Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S., on Friday, April 1.Michael Nagle/Bloomberg
After the biggest monthly rally since 2011, Canadian stocks stalled to start April, as crude wiped out gains for the year and gold declined on Friday after data showed the U.S. economy added more jobs than forecast.
The Standard & Poor's/TSX Composite Index fell 0.4 per cent, or 53.92 points to 13,440.44 in Toronto for a second day of losses. The Canadian benchmark equity gauge rose 4.9 per cent in March, the best monthly advance since October 2011. The S&P/TSX is also up 2.7 per cent this year and remains one of the best-performing developed markets in the world, trailing only New Zealand.
Canadian equities had a seesaw first quarter, as losses by energy and raw-materials producers through Jan. 20 were wiped out by rebounding resource companies during February and March. The broader S&P/TSX trades at 21.2 times earnings, about 14 per cent more expensive than the valuation of the U.S. equity benchmark, the Standard & Poor's 500 Index, data compiled by Bloomberg show.
Crude slumped as much as 4.2 per cent in New York, dipping below $37 (U.S.) a barrel and erasing gains for the year after Saudi Arabia said it will only freeze its oil output if Iran and other major producers do so, the kingdom's deputy crown prince, Mohammed bin Salman, said in an interview with Bloomberg.
Gold fell more than 1 per cent on Friday after U.S. March payrolls data beat expectations, allaying some fears about the U.S. economy and stoking speculation about the timing of likely interest rate hikes by the Federal Reserve this year.
U.S. employers added 215,000 jobs in March, the payrolls report showed, against expectations for 205,000. U.S. interest rate futures suggested traders are now betting the Fed will next raise rates as soon as November, versus December ahead of the report.
Spot gold was down 1 per cent at $1,220.07 (U.S.) an ounce in the late afternoon, having earlier touched a low of $1,208.45, while U.S. gold futures for June delivery settled down $12.1 an ounce at $1223.50.
The metal saw its biggest quarterly rise in nearly 30 years in the three months to March, rallying more than 16 per cent as expectations faded that the Fed would move to normalize interest rates after their first increase in nearly a decade in December.
"We may have had a few more people thinking the Fed's going to hike (rates) in June because of the numbers. I don't agree with that - I think the fed will hike just once this year," said Bill O'Neill, co-founder of commodities investment firm Logic Advisors in New Jersey.
"It's an emotional market right now and we get different signals from the Fed governors. What has people worried is that there is something of a split in the Fed and they aren't all on the same page."
In Toronto, energy producers sank 2.65per cent, the most in the S&P/TSX, while financials dropped 0.2 per cent.
BlackBerry Ltd. slumped 7.6 per cent, the most since January, after the smartphone maker posted sales that fell short of analysts' estimates on lacklustre demand for its new handset. The company is shifting to software and services and away from devices as it struggles to compete with smartphones from Apple Inc. and Google Inc.
Wall Street extended a seven-week rally after upbeat U.S. jobs and factory data hinted at stronger corporate earnings without increasing concerns of potential U.S. interest rate hikes.
The Dow Jones industrial average was up 108.14 points, or 0.61 per cent, to 17,793.23, the S&P 500 gained 13.15 points, or 0.64 per cent, to 2,072.89 and the Nasdaq Composite added 44.70 points, or 0.92 per cent, to 4,914.54.
"We now have a super dovish Fed in our corner and jobs data in line with the trend," said Yousef Abbasi, global market strategist at JonesTrading Institutional Services LLC in New York. "The market initially sold off on the conflict of a dovish message and then beats on every single line of the data, but now people are realizing you have a combination of better economic data and a Fed that's being very gentle with the market. It seems the Fed's more concerned with the global picture than the domestic picture."
Equities shook off early losses after data showed manufacturing expanded in March for the first time in seven months, in a sign factories are emerging from their worst slump since the last recession. That followed a report showing payrolls and average hourly earnings rose more than forecast, while the jobless rate crept up as more people entered the labour force.
Additional tightening in the job market that sparks bigger pay gains for American workers may convince Fed policy makers that the economy is more insulated to weakness overseas.
The S&P 500 advanced after its strongest monthly climb since October. Equities staged a sizzling comeback in the first quarter's final six weeks, as crude rebounded from a 12-year low and central bankers from Asia to Europe and America eased concerns that a global slowdown would deepen as they signalled a willingness to bolster growth. The gauge rose 0.8 per cent in the past three months, marking the first time since 1933 it finished a quarter with a gain after falling at least 10 per cent.
Still, the late-quarter rally came amid light trading, with a three-week stretch that's seen the S&P 500 go its longest without a daily move of 1 per cent in more than a year. The Chicago Board Options Exchange Volatility Index fell 32 per cent in March, snapping its longest streak of monthly increases in four years. The measure of market turbulence known as the VIX slipped 2.9 per cent Friday to 13.54 toward its lowest since August.
"The weaker international markets had us down before the jobs report, and that will be just as much of a driver of market sentiment today," said Michael James, managing director of equity trading at Wedbush Securities Inc. in Los Angeles. "Since it's the start of the quarter, it's not surprising to see a little bit of a pause."
Oil erased its gains for the year in New York as Saudi Arabia's deputy crown prince said the kingdom will only freeze production if Iran and others follow suit.
Futures capped a weekly decline of 6.8 per cent, the first since mid February. With producers scheduled to meet in Doha this month to complete an accord on capping output, Saudi Arabia's Mohammed bin Salman signalled in an interview with Bloomberg that if any country raises output, the kingdom will also boost sales. While Iran will attend the talks, it has ruled out limiting supply as it restores exports after sanctions were lifted in January.
"The Saudis are now saying that they will only freeze if everyone else lines up behind the idea," said Tim Evans, an energy analyst at Citi Futures Perspective in New York. "That makes the meeting useless since the Iranians are going to continue increasing output."
Oil rose 14 per cent in March as it rebounded from a 12-year low amid speculation the global glut will ease as U.S. output falls. Russia will join Oman and every member of the Organization of Petroleum Exporting Countries apart from Libya in Doha on April 17 to discuss freezing production. OPEC members, led by Iran and Iraq, boosted output in March, a Bloomberg survey showed.
West Texas Intermediate for May delivery fell $1.55, or 4 per cent, to close at $36.79 a barrel on the New York Mercantile Exchange. It was the lowest settlement since March 15. Total volume traded was 10 per cent below the 100-day average at 2:46 p.m. Prices rose 3.5 per cent last quarter.
Brent for June settlement fell $1.66, or 4.1 per cent, to $38.67 a barrel on the London-based ICE Futures Europe exchange. The May contract expired Thursday after gaining 34 cents to $39.60. The global benchmark crude closed at a 47-cent premium to WTI for June delivery.
"If all countries agree to freeze production, we're ready," Saudi Arabia's bin Salman said. "If there is anyone that decides to raise their production, then we will not reject any opportunity that knocks on our door."
Saudi Arabia hasn't informed Russia that it has no plans to freeze oil output without Iran doing same, Energy Minister Alexander Novak told reporters in St. Petersburg on Friday. It's too early to talk about any freeze solutions for Iran within a wider OPEC-Russia deal, he said.
"The Saudi comments about requiring all producers to take part in the freeze doom the Doha talks," said John Kilduff, partner at Again Capital LLC, a New York hedge fund focused on energy. "The Doha process is falling apart before our eyes. The market has richly rewarded the rhetoric."