Canadian Stocks Slide With U.S. Shares Amid Hawkish Fed Remarks

  • New York Fed’s Dudley raises specter of September rate hike
  • Avigilon plunges to lowest since 2012 after results disappoint

Canadian stocks fell, joining losses in the U.S. after comments from a Federal Reserve official increased speculation the central bank will raise interest rates by the end of the year, overshadowing a rally in commodities prices.

The S&P/TSX Composite Index lost 0.5 percent to 14,703.44 at 4 p.m. in Toronto. The index has swung between gains and losses for the past five days after closing at the highest level since July 2015. Trading volume was 19 percent lower than the 30-day average. The Canadian benchmark is the second-best performing developed market in the world this year, just behind New Zealand.

Canadian equities joined a retreat in global markets Tuesday as U.S. stocks pulled back from records. The U.S. dollar trimmed a drop of as much as 1.2 percent after New York Fed President William Dudley said policy makers could potentially raise interest rates as soon as next month. Traders have priced in a 24 percent chance of a rate move at the next meeting in September, according to data compiled by Bloomberg. The Canadian dollar has strengthened against the greenback for seven sessions, the longest winning streak since 2012.

Crude rallied to the highest in five weeks while gold posted its biggest gain in two weeks amid the dollar’s weakness, though it wasn’t enough to drive commodities producers higher.

Financial shares contributed the most to declines on Tuesday, as nine of benchmark’s 10 main groups retreated. Sun Life Financial Inc. lost 1.4 percent. Raw-materials producers fell 0.8 percent, while technology shares lost 0.7 percent. Video-surveillance company Avigilon Corp. sank a record 25 percent after posting second-quarter earnings well short of expectations.

Canadian Natural Resources Ltd. and Birchcliff Energy Ltd. retreated at least 1 percent as energy producers fell 0.4 percent as a group. Barrick Gold Corp. fell 1.5 percent after billionaire investor George Soros’ Soros Fund Management LLC cut its holdings in the world’s largest producer of the metal by 94 percent after only taking a stake in the first quarter.

Alimentation Couche-Tard Inc. added 3.1 percent to lead consumer staples stocks higher, the only group in the S&P/TSX to advance. The gas station and convenience store chain operator is said to be near a deal to buy CST Brands Inc. as the likely winner of an auction for the company, according to the Wall Street Journal.

In Canada, the rebound this year continues to be led by mining and materials companies, the top gainers this year among 10 industries in the S&P/TSX with a 62 percent advance, the best year-to-date performance for the category in at least 30 years according to data compiled by Bloomberg.

That’s boosted the Canadian equity benchmark to a 13 percent jump in 2016, rebounding from a slump last year that was the worst for the S&P/TSX since the 2008 financial crisis. The rally has made Canadian stocks more expensive than their U.S. peers, with a price-earnings ratio of 23.5 for the S&P/TSX, about 15 percent higher than the S&P 500 Index.

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