Gold a Drag on Raw Materials as Canada Stocks End Little-Changed

Updated on
  • Agrium, Potash Corp. confirm preliminary merger discussions
  • Gold price headed for first August decline in seven years

Canadian stocks ended the day little-changed after erasing an advance, as gold producers tumbled with the metal to all but wipe out gains sparked by talks of a merger among fertilizer giants Potash Corp. of Saskatchewan Inc. and Agrium Inc.

The S&P/TSX Composite Index rose less than 0.1 percent to 14,684.85 at 4 p.m. in Toronto, paring an earlier increase of as much as 0.7 percent. The equity gauge is still on track for a 0.7 percent climb in August. Trading volume today was 6.4 percent higher than the 30-day average at this time of the day.

Raw-materials producers slumped 2 percent, the biggest contributor to losses in the S&P/TSX as Barrick Gold Corp. and Goldcorp Inc. tumbled at least 4.7 percent. Gold is set for a monthly decline in August for the first time in seven years, with futures down 3 percent this month as the Federal Reserve inches closer to raising interest rates.

Potash Corp., the world’s second-largest producer of the fertilizer, soared 11 percent for the biggest gain in six years while Agrium climbed 7.4 percent. The two companies are in talks for a potential merger, as reported by Bloomberg News and subsequently confirmed by the companies. A combination could be announced as soon as next week, people familiar with the matter said.

Bank of Nova Scotia added 1.6 percent, for the highest close since November 2014 to boost financial-services firms. The nation’s third-largest lender posted earnings that beat analysts’ estimates, led by gains in capital markets and international banking. The bank also raised its dividend.

Scotiabank joins CIBC, Toronto-Dominion Bank, Royal Bank of Canada and Bank of Montreal topping analysts’ expectations in the past week. Financial services stocks rose 0.6 percent, for an eighth straight day of gains, the longest in more than a month.

Ritchie Bros. Auctioneers Inc. surged 24 percent, the biggest one-day advance ever for a record close, after agreeing yesterday to buy online heavy equipment marketplace IronPlanet for $758.5 million.

Energy companies added 0.1 percent Tuesday, after paring a 0.9 percent climb as crude oil erased an advance.

Raw-materials producers remain the worst performers among 10 industries in the S&P/TSX this month, slumping 9.3 percent on the weakness in gold. Meanwhile, health-care stocks are up 17 percent, led by Valeant Pharmaceuticals International Inc.’s 36 percent rally in August. The drugmaker affirmed its 2016 outlook earlier this month, restoring some confidence in analysts and investors in its turnaround strategy.

Valeant rose 0.5 percent today after agreeing to acquire the Canadian rights to obesity drug Contrave. Valeant plans to file with Canadian regulators for approval of the drug in January. Terms of the agreement were not disclosed.

The materials group is up 46 percent this year, an increase that would halt the longest yearly losing streak since 1988. Energy producers have gained 21 percent in the same period, on pace for the strongest in seven years.

That’s boosted the Canadian equity benchmark to an almost 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 23.3 for the S&P/TSX, opening up a 14 percent premium over the S&P 500 Index.