A monitor is pictured as a trader works on the floor of the New York Stock Exchange (NYSE) shortly after the opening bell Aug. 30.Lucas Jackson/Reuters
Canadian stocks fluctuated on Tuesday as weak services industries expansion in the U.S. sent shares in consumer and manufacturing shares lower while commodities producers rallied with resource prices.
The S&P/TSX Composite Index added 0.12 per cent, or 17.29 points, to 14,812.99 in Toronto. The benchmark capped a 1.1-per-cent rally last week for its best advance since July 15. Canadian equity markets were closed Monday for a holiday.
Among shares moving, Enbridge Inc. led gains in energy producers after agreeing to a $28-billion cross-border deal to form the largest energy pipeline and storage company in North America. OceanaGold Corp. and Yamana Gold Inc. surged more than 5.7 per cent to pace gains among miners. Bombardier Inc. plunged more than 4 per cent after cutting its C Series delivery forecast.
Canadian shares resumed the 2016 rally to start September after hitting a speed bump in August with the narrowest one-month climb since June 2009 after torrid gains in raw-materials producers faltered. The group is still up 53 per cent and on track to halt the longest yearly losing streak since 1988. Energy producers have gained 22 per cent in 2016, on pace for the strongest in seven years.
The S&P/TSX is also the second-best performing developed market in the world, just behind New Zealand. Canadian stocks are more expensive than their U.S. peers, with a price-earnings ratio of 23.4 for the S&P/TSX, opening up a 15-per-cent premium over the S&P 500 Index.
On Tuesday, Enbridge added 3.9 per cent for a third day of gains, to the highest in three weeks, after agreeing to buy Spectra Energy Corp. in a stock-for-stock deal, according to a company statement Tuesday. The deal is expected to close in the first quarter of 2017 and would be the biggest foreign purchase ever by a Canadian company.
Barrick Gold Corp. gained 3.7 per cent to lead raw-materials producers higher, as Goldman Sachs analysts led by Andrew Quail named the Canadian company as among its top ideas within gold companies. Gold prices held a three-day advance.
Bombardier slumped 4.3 per cent, the most in almost six weeks, after it cut its 2016 forecast for C Series jet aircraft deliveries by more than half because of delays in engine shipments from supplier Pratt & Whitney. The Montreal-based planemaker now expects to deliver seven of the aircraft this year, down from 15, which will result in weaker revenue for Bombardier.
Performance Sports Group Ltd. tumbled 10.2 per cent, the biggest decline since Aug. 17. The maker of hockey and athletic equipment ended a shareholder nomination agreement with largest investor Sagard Capital Partners Friday.
With gold on pace for its strongest rally since 2010 with a more than 25-per-cent gain amid speculation over the course of Federal Reserve interest rate increases, the Canadian equity benchmark has surged to an almost 14-per-cent jump in 2016 to rebound from a slump last year that was the worst for the S&P/TSX since the 2008 financial crisis. Meanwhile, the Bank of Canada is set to announce its latest interest-rate decision Wednesday, with traders pricing in only a 4.4-per-cent chance of a cut.
U.S. stocks edged higher on Tuesday as economic data bolstered views the Federal Reserve may decide against raising interest rates in the near term.
The S&P financial index, which tends to rise with expectations for higher rates, slipped 0.2 per cent, while the S&P utilities index rose 1.1 per cent.
A weaker-than-expected reading on the U.S. services sector in August added to views the Fed will refrain from raising interest rates when it meets next week.
The Fed is "not getting support from data for a rate increase, and so we're seeing the market creep a little higher today," said Bucky Hellwig, senior vice president at BB&T Wealth Management in Birmingham, Alabama.
Stocks should benefit from a continued environment of low rates and the Fed on the sidelines as long as economic data doesn't show significant slowing, he said.
The chances of a rate hike in September dropped to 15 per cent, from 21 per cent, after the data. Odds for a December rate hike fell to 46.9 per cent from 50.6 per cent, according to CME Group's FedWatch tool.
The Dow Jones industrial average was unofficially up 46.37 points, or 0.25 per cent, to 18,538.33, the S&P 500 gained 6.50 points, or 0.3 per cent, to 2,186.48 and the Nasdaq Composite added 26.01 points, or 0.5 per cent, to 5,275.91.
The S&P 500's energy index rose 1.5 per cent, driven by Enbridge's acquisition of Spectra Energy. Spectra jumped 13.4 per cent.
Navistar jumped 40.5 per cent after Volkswagen agreed to supply engines to the U.S. truck maker in exchange for a 16.6-per-cent stake.
Global benchmark Brent crude fell almost 1 per cent on Tuesday as hopes waned for an agreement between two of the biggest oil producers to freeze output to tackle a global supply glut.
Brent had jumped 5 per cent on Monday, after Saudi Arabia and Russia agreed to cooperate in world oil markets. But Brent pared gains later that session after Saudi Energy Minister Khalid al-Falih said there was no need to freeze output for now.
Still, his Russian counterpart Alexander Novak said he was open to ideas on what cut-off period to use if countries chose to freeze output, and said even production cuts could be considered.
On Tuesday, Brent futures for November delivery fell 37 cents, or 0.8 per cent, to settle at $47.26 a barrel. U.S. crude, meanwhile, rose 39 cents, or 0.9 per cent from Friday's settlement, to $44.83 per barrel. U.S. crude did not settle on Monday due to the Labor Day holiday.
U.S. trading was thin following the long Labor Day holiday weekend. Traders said U.S. crude was supported by Genscape data showing a draw of some 700,000 barrels last week at the Cushing, Okla., delivery hub for U.S. crude futures.
The Organization of the Petroleum Exporting Countries and non-OPEC producers such as Russia will hold informal talks in Algeria on Sept. 26-28. Many in the market are skeptical a deal will happen.
"The reaction so far suggests that talk is no longer enough to support prices; the market needs to see action," Tim Evans, energy futures specialist at Citi Futures, said in a note.
"While talk of a production freeze is easy, achieving one will be more difficult, with Iran still poised to increase output to 4.0 (million barrels per day) and Nigeria plotting a recovery."
With files from Reuters