Canada Stocks Fall as Energy Shares Overshadow Rally in Miners

  • Crude oil’s retreat drags down oil and gas companies
  • West Fraser Timber surges as earnings, sales beat estimates

Tuesday's Canadian Stock Movers

Canadian stocks fell for a second day as a selloff in crude dragged energy producers lower, overshadowing a rally in raw materials paced by West Fraser Timber Co. Ltd. and gold miners.

The S&P/TSX Composite Index fell 0.4 percent to 14,870.63 at 4 p.m. in Toronto. Raw materials rebounded after snapping their longest winning streak in three months. Miners and energy producers have propelled the index to a 14 percent increase this year, making it the top performing developed equity market in the world, ahead of the U.K. and New Zealand.

Nine of the 11 sectors in the index fell, paced by a 1.3 percent decline in energy shares, while raw-materials producers rose to a one-week high as gold climbed and West Fraser Timber Co Ltd. topped earnings and revenue estimates. The lumber company capped its largest gain in 16 years, rising 12 percent. Gold investors assessed demand from India before its Diwali festival that can lead to increased buying, with miners rebounding from yesterday’s decline. B2Gold Corp. added 8 percent and Barrick Gold Corp. increased 2.2 percent.

Demand for gold has slipped recently, with the price falling more than $100 from its high this year, as traders price in increasing odds that interest rates will rise. Expectations for higher borrowing costs have strengthened the dollar, sending a gauge on the currency to its highest since March before easing back today. Rising rates dull the precious metal’s appeal when compared to higher yielding assets.

Health-care shares advanced 0.8 percent, led by a 1.8 percent climb in Valeant Pharmaceuticals International Inc. Renowned fund manager Bill Miller said he purchased shares of the drug maker, predicting the stock will double in three years.

Energy producers, Canada’s second largest sector, retreated as crude in New York dropped 1.1 percent to a one-week low. Oil slipped below $50 a barrel on speculation Russia won’t curb output, just after Iraq said it should be exempt from OPEC’s planned cuts. TransCanada Corp. and Canadian Natural Resources Ltd. fell at least 1.3 percent.

Financials, which account for about a third of the index, declined 0.3 percent. Royal Bank of Canada slipped 0.4 percent to a one-week low, while Thomson Reuters Corp. declined 0.9 percent.

Bank of Canada Governor Stephen Poloz said Monday Canada’s two-track economy complicates the decision to cut interest rates. Poloz reiterated the central bank considered cutting rates ahead of last week’s decision to stand pat, but held off because of uncertainties around the nation’s growth outlook. Yesterday, the central bank renewed a two percent inflation targeting agreement, as price increases quickened in September for the first time in five months.

Canadian stock valuations remain 17 percent higher than their U.S. peers, with the S&P/TSX carrying a price-earnings ratio of 23.6 compared with 20.1 for the the S&P 500 Index, according to data compiled by Bloomberg.

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