Roundup: Canadian stock market drops as commodities weigh

Canada's main stock market in Toronto continued retreat on Monday, as a drop in commodities weighed on the sluggish trading sentiment.

The Toronto Stock Exchange's benchmark Standard & Poor's/ TSX Composite Index lost 94.46 points points, or 0.74 percent, to settle at 12,695.49 points, with resources shares led the fall.

The mining sector dived 6.87 percent after gold futures on the New York Mercantile Exchange plummeted on Monday when speculation prevailed about whether the U.S. Federal Reserve is to raise the interest rate during its two-day meeting later this week.

S&P/TSX Global Gold Index fell 6.03 percent when the most active gold contract for February delivery shrank 12.3 U.S. dollars, or 1.14 percent, to 1,063.40 dollars per ounce.

Newmont Mining Corp., the biggest gold miner by market capitalization in TSX, lowered 4.08 percent to 18.35 Canadian dollars (about 13.36 U.S. dollars) while Barrick Gold Corp. tumbled 8.93 percent to 9.69 Canadian dollars per share.

Base metals miners also suffered sharp sell-offs. First Quantum Minerals Ltd. vapored 11.49 percent to 3.93 Canadian dollars over the falling copper prices and Potash Corporation of Saskatchewan Inc., the world's biggest potash fertilizer producer, declined 3.44 percent to 23.02 Canadian dollars.

Meanwhile, the energy sector, another resources group, lost ground by 1.74 percent when its heavyweight Encana Corp. dived 8.18 percent to 7.63 Canadian dollars after the oil and gas producer announced on Monday that it is to cut capital spending in 2016 and lower its dividend by about 79 percent due to a sharp drop in oil prices.

The most influential sector financials edged down 0.48 percent as the plunge in oil prices has weighed on Canadian overall national net worth and household financial assets.

According to the data newly released by Statistics Canada on Monday, national wealth, or the total value of non-financial assets in the Canadian economy, declined 190.4 billion Canadian dollars to 9,205 billion Canadian dollars at the end of the third quarter.

And the federal agency reported that the household net worth was 259,700 Canadian dollars in the third quarter, largely unchanged from the previous quarter, but leverage, as measured by household credit market debt to disposable income (excluding pension entitlements), rose to 163.7 percent in the third quarter from 162.7 percent in the second quarter. In other words, there was 1.64 in credit market debt for every dollar of disposable income.

"We continue to expect a further deterioration in the balance sheet position of most sectors of the economy. Oil prices have continued to tumble through the fourth quarter of the year", according to Diana Petramala, an economist from TD Economics, the Canadian economic growth is also losing momentum, and following a disappointing 1.2 percent gain in 2015, real GDP growth is expected to remain sub 2 percent in 2016.

However, Telecom and Industrials, up 1.12 percent and 0.03 percent respectively, bucked the trend when Rogers Communications Inc. advanced 1.13 percent to 49.21 percent and Canadian National Railway Company rose 2.22 percent to 74.08 Canadian dollars apiece.

The TSX index is going to face more challenges this week ahead of FOMC meeting since a possible appreciation of the U.S. dollars may further weigh on the commodities market.

Diana Petramala said that oil prices have continued to tumble through the fourth quarter of the year, hitting a new low of below 35 U.S. dollars per barrel in Monday morning, while equity prices are down a further 4 percent since the end of September.

On the currency front, the Canadian dollar Monday inched higher to 0.7279 U.S. dollar at 4 O'clock (the Canadian Eastern Daylight Time), when compared with 0.7277 U.S. dollar on last Friday. Enditem