Canadian Stocks Fall Second Day as Banks Slump on Brexit Fallout

  • Lenders, energy shares contribute most to two-day decline
  • Gold producers climb as investors flock to metal for haven

Canadian stocks declined a second day, for the steepest two-day slide since February, as the fallout from Britain’s decision to leave the European Union continued to cause turbulence in financial markets.

The S&P/TSX Composite Index lost 1.5 percent to 13,689.79 at 4 p.m. in Toronto, following a third week of losses and a weekend of political turmoil. The benchmark posted a two-day retreat of 3.1 percent, the biggest since February. 

Seven of 10 industries in the S&P/TSX retreated. Financial and energy shares contributed the most to losses. The 46-member S&P/TSX Financial gauge sank to its lowest level since April today. Of the 49 stocks in the S&P/TSX Energy Index, 46 slid with oil extending declines below $47 a barrel as traders and investors assessed the impending period of uncertainty brought about by Britain’s decision to exit the EU.

The S&P/TSX has now erased gains for June, drifting to a 2.7 percent loss for the month and on pace to halt a four-month rally. Canadian equities have fared relatively better than global peers this year. The S&P/TSX is neck-and-neck with New Zealand as the top-performing developed markets in the world in 2016, with the countries now the only two among 24 in positive territory, according to data compiled by Bloomberg. 

Canadian shares remain more expensive relative to their U.S. peers. The S&P/TSX now trades at 21 times earnings, about 14 percent higher than the valuation of the S&P 500 Index.

Royal Bank of Canada and Bank of Nova Scotia stumbled at least 1.9 percent to lead a decline in financial services stocks. Energy producers Encana Corp. and Cenovus Energy Inc. sank at least 4.8 percent. Bombardier Inc. sank 6.7 percent as industrials retreated.

First Quantum Minerals Ltd. slumped 6.9 percent while commodity producers were little changed. Gains by gold stocks largely offset declines among base-metals and fertilizer producers, even as investors flocked to the precious metal as a haven.

Gold pushed its increase this year to 25 percent. The S&P/TSX Gold Index has rallied 92 percent this year, on pace for the biggest annual gain since 1993 and its best year-to-date performance in at least 30 years, data compiled by Bloomberg show.

Global markets traded at the lowest levels since March, while the S&P 500 Index retreated for a second day. Sterling extended its plunge from last week to the lowest since 1985, as U.K. Prime Minister David Cameron rejected calls for a do-over vote and set up a team of officials to prepare for withdrawal from the EU.

Consumer discretionary stocks dropped 2.7 percent, led by declines in auto-parts producer Magna International Inc. The Aurora, Ontario-based manufacturer has slumped 14 percent in two sessions, for the biggest drop since 2011. Magna generated about 36 percent of the company’s total revenue from Europe in the first quarter, according to data compiled by Bloomberg.

Fairfax Financial Holdings Ltd. added 1.9 percent after agreeing to buy an 80 percent stake in Indonesian financial group PT Paninvest’s non-life insurance unit, according to people with knowledge of the matter.

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