Canada Stocks Rise, Cap July Gain as Oil Rebounds Amid GDP Data

  • S&P/TSX advances 3.7% in July, the fifth in six months
  • Economic growth in Canada shrank 0.6% in May due to wildfires

Friday's Canadian Stock Movers

Canadian stocks pared a weekly decline as energy producers advanced after crude oil rebounded from the precipice of a bear market. The nation’s equity benchmark completed a monthly gain, after swinging between gains and losses, with disappointing economic data and earnings setting the tone on the last day of July trading.

The S&P/TSX Composite Index rose 0.2 percent to 14,582.74 at 4 p.m. in Toronto. The equity gauge rose 3.7 percent in July, its best month since March. Trading volume was 12 percent lower than the 30-day average. Equity markets will be closed on Monday for a holiday. 

The Canadian benchmark is up 12 percent in 2016, one of the best gains among developed markets this year. The rally has made Canadian stocks more expensive than their U.S. peers, with a price-earnings ratio of 23.1 for the S&P/TSX, about 14 percent higher than the S&P 500 Index.

Seven of the 10 main groups in the index retreated Friday, as data showed Canada’s gross domestic product contracted at the fastest pace in more than seven years in May after wildfires curbed Alberta oil production. In the U.S., the economy expanded slower than forecast, driving the biggest drop in the U.S. dollar in almost two months and boosting commodities prices.

Even with oil-sands production having recovered since the May wildfires, “the underlying weakness of the economy means that second-quarter GDP still contracted between 1 percent and 1.5 percent,” said Paul Ashworth, chief North America economist at Capital Economics in a note to clients. “With the U.S. economy clearly struggling too, hopes of a non-energy export led recovery in Canada look less realistic now.”

Energy producers bolstered gains Friday. The group rose 1.2 percent, reversing an earlier decline of as much as 0.7 percent. Enbridge Inc. climbed 3 percent after reporting second-quarter earnings just short of expectations. Crude rebounded, rising as much as 1.2 percent, pulling back from earlier losses that would have pushed prices into a bear market. Raw-materials producers climbed 1 percent led by gold and silver producers. The two industries account for about a third of S&P/TSX companies by market capitalization.

The Canadian benchmark posted a fifth monthly gain in six, led by advances across every industry in the S&P/TSX except for energy producers. Technology stocks have the biggest increase in July at 9.2 percent, with Celestica Inc. and supply-chain company Kinaxis Inc. advancing at least 19 percent.

Mining stocks are the top group in the S&P/TSX this year, up 61 percent so far in 2016, the best year-to-date performance for the group in at least 30 years, according to data compiled by Bloomberg. 

Mining and energy stocks have propelled Canada to the second-best performance among developed markets this year with a 12 percent increase, trailing only New Zealand. The S&P/TSX has joined global markets extending gains this month following a brief post-Brexit vote swoon amid a stretch of solid U.S. economic data and improving earnings.

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