By Matt Walcoff
Jan. 20 (Bloomberg) — Canadian stocks fell the most in two months as oil and base metals slumped on prospects of higher interest rates in China and gold slipped after reports on U.S. initial jobless claims and housing were better than forecast.
Barrick Gold Corp., the worlds largest gold producer, lost 2.2 percent as the metal retreated to a two-month low. Teck Resources Ltd., Canadas largest base-metals and coal producer, slumped 2.4 percent as copper fell the most in five weeks. Canadian Natural Resources Ltd., the countrys second-biggest energy company by market value, decreased 0.8 percent as crude futures fell for a third day.
The Standard & Poors/TSX Composite Index dropped 169.44 points, or 1.3 percent, to 13,269.60 at 11:23 a.m. in Toronto. Oil and base metal prices dropped after China reported faster fourth-quarter economic growth than most economists forecast, spurring speculation the country will rein in credit. Reports also showed U.S. jobless claims fell by 37,000 last week and purchases of existing homes rose 12 percent in December.
Normally commodities are higher when you get that kind of news, but now investors are looking at the impact on interest rates, said Stephen Gauthier, who helps oversee C$500 million ($499 million) as a money manager at Fin-XO Securities in Montreal. Basically, commodities are down because the economy is strong.
The S&P/TSX had slipped less than 0.1 percent this month through yesterday after surging 19 percent in the second half of 2010. Gold futures, which jumped 30 percent last year, had declined 3.6 percent this month as gauges of U.S. manufacturing, the service sector and retail sales advanced. Thirty of 42 S&P 500 companies that have reported earnings since Jan. 10 have topped their average analyst estimate.
Changing Scenario
Gold had been doing very well because weve been expecting a bad economy and the impact on sovereign debt, Gauthier said. In the past few weeks, the scenario suddenly had changed, and its not positive for gold anymore.
Gold companies make up 11 percent of Canadian stocks by market value. S&P/TSX gold stocks have tumbled 12 percent this month, which would be the most in a month since April 2009.
Gold futures lost 1.8 percent to $1,345.10 an ounce in New York, while silver plunged 4.3 percent. Precious metals lost appeal as an alternative investment after the U.S. Labor Department said 404,000 Americans filed for first-time jobless benefits last week, 16,000 fewer than the median forecast in a Bloomberg survey, and the National Association of Realtors said December sales of previously owned homes jumped to a 5.28 million annual rate, beating the highest forecast.
Mining Shares
Barrick decreased 2.2 percent to C$46.50. Goldcorp Inc., the worlds second-largest gold producer by market value, retreated 1.5 percent to C$39.98. Silver reseller Silver Wheaton Corp. tumbled 4.1 percent to C$30.87, extending its monthly slump to 21 percent. First Majestic Silver Corp., which mines in Mexico, sank 9.8 percent to C$11.39.
Crude futures fell 2.4 percent to $88.68 a barrel in New York. Canadian Natural declined 0.8 percent to C$42.01. Suncor Energy Inc., Canadas largest oil and gas producer, lost 0.7 percent to C$37.61. Cenovus Energy Inc., Canadas fifth-biggest energy company, slipped 1.5 percent to C$31.34 for a sixth- straight drop, the longest streak since EnCana Corp. spun off Cenovus in 2009.
Copper retreated in New York, while zinc fell in London for a sixth day. Teck decreased 2.4 percent to C$60.87. Ivanhoe Mines Ltd., which is building a copper and gold mine in Mongolia with Rio Tinto Group, slumped 3.1 percent to C$24.98. First Quantum Minerals Ltd., Canadas second-largest publicly traded copper producer, dropped 2.7 percent to C$113.68.
Fertilizer producers declined for a second day after Cargill Inc. said Jan. 18 it will sell its stake in Mosaic Co.
Potash Corp. of Saskatchewan Inc., the worlds largest fertilizer producer by market value, lost 1.9 percent to C$163. Agrium Inc., the worlds fourth-largest agricultural-chemicals company, decreased 2 percent to C$88.77.
–Editor: Stephen Kleege, Niamh Ring
To contact the reporter on this story; Matt Walcoff in Toronto at [email protected].
To contact the editor responsible for this story: Nick Baker at [email protected].
