|Globe Investor | May 6, 2015|
At midday: TSX hits one-month low in wake of Alberta election
Hefty losses among energy companies follow NDP victory
Canada’s main stock index fell on Wednesday for the second straight session as hefty losses among energy companies following an unprecedented election outcome in Alberta province pushed the market to its lowest level in more than a month.
The left-wing New Democratic Party beat the Progressive Conservatives in a crushing victory that ended the centre-right party’s 44-year hold on power in the Western Canadian, oil-producing province.
“Putting aside ideology issues, the most significant issue facing the NDP looks to be a lack of governing experience,” Credit Suisse analyst Andrew Kuske said in a client note.
Analysts have said the win could hurt energy stocks, at least temporarily, citing potential issues including policy changes that could hurt production levels.
“Policies that crimp growth in oil and gas production would likely impact demand for new infrastructure, and hence, future growth for the stocks with operations in the province,” Robert Kwan, an analyst with RBC Dominion Securities wrote in a note.
“Despite unknowns as to how this will play out, we suspect that most stocks with material Alberta operations would initially underperform,” he wrote, saying that power producers and pipeline companies would be among those coming under the most pressure.
Energy stocks, which make up some 22 per cent of the TSX’s weight, plunged 3.2 per cent on a day which saw crude prices surge to 2015 highs, typically a positive driver for the sector.
The top three most influential decliners on the index were Enbridge Inc, which fell 3.03 per cent to $60.84; Suncor Energy Inc, which tumbled 3.7 per cent to $36.92; and Canadian Natural Resources, which sank 4.14 per cent to $37.99.
The Toronto Stock Exchange’s S&P/TSX composite index fell 169.7 points, or 1.12 per cent, to 15,004.24.
Nine of the index’s 10 main groups were in the red, with declining issues outnumbering advancing ones by 220 to 24, for a 9.17-to-1 ratio on the downside.
Other heavy losers included the materials group, which fell 1.8 per cent, hurt in part by lower metal prices.
Financial shares, another big index mover, were down 1 per cent, with Royal Bank of Canada falling 0.7 per cent to $79.95.
Telecoms were the lone gainers, rising 0.9 per cent. Rogers Communications Inc led with a 3.6-per-cent jump to $43.67, followed by Telus Corp, which was up 1.7 per cent, at $41.54.
U.S. stocks turned negative on Wednesday, after opening slightly higher, as disappointing data, including weaker-than-expected private jobs numbers, fueled concerns about the economy’s potential to rebound from a first-quarter slump.
Stock markets globally have also been under pressure as the worldwide sell-off in government bonds deepened, spreading unease across all assets.
ADP payroll data showed U.S. private employers added 169,000 jobs last month, the fewest since January 2014 and far below economists’ expectations, posing a downside risk for the more comprehensive nonfarm payrolls report.
“This is certainly going to change expectations for Friday’s numbers,” said Joe Saluzzi, co-manager of trading at Themis Trading in Chatham, New Jersey.
“Some people think that the Fed will now delay raising rates.”
Adding to the weak jobs data, applications for U.S. home mortgages fell last week as interest rates jumped, while nonfarm productivity fell in the first quarter as harsh winter weather weighed on output.
The Dow Jones industrial average was down 31.9 points, or 0.18 per cent, at 17,896.3, the S&P 500 was down 2.41 points, or 0.12 per cent, at 2,087.05 and the Nasdaq Composite was down 6.59 points, or 0.13 per cent, at 4,932.73.
Nine of the 10 S&P sectors were lower, with only the energy index gaining 0.6 per cent as oil prices hit fresh 2015 highs.
Tech stocks, led by Apple and Microsoft, were the biggest drag on the three major indices.
The weak data and bond markets also overshadowed strong results from corporates and a mini revival in dealmaking.
MoneyGram soared 23.08 per cent to $9.60 after Bloomberg reported that Western Union was considering buying its smaller rival. Western Union rose as much as 9 percent to a record high of $22.84.
Oil prices rose to 2015 highs on Wednesday, as a month-long rally gained further impetus from the first fall in U.S. crude stocks since the beginning of January.
Brent crude was up $1.60 to $69.12 a barrel, after hitting a 2015 peak of $69.63.
U.S. crude traded $1.54 higher at $61.89 a barrel, near an intraday high of $62.58.
“Bulls are in control of the market,” said Tamas Varga and Stephen Brennock, analysts at London brokerage PVM Oil Associates, in a note on Wednesday.
The U.S. government’s Energy Information Administration said crude stocks fell 3.88 million barrels to 487.03 million barrels, the first stock draw since the beginning of January and more than double the 1.5 million barrel draw reported by the American Petroleum Institute on Tuesday.
Stocks at the key delivery point of Cushing, Okla., fell for a second straight week by 12,000 barrels to 61.67 million barrels, easing fears of storage hitting tank tops.
“It’s a big bullish crude draw,” said Dominick Chirichella, senior partner at the Energy Management Institute in New York.
“Lower imports seem to be the main driver for the draw down,” he said.
Oil prices also had support from the dollar, which fell by more than a percent against a basket of currencies, on course for a fourth straight weekly loss.
|New Investor Tools|
Detailed quarterly mutual fund data now available to Globe Unlimited subscribers
Globe Unlimited users now have access to quarterly mutual fund performance tables as part of their monthly subscription. Read more
|More Globe Investor Tools|
About Inside the Market
Inside the Market is a concise and insightful look at financial market numbers and what’s moving them. You’ll get three updates a day, so you'll always know what’s happening before the North American markets open, at noon, and at the close.
Please do not reply to this message. To contact The Globe and Mail, click here.
You received this email at ##emailAddr## because you subscribe to Inside the Market from The Globe and Mail.
To manage your newsletters from The Globe, please login.
To unsubscribe from this newsletter, or all email communications from The Globe, click here.
To advertise with us in print and online, visit GlobeLink
© Copyright 2015 The Globe and Mail Inc. All Rights Reserved.
444 Front St. W., Toronto, ON Canada M5V 2S9
Phillip Crawley, Publisher