bloomberg.

Global stocks advanced a fourth day, the longest winning streak in nearly two weeks with bookmakers’ odds now implying about a 28 percent chance Britons will vote to leave the EU. The pound touched the highest in five months before paring gains and the U.K. benchmark FTSE 100 Index has erased its losses for the month.

“It goes without saying that we would get a huge relief rally with a ‘Remain’ vote,” David Rosenberg, Toronto-based chief economist and strategist at Gluskin Sheff & Associates Inc., said in a report to clients Wednesday. “And given how much optimism has been priced in over the past few days, a likely equally severe selloff in risk assets if the Brits do decide to leave the EU.”

In Canada, shares of companies most exposed to the European market including Brookfield Asset Management Inc., CGI Group Inc. and Great-West Lifeco Inc. have jumped 1.4 percent so far this week, outperforming the broader S&P/TSX, according to data compiled by Bloomberg. The group of 19 stocks still trails peers in the benchmark with a 3.1 percent gain for the year.  

Canadian retailers meanwhile are off to their best start since 2010 as retail sales jumped 0.9 percent in April on a rebound at gas stations and building-material stores to recover all the losses from a revised drop in March, according to data from Statistics Canada. Sales so far in the year are up 5.3 percent. Canadian Tire Corp. added 0.3 percent.

Energy producers dropped 1 percent, offsetting a 1.3 percent rally in raw-materials producers as five of 10 industries in the S&P/TSX declined. Canadian Pacific Railway Ltd. added 2.9 percent after the stock was raised to a strong buy at Raymond James.

Canadian Natural Resources Ltd. and Encana Corp. dropped more than 2 percent. Oil declined for a second day in New York as government data showed crude stockpiles dropped less than expected while imports increased.

Canadian shares remain more expensive relative to their U.S. peers. The S&P/TSX now trades at 21.5 times earnings, about 11 percent higher than the 19.3 times valuation of the S&P 500 Index.

Raw-materials and energy producers have fueled the rebound in Canadian equities this year as the S&P/TSX stormed back into a bull market earlier this month to halt a brief bear market of less than five months. Commodities prices have bounced back led by gains in gold and a 90 percent rally in crude from the lowest levels in 12 years back in February. A gauge of raw-materials producers is up 43 percent to lead the S&P/TSX.

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