Canada Stocks Edge Higher as Energy Offsets Lender Skepticism

  • OPEC agreed to first output cut in 8 years at Algiers meeting
  • Gold slips, weighing on miners as U.S. economic growth firms

Canadian stocks ended higher Thursday after swinging between gains and losses, as oil a and gas producers extended a rally that offset weakness among lenders sparked by worries over Deutsche Bank AG’s finances.

Bloomberg reported that some Deutsche Bank clients are concerned about doing business with the firm after the U .S. Justice Department requested $14 billion to settle an investigation into residential mortgage-backed securities.

The S&P/TSX Composite Index rose 0.2 percent to 14,754.55 at 4 p.m. in Toronto, recovering from a brief dip after an earlier advance of as much as 0.6 percent. The index has risen 4.9 percent since the end of June and is headed for a third quarterly gain, its longest streak in two years. The S&P/TSX is up more than 13 percent this year, making it the the second-best performing developed market equity index in the world behind New Zealand.

Not coincidentally, Canadian stocks are now more expensive than their U.S. peers, with the S&P/TSX carrying a price-to-earnings ratio of 23.6 compared with 20.6 for the the S&P 500 Index. The current valuation of Canadian equities is near the highest levels in 14 years, according to data compiled by Bloomberg.

Financial shares lost 0.2 percent after Bloomberg reported that a number of funds that clear derivatives trades with Deutsche Bank have withdrawn some excess cash and positions held at the firm. Meanwhile, U.S. lender Wells Fargo & Co. is now facing Justice Department sanctions over improperly repossessing cars owned by members of the military, according to two people with knowledge of the investigation. A penalty of as much as $20 million is expected. This comes after weeks of pummeling over the bank’s practice of opening fraudulent customer accounts.

Energy producers continued to rally following an agreement by OPEC members for their first output cut in eight years. Suncor Energy Inc. rose 2.3 percent and Canadian Natural Resources Ltd. gained 2.4 percent as the energy sector advanced 1.4 percent.

The S&P/TSX Energy Index has rallied 5.1 percent in its best two-day gain since March, rising to a three-week high. Meanwhile, raw-materials producers slipped 0.1 percent as gold drifted to a loss amid gains in the dollar on evidence the U.S. economy is improving. Torex Gold Resources Inc. declined 2.2 percent. Kirkland Lake Gold Inc. fell 7.6 percent, its biggest loss in two months, after agreeing to buy Newmarket Gold Inc. in a stock deal valued at C$1.01 billion to create a producer with operations in Canada and Australia.

U.S. gross domestic product rose 1.4 percent in the second quarter, ahead of analysts’ forecasts, while jobless claims increased less than predicted last week. The dollar climbed against most major peers, after a three-day slide, as traders priced in a 54 percent chance the Federal Reserve will raise rates in December.

Crude added 1.7 percent in New York to the highest in a month, erasing an earlier decline, after posting the biggest advance since April on Wednesday. Energy and raw-materials producers are the top-performing industries in Canada this year, fueling a rebound in the wider gauge. The S&P/TSX Materials Index is up 51 percent and set to halt its longest yearly losing streak since 1988, while energy producers are second with a 24 percent gain.

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