Energy sector falls amid oil pessimism
TORONTO — The Toronto stock market registered a triple-digit drop Monday, led by another sizable loss in energy stocks amid a report from investment bank Goldman Sachs that forecast further big declines in oil prices.
The S&P/TSX composite index closed well off the worst levels of the session, falling 119.91 points to 14,265.01 with the energy sector down 4.6 per cent.
The February crude contract in New York dropped $2.29 to US$46.07 a barrel — its lowest level since April 2009 — after energy analysts at Goldman Sachs reduced forecasts for global benchmark crude prices, predicting inventories will increase over the first half of this year. It forecast that West Texas Intermediate — the North American benchmark —will trade at US$41 a barrel in three months. It had previously forecast WTI at $70.
Oil prices have collapsed since June 2014, falling more than 55 per cent. They have dropped more than 33 per cent just since the end of November, when Saudi Arabia made it clear it would not cut production to support prices.
“The speed has been breathtaking,” said David Wolf, portfolio manager, co-manager of Fidelity Canadian Asset Allocation Fund.
“And I think one of the reasons that equity markets are struggling with this is because it is a bit reminiscent of what happened in late 2008, so the surrounding memories of that are an economy in free fall, a real demand shock and at that stage the oil prices decline was really telling us something very bad.”
But Wolf said it is important to remember that this price shock is rooted in a glut of global oversupply and “markets are underestimating how much of a positive this is going to be to company earnings or economic growth.”
The Canadian dollar declined to levels not seen since April 2009 as tumbling oil sent the loonie down 0.71 of a cent to 83.56 cents US.
New York indexes were also negative as the Dow Jones industrials fell 96.53 points to 17,640.84, the Nasdaq dropped 39.36 points to 4,664.71 and the S&P 500 index lost 16.55 points to 2,028.26.
Elsewhere on the TSX, the base metals group was down 3.9 per cent as lower demand prospects sent copper to a fiveyear low with the March contract down three cents at US$2.73 a pound.
Other market weights included financials, down one per cent while industrials shed 0.7 per cent.
In the positive column, the gold sector was ahead five per cent as February bullion gained $16.70 to US$1,232.80 an ounce and telcos gained 0.45 per cent.
Shares in Tekmira Pharmacheuticals jumped $10.55 or 56 per cent to $29.38 after the Vancouver-based company announced a friendly merger proposal with OnCore Biopharma Inc., a U.S. drug developer working on complementary products for treating Hepatitis B.
Onex Corp. has agreed to acquire British survival equipment provider Survitec Group Ltd. for $680 million. Southampton, England-based Survitec sells survival gear, including suits and inflatables, for the marine, defence and aerospace industries. The company has more than 2,000 employees and operates seven manufacturing facilities around the world. For its most recent fiscal year, ended March 31, 2014, Survitec generated approximately $370 million in revenues.
The Canada Pension Plan Investment Board will invest $234 million in a real estate development in Suzhou, China. The Canadian pension fund manager has formed a joint venture with Longfor Properties Co. Ltd. to invest in the Times Paradise Walk project, a mixed-use development with residential, office, retail and hotel space.