Strengthened loonie prompts oil sell off
Canada’s main stock index shed nearly 100 points on the final trading day of the week in a broad-based decline.
The S&P/TSX composite index closed down 81.31 points at 14,952.33.
“Resource stocks in Canada are selling off today because a higher dollar negates the rise in the commodity price,” said Norman Levine, managing director of Portfolio Management Corp.
The loonie recorded its third consecutive day of gains, trading at an average price of 79.45 cents US, up 0.38 of a U.S. cent. It’s risen 1.05 of a U.S. cent since Tuesday’s daily average price of 78.40 cents US.
The loonie rallied Friday following news that the country’s annual inflation rate accelerated in July for the first time since January. Last month, the year-over-year inflation rate rose to 1.2 per cent and the rise reinforced notions that the Bank of Canada will once again hike its benchmark interest rate in the fall.
The strengthened loonie prompted a sell off in resources stocks, said Levine, explaining commodities are priced in U.S. dollars. Shares in the global gold and the energy sector slid, despite a boost in the price of oil. The October crude contract gained $1.42 cents to $48.66 US per barrel.
The commodity got a lift from a lower U.S. rig count. Figures released Friday showed the number of rigs exploring for oil and natural gas in America decreased by three this week to 946.
While resource stocks contributed to the day’s fall, Levine said he believes “the general malaise in the Canadian market really has to do with the anti-business attitude that the federal, provincial and municipal government have over various sectors and industries, and investors are saying, ‘You know, I can invest in more investorfriendly, hospitable places.”’
He pointed to the federal government’s lukewarm attitude to pipeline investment as an example of such attitudes. South of the border, indices also fell. The Dow Jones industrial average slipped 76.22 points to 21,674.51, while the S&P 500 index fell 4.46 points to 2,425.55. The Nasdaq composite index dropped 5.38 points to 6,216.53. Some of that comes from continued reaction to political drama coming from the White House and to the terrorist attack in Spain on Thursday, Levine said, while part of the drop can be attributed to profit taking as valuations in the U.S. have reached high levels.
Elsewhere in commodities, the December gold contract retreated 80 cents to $1,291.60 US an ounce. The September natural gas contract fell 3.6 cents to $2.89 US per mmBTU and the September copper contract was relatively unchanged at about $2.94 US a pound.
Icahn quits Trump
WASHINGTON — President Donald Trump is losing another informal adviser: billionaire investor Carl Icahn, who gave the White House guidance on its deregulation efforts.
Icahn said in a letter to Trump that he is stepping down to prevent “partisan bickering” about an unofficial role that Democrats suggested could benefit him financially. Trump lost a pair of business advisory councils Wednesday over his inability to condemn the role white supremacists played in violence last weekend in Charlottesville, Virginia.
Icahn said in the letter he never had access to nonpublic information or profited from his position and that he believes there was no conflict of interest. He said he limited his input to broad matters of policy involving the oil refining industry. Icahn controls a sizable stake in refiner CVR Energy.