Canadian resource companies led stocks lower on Wednesday as oil, gold and copper prices dropped amid concern slowing economic growth will sap demand for commodities, and the country’s fifth-largest gold producer halted some production because of flooding.
The materials group in the S&P/TSX composite index plunged 5.1 per cent, its steepest drop in almost a month. It was the heaviest drag on the benchmark among its 10 industries.
Markets worldwide have tumbled this year amid worries that a Greek debt default will weaken the global financial system and that expansion will slow in the United States and China, the world’s two biggest economies. Emerging divisions in French and German proposals to help Europe contain its debt crisis also weighed on markets Wednesday, and declines accelerated in the afternoon after the U.S. Federal Reserve said companies are more pessimistic about the outlook.
“That took the wind out of the sails of commodities, starting with crude oil,” said John Kurgan, senior market strategist with MF Global Canada. “It wouldn’t surprise me if we saw a bit of a down move in the markets over the next few days,” he said, following the gains of the past few weeks and high-level meetings in Europe this weekend.
Barrick Gold Corp. and Goldcorp Inc., the world’s largest gold producers, dropped more than 4 per cent as the precious metal declined for the third consecutive day. Teck Resources Ltd., Canada’s biggest producer of base metals and coal, slumped 5.1 per cent after copper futures fell to their lowest level in three weeks.
“Overall economic activity continued to expand in September, although many districts described the pace of growth as ‘modest’ or ‘slight,’” the Fed said in its Beige Book. “Contacts generally noted weaker or less certain outlooks for business conditions.”
“The Beige Book continued to show that the U.S. economy remains colourless and neutral, lingering closer to stall speed than to escape velocity,” David Watt, senior currency strategist at RBC Dominion Securities Inc., said in a research note.
Agnico-Eagle Mines Ltd., Canada’s No. 5 gold producer, plunged 18 per cent after the company suspended production at its Goldex mine in Quebec because of ground instability and flooding, and said it will booking a related charge of about $170-million (U.S.). Barrick and Goldcorp were the heaviest individual drags on the S&P/TSX, followed by Agnico-Eagle.
Cameco Corp., the world’s largest uranium producer, lost 4.6 per cent after Rio Tinto Group trumped the Canadian company’s hostile bid for Hathor Exploration Ltd. Hathor shares surged.
With files from Bloomberg News