By Sarah Pringle, MarketWatch
SAN FRANCISCO (MarketWatch) — Canadian stocks shed most gains by the close of trading Wednesday after a ratings agency cut Spain’s credit ratings, but losses were limited by a rally in gold miners on hopes of more Federal Reserve stimulus.
The S&P/TSX Composite Index closed up just 0.57 point, or less than 0.01%, at 11,497.87. The benchmark had rallied as much as 83.09 points and then turned lower in the last hour of trading, in line with a swift downturn in U.S. stocks. The S&P 500 /zigman2/quotes/210599714/realtime SPX +3.06% ended down 0.7%.
Reprising concerns that Spain’s debt burden would sink Europe further into recession, Egan-Jones Ratings Co. lowered its rating on Spain to CCC+ from B, or further into junk. After the close of trading, Moody’s Investors Service cut Spain to Baa3 from A3 and placed it on review for further downgrade.
Gains in miners and financials supported the TSX, however. The diversified mining and metals index added 2% and the financials index /zigman2/quotes/210598468/delayed XX:TORGC189 +0.88% rose 0.6%.
Gold futures closed with a fourth-straight session of gains, with gold for August delivery climbing 0.4% to close at $1,619.40 an ounce, boosted by news of a decline in U.S. retail sales and producer prices. Read more on metals stocks.
Nervousness surrounding U.S. economic data released Wednesday, as well as uncertainties in Europe, were the main factors propelling the movement of gold, said Brian Huen, managing partner at Red Sky Capital Management in Toronto.
“There’s more interest to flee to a different currency. It’s a reason to potentially buy a bit more gold as a mechanism to protect oneself,” said Huen.
In addition to positive momentum in gold prices, a renewed interest in the banking sector helped buoy Canada’s stocks Wednesday, said Laura Wallace, portfolio manager at Scotia Asset Management.
“The movement in bank stocks is due to favorable valuation parameters and the recognition that our banks are largely immune to the turmoil in Europe,” said Wallace.
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Lululemon Athletica Inc. /zigman2/quotes/203839209/delayed CA:LLL -5.56% /zigman2/quotes/204011506/composite LULU +2.46% was among top percentage losers, down 3.3%, followed by Sherritt International Corp. /zigman2/quotes/200130446/delayed CA:S +1.14% , which fell 2.4%.
Traders “should expect to see some day-to-day fluctuations in crude until there are some major catalysts coming out of Europe or the U.S.,” said Mazen Issa, Canada macro strategist at TD Securities.
Still, “there has been a strong comeback in crude prices and commodity companies are a benefactor of this,” said Issa.
Canada’s dollar /zigman2/quotes/210561978/realtime/sampled USDCAD -0.1163% declined against its U.S. counterpart, with one U.S. dollar purchasing C$1.0289, up from C$1.0261 Tuesday. The U.S. dollar has gained 5.5% on the loonie over the past 12 months.