Canada Stocks Fall as Gold Stumbles, Rate Hike Expectations Rise

  • Rising chance of interest rate hike also weighs on shares
  • Bullion sees worst weekly loss in more than three years

Canadian stocks declined for a second day as employment data from the U.S. signaled that interest rates may be rising soon. Gold had the biggest weekly loss in more than three years.

The S&P/TSX Composite Index fell 0.2 percent to 14,566.26 at 4 p.m. in Toronto, capping a weekly drop of 1.1 percent. The index is up 12 percent this year, making it the third-best performing developed market equity index in the world just behind New Zealand and the U.K.

Gold capped its biggest weekly loss since 2013 as investors judged that a weaker-than-expected U.S. payrolls report won’t be enough to sidetrack the Federal Reserve from raising interest rates this year. Higher rates hurt the precious metal’s appeal since it doesn’t pay interest. Traders have now priced in a 64 percent chance that rates will rise in December, according to data compiled by Bloomberg.

Canadian stocks remain expensive compared to their U.S. peers. The S&P/TSX is carrying a price-to-earnings ratio of 23.2 compared with 20.3 for the the S&P 500 Index, according to data compiled by Bloomberg.

The decline in the S&P/TSX was broad-based, as nine of the 11 sectors declined. Raw-materials producers led gains, jumping 0.4 percent. Raw-materials and energy producers remain the top-performing industries in Canada this year. 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.

Barrick Gold Corp. rose 1.6 percent erasing losses earlier this week. Goldcorp Inc. gained 0.4 percent and Franco-Nevada Corp. jumped 0.8 percent.

Financial shares declined 0.2 percent. Royal Bank of Canada and Bank of Nova Scotia fell 0.3 percent. First National Financial Corp. tumbled 1.1 percent to its lowest level since April 2016. The company said Thursday that new housing rules will cut into its profit growth.

Sunopta Inc. stock declined to the lowest level in seven months after announcing the conclusion of a strategic review. Oaktree Capital Management invested $85 million into the Canadian natural and organic food producer, and appointed new directors to the board.

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