Canadian stocks plunged to a two-month low, joining a global rout in equities and commodities, after the U.S. Federal Reserve said it may phase out stimulus and manufacturing in China contracted.
All 10 industries in the Standard & Poor’s/TSX Composite Index (SPTSX) retreated, led by a 5.7 percent decline among raw-materials producers. OceanaGold Corp. lost 12 percent as gold plunged to a 2 1/2 year low. First Quantum Minerals Ltd. slid 6.4 percent as copper skidded to the weakest in seven weeks. TransGlobe Energy Corp. fell 13 percent as oil retreated 2.9 percent.
The S&P/TSX lost 299.72 points, or 2.4 percent, to 11,968.57 at 4 p.m. in Toronto, as 94 percent of the gauge’s 237 members retreated. The index is down 3.7 percent this year. Trading volume was 55 percent higher than the 30-day average.
“The reason why the market reaction today is noticeably strong is because people had set themselves up for a more dovish message than they received,” Michael O’Brien, fund manager with TD Asset Management Inc., said from Toronto. He helps manage C$204 billion ($197 billion) at the firm. “It’s a healthy shakeup in that we had a one-way trade in bonds, dividend-paying stocks and financial assets in general. The market is recalibrating, with the view of ’Maybe we shouldn’t have taken everything up together, maybe we’ll sort out the wheat from the chaff.’”
The MSCI All-Country World Index slipped 3.4 percent today, the most since September 2011. Asian stocks tumbled to the weakest in 21 months and European shares plunged 3 percent to a 19-month low. The S&P 500 plunged 2.5 percent for its worst decline since 2011.
Fed Chairman Ben S. Bernanke said yesterday the central bank may begin reducing its $85 billion in monthly bond purchases this year and end the program in 2014 should the U.S. economy continue to improve.
Canadian 10-year government bond yields have risen about 65 basis points since May 2 to 2.33 percent, driving investors away from high dividend-paying stocks. The S&P/TSX Telecommunications and Utilities indexes, which yield higher dividends than the broader index, have fallen at least 9 percent in the past month for the worst performance in the benchmark gauge. Utilities stocks have plunged 6.9 percent in the last two days to the lowest level in almost three years.
A Chinese manufacturing gauge released today by HSBC Holdings Plc and Markit Economics reached 48.3 this month, from 49.2 in May. A reading below 50 indicates contraction. China, the world’s biggest consumer of industrial metals and energy, is Canada’s second-largest trading partner behind the U.S.
The S&P GSCI Index, which tracks a basket of global commodities prices, slid 3.1 percent as gold sank below $1,300 an ounce for the first time since September 2010. Silver plunged 8.3 percent to settle at $19.823 an ounce in New York. In trading after the settlement, silver touched $19.56, the lowest since September 2010. Platinum slumped 4.2 percent and copper declined 2.5 percent. Crude for July delivery slid the most in seven months, losing 2.9 percent to settle at $95.40 a barrel.
Raw-materials producers extended their decline in June to 15 percent, falling to the lowest level since January 2009. OceanaGold tumbled 12 percent to C$1.26 and Detour Gold Corp. plunged 16 percent to C$8.41 to pace losses among producers of the precious metal. Barrick Gold Corp., the world’s largest producer, sank 6.9 percent to C$17.27.
First Quantum, a copper and gold miner, sank 6.4 percent to C$15.48 for a two-month low. The company fired 500 workers after it was ordered to stop building a dam at its Sentinel copper project in Zambia due to rights issues.
Teck Resources Ltd., Canada’s largest diversified miner, lost 2.6 percent to C$22.51.
TransGlobe Energy slumped 13 percent to C$6.32 and Athabasca Oil Corp. declined 8.7 percent to C$6.61 as oil and gas stocks dropped 2.3 percent as a group.
Manulife Financial Corp. (MFC), Canada’s largest insurer, gained 1.5 percent to C$16.80, its highest close since July 2011. Tom Mackinnon, analyst with BMO Capital Markets, yesterday raised the stock to outperform, the equivalent of a buy, from market perform, equal to a hold, with a target price of C$19 a share.
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