The corner of Bay Street and Adelaide streets in the heart of Toronto’s financial distriGloria Nieto/The Globe and Mail
Canadian stocks rose a third day on Tuesday extending a two-week high, as commodities producers advanced with the price of metals from copper to gold.
Makers of energy and raw materials led a 0.9-per-cent increase in Canadian equities. While the commodities producers have rallied at least 9 per cent since Sept. 28, they remain the index's biggest drag this year with losses of more than 17 per cent.
The Standard & Poor's/TSX Composite Index rose 123.69 points to 13,675.43 at 11:24 a.m. in Toronto, extending a Sept. 21 high. The benchmark Canadian equity gauge has climbed almost 3 per cent in three days, rebounding from a 4-per-cent slump in September. The index has lagged global peers among developed markets this year with a 6.8-per-cent decline.
Canada's merchandise trade deficit widened in August as exports fell 3.6 per cent, including a 20.9-per-cent drop in crude oil and bitumen. The deficit expanded to $2.53-billion ($1.93-billion U.S.) from July, exceeding the most bearish forecasts, according to Statistics Canada Tuesday from Ottawa.
Commodities producers have rallied as the U.S. dollar has weakened on bets the Federal Reserve will delay raising interest rates. The Bloomberg Dollar Spot Index slipped 0.2 per cent for a fourth straight decline, the longest streak since Aug. 24.
Barrick Gold Corp. rallied 7.4 per cent and Yamana Gold Inc. increased 9.65 per cent. Gold for immediate delivery added 0.2 per cent to $1,137.75 an ounce in London, after reaching a one- week high on Monday. Higher interest rates curb the demand for gold, which doesn't pay interest and is seen as an alternative investment.
Chemical products company Canexus Corp. soared 23.73 per cent, the most since 2009, after agreeing to sell itself to Superior Plus Corp. in an all-share deal that implies a 48-per-cent premium from yesterday's close. Superior lost 5.89 per cent, the most since Sept. 1.
First Quantum Minerals Ltd. jumped 19 per cent after announcing plans to cut net debt by greater than $1-billion through asset sales and other moves. The company also lowered its production forecasts for 2015 to 385,000 to 410,000 tonnes from a July 29 estimate of 410,000 to 440,000 tonnes. First Quantum has surged 58.49 per cent in five days, the most since 2009.
U.S. stocks fluctuated, following the Standard & Poor's 500 Index's longest rally this year, with the benchmark near its highest level since the August selloff.
The main equity index surged to within 1 per cent of 2,000 yesterday, near a point where a previous advance faltered at the end of August, and another rally ran out of steam after the Federal Reserve stood pat on interest rates last month. Biotechnology shares continued a selloff Tuesday after ending a three-day climb Monday, while energy and raw-materials rose for a sixth day.
The S&P 500 slipped 0.2 per cent to 1,983.18 at 11:16 a.m. in New York, after rising to a more than two-week high Monday.The Dow Jones Industrial Average added 51.34 points, or 0.3 per cent, to 16,827.77. DuPont Co. rallied 11 per cent to add about 39 points to the Dow after its chief executive, Ellen Krullman, said she intends to retire. The Nasdaq Composite Index sank 0.7 per cent amid the drag from biotechs.
"The market is catching its breath after strong run over the past several days," said Alan Gayle, senior strategist for Atlanta-based Ridgeworth Investments, which has about $42.5-billion in assets. "The important thing for me is the market tried to test the August lows and we saw a rebound from there."
The benchmark's five-day advance restored almost $700-billion to U.S. equity prices, as expectations for a Federal Reserve interest-rate increase have been pushed out into next year. That has sent the dollar lower and boosted shares of energy, raw-material and industrial shares amid speculation that a weaker U.S. currency will lift profits for multinational companies which benefit when their overseas earnings are converted back to dollars.
After the S&P 500's worst quarter since 2011, 12 of the 21 strategists surveyed by Bloomberg have cut their year-end forecasts for the index. To get to their average estimate, the gauge would have to rally more than 8 per cent between now and the end of December.
The Chicago Board Options Volatility Index was little changed Tuesday at 19.49. The measure of market turbulence known as the VIX fell Monday to close below 20 for the first time since Aug. 20.
Day to day swings in U.S. equities have abated in the last week, providing some respite from turbulence fueled by concerns about slowing global growth and uncertainty over the Fed's course of action on rates. After disappointing payrolls data on Friday, traders are now pricing in 34-per-cent odds of a Fed rate liftoff in December, and a 57-per-cent chance in March.
While China's slowdown and Fed policy have had the heaviest influence on investor sentiment lately, corporate profits will begin to grab more attention. Alcoa Inc. unofficially kicks off the reporting season after markets close Oct. 8. Analysts project earnings for S&P 500 members dropped 6.9 per cent in the third quarter.
A slowdown in emerging markets driven by weak commodity prices forced the International Monetary Fund to cut its outlook for global growth this year to 3.1 per cent from a July forecast of 3.3 per cent. Next year the world economy will expand 3.6 per cent, less than the 3.8-per-cent projected in July.
Among the S&P 500's 10 main groups, raw-materials and energy shares extended their rally to a sixth day, while health- care fell the most as biotechs retreated. Technology and phone companies were little changed.
"You're right at the cusp of the highest closing level since we crashed in August," said Jim Paulsen, the Minneapolis- based chief investment strategist at Wells Capital Management Inc., which oversees $351-billion. "All that is good technically, but one bad thing is leadership. The main leader, health-care, has been AWOL in this rally. That's probably not a good sign that this is a sustainable rally."
Health-care companies fell for the first time in five sessions, as Biogen Inc., Celgene Corp. and Vertex Pharmaceuticals Inc. lost more than 4.3 per cent. The Nasdaq Biotechnology Index dropped for a second day, down 4.5 per cent. The gauge has slumped 16 per cent since Hillary Clinton criticized "price gouging" in the industry two weeks ago.