Canada’s main stock index closed down despite a rising crude oil price and strong performance from gold and metals stocks a day after Barrick Gold Corp. announced a deal to buy Randgold Resources.
“We think the Barrick Randgold merger announced yesterday probably woke up some interest in the gold sector,” says Patrick Bernes, a portfolio manager for CIBC Asset Management.
Base metals led the TSX, gaining about 1%, following by the health-care, gold materials and industrials sectors.
“The bid we’re seeing in base metal stocks likely reflects a bit more comfort that the trade war may not cause too much damage to global growth,” he said in an interview.
The S&P/TSX composite index closed down 47.82 points at 16,159.50, after hitting a low of 16,159.50 on 237.4 million shares traded.
The consumer discretionary sector led on the downside, driven by autoparts companies Martinrea International, Magna International and Linamar Corp.
Bernes attributed the companies’ share losses to higher commodity prices and ongoing unresolved NAFTA issues.
Crude prices rose for a fourth-straight day with the November crude contract rising US36¢ at US$72.44 per barrel, mainly related to tight supply.
Data suggests Iranian production is dropping off rapidly and anticipated offsetting purchases from India and China aren’t materializing, Bernes said.
A published report said Indian energy companies are expected to eliminate Iranian imports in November, likely because of pressure from U.S. sanctions, he said.
Also, Saudi Arabia appears comfortable with higher oil prices and has been unwilling to fill the production drop off.
Canadian energy equities did not benefit from Tuesday’s higher crude price because the country is still having a problem moving the oil, resulting in a widening gap between Western Canada Select and the West Texas Intermediate, Bernes said.
In New York, the Dow Jones industrial average closed off 69.84 points at 26,492.21. The S&P 500 index shed 3.81 points to 2,915.56, while the Nasdaq composite was up 14.22 points to 8,007.47.
Wednesday’s forecasted interest rate hike by the U.S. Federal Reserve is already priced in to stocks, added Bernes.
“Markets are probably in a wait-and-see mode for the Fed,” he said in an interview.
The November natural gas contract was up US2.9¢ at US$3.06 per mmBTU.
The December gold contract was up US70¢ at US$1,205.10 an ounce and the December copper contract was down US1.25¢ at US$2.82 a pound.