Canada Stocks Slip as Gold Rout Worsens Ahead of U.S. Jobs Data

  • Gold extends losses a fifth day as Fed rate hike bets increase
  • Crude oil climbs above $50 a barrel for first time since June

Canadian stocks ended the day lower as a rout in gold miners worsened while financial shares advanced on speculation that interest rates are poised to rise.

The S&P/TSX Composite Index fell 0.1 percent to 14,595.50 at 4 p.m. in Toronto, after recovering from a three-day slide Wednesday that had wiped out 1.6 percent of its value. The index is up 12 percent this year, making it the second-best performing developed market equity index in the world just behind New Zealand.

Canadian stock valuations remain 15 percent higher than their U.S. peers, with the S&P/TSX carrying a price-to-earnings ratio of 23.3 compared with 20.4 for the the S&P 500 Index, according to data compiled by Bloomberg.

Raw-materials producers tumbled the most in the index, with gold miners dropping 2.3 percent to the lowest since April. Gold fell for a fifth day in New York, to the lowest in almost four months, wiping out more than 5 percent of value during a five-day slide. 

Raw-materials and energy producers remain the top-performing industries in Canada this year, fueling a rebound in the wider gauge even as its first-half resurgence has sputtered somewhat in the second. The S&P/TSX Materials Index is up 35 percent and set to halt its longest yearly losing streak since 1988. Energy producers are second with a 25 percent gain.

Traders have now priced in a 64 percent chance the Federal Reserve will raise interest rates in December, according to data compiled by Bloomberg. The U.S. is expected to report Friday that it added roughly 171,000 jobs in September, according to consensus estimates ahead of the latest jobs report. Gold is less attractive in an environment of higher rates as it doesn’t pay any yield.

The prospect for higher rates lifted shares of some of Canada’s largest lenders, the largest component of the S&P/TSX.

Canadian Western Bank jumped 2.6 percent, while Royal Bank of Canada added 0.6 percent. First National Financial Corp. fell 1.2 percent, erasing an earlier gain to extend losses for a fourth day. The alternative lender has now plunged 20 percent in four days, after Finance Minister Bill Morneau introduced measures this week to cool housing markets in Toronto and Vancouver and curb the rise in household debt.

Imperial Oil Ltd. and Cenovus Energy Inc. rose more than 1.5 percent to lead gains among energy producers, as seven of 11 industries in the S&P/TSX advanced, offsetting some losses. Oil futures added 1.2 percent to settle at $50.44 in New York, extending gains after closing at the highest in more than three months Wednesday. The price of crude surged above $50 a barrel for the first time since June as U.S. stockpiles fell.

Canopy Growth Corp. ended the day down 1.8 percent, after touching a record high. The marijuana producer’s Tweed brand is partnering with rapper Snoop Dogg to introduce a selection of varieties of cannabis under the “Leafs by Snoop” brand. Canopy is up 65 percent this year, after graduating to the Toronto Stock Exchange in July.

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