A trader works on the floor of the New York Stock Exchange (NYSE) on Friday, June 10.Michael Nagle/Bloomberg
Canadian stocks fell a third day, with energy producers sinking with the price of oil as investors braced for a series of key events later this month that could renew turbulence in financial markets.
The S&P/TSX Composite Index slid 1.4 per cent, or 202.48 points, to 14,037.054 in Toronto, its steepest drop since February. While the benchmark touched the highest level in 10 months earlier this week, it has fallen 2.3 per cent in the last three days.
Global stocks headed for the steepest drop in four months, the U.S. dollar rallied, and bond yields slid to record lows, as investors braced for a series of events later this month that could renew turbulence in markets/
The British pound tumbled and stocks took another leg down after poll results showed a majority favor the nation leaving the European Union. Both the MSCI All-Country World Index and S&P 500 Index wiped out weekly gains. Treasury 10-year note yields declined, as yields from Japan to Germany fell to all-time lows, before next week's Federal Reserve meeting and Britain's referendum this month. Oil traded around $49 a barrel, leading commodities lower.
Canadian shares remain more expensive relative to their U.S. peers, trading at 21.6 times earnings, about 11 per cent higher than the 19.4 times valuation of the S&P 500 Index.
Energy producers led declines Friday, as all 10 industries in the Canadian equity benchmark retreated. Encana Corp.. and Baytex Energy Corp. lost at least 6.9 per cent. Crude futures dipped below $50 a barrel in New York as a rising U.S. dollar countered declining crude stockpiles and disruptions from Canada to Nigeria.
Transcontinental Inc., a Montreal-based commercial printer of flyers, plunged 10 per cent after posting second-quarter profit that fell short of analysts' estimates.
U.S. stocks also dropped for a second straight day on Friday following another drop in oil prices and rising worries about the global economy ahead of Britain's referendum on whether to stay in the European Union.
The Dow Jones industrial average fell 119.37 points, or 0.66 per cent, to 17,865.82, the S&P 500 lost 19.35 points, or 0.91 per cent, to 2,096.13 and the Nasdaq Composite dropped 64.07 points, or 1.29 per cent, to 4,894.55.
"The inability of the S&P to even hold key resistance tells you the market is not ready to break out to new record highs," said Adam Sarhan, chief executive of Sarhan Capital in New York.
"The global economy is weak and it can't handle any major shocks. If Brexit occurs, that's a major shock."
Jeffrey Gundlach, chief executive of DoubleLine Capital, said Friday investors are dropping risky assets because of falling global GDP expectations, fueled by China's slowing growth and the intensifying U.S. presidential race.
Some stock investors are betting on a return of the volatility that marked the first two months of the year. The bounce-back in commodity prices that fueled much of the 13.3-per-cent rally in the Standard & Poor's 500 index since its February lows is leveling off.
Crude fell the most in 10 weeks as the number of rigs drilling for oil in the U.S. climbed and the U.S. dollar strengthened against its peers.
Futures tumbled 3 per cent in New York. Rigs targeting crude in the U.S. rose by 3 to 328 this week, capping the first two-week gain since August, Baker Hughes Inc. said Friday. The dollar rose, making commodities denominated in the currency less attractive as an investment. Prices climbed earlier this week as U.S. crude stockpiles declined and disruptions cut Canadian and Nigerian supply.
Tim Evans, an energy analyst at Citi Futures Perspective in New York, said even though the "market is so intensely focused on the rig count now," the two-week gain won't have much effect on actual supply in the near-term.
"The uptick can at most be considered an inflection point where the rig-count decline stopped. It will take at least six months before it will be reflected in supply," he said.
Oil has surged about 90 per cent from a 12-year low in February as the global glut is trimmed by disruptions and a slide in U.S. output, which is under pressure from the Organization of Petroleum Exporting Countries' policy of pumping without limits.
West Texas Intermediate for July delivery slipped $1.49 to settle at $49.07 a barrel on the New York Mercantile Exchange, the biggest decline since April 4. Futures rose 0.9 per cent this week. Total volume traded was 6.8 per cent below the 100-day average.
Brent for August settlement dropped $1.41, or 2.7 per cent, to $50.54 a barrel on the London-based ICE Futures Europe exchange. The North Sea crude, used as a global benchmark, climbed 1.8 per cent this week. Brent closed at an 82-cent premium to WTI for August delivery.
The Bloomberg Dollar Spot Index, which tracks the currency against 10 major peers, rose as much as 0.8 per cent after rallying 0.4 per cent on Thursday. The Bloomberg Commodity Index looked set for a second day of losses Friday.
Global stocks headed for the biggest drop in two months and bond yields slid to record lows as investors braced for next week's Federal Reserve meeting and Britain's referendum on European Union membership later this month.
"Ninety percent of the world's oil is dollar-denominated," so any change in dollar value will "feed through pretty directly," Paul Sankey, an energy analyst at Wolfe Research LLC, said. "We are expecting Canadian production to come back soon."
Fires in Canada's oil-sands region are expected to disrupt supplies by an average of 400,000 barrels a day this month, after peaking at more than 1.1 million barrels a day of lost production in May, according to the U.S. Energy Information Administration. Cenovus Energy Inc. is in the process of restarting production at the Pelican Lake oilfield after shutting operations on Wednesday.
Oil producers in Nigeria are facing a renewed wave of violence in the delta region that accounts for most of the country's crude. The country's output dropped to the lowest in almost three decades as armed groups intensified attacks to rupture pipelines in recent months.
With files from Reuters