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S&P/TSX composite declines for sixth straight session on commodities selloff

TORONTO — Canada's main stock index declined Thursday for a sixth straight session, driven by a commodities sell-off affecting oil and mining companies.

TORONTO — Canada's main stock index declined Thursday for a sixth straight session, driven by a commodities sell-off affecting oil and mining companies.

“We’ve seen quite a selloff in some of those commodity producers today,” said Ryan Crowther, vice-president and portfolio manager with Franklin Templeton Canada. 

“It’s why we see the Canadian market weaker than the U.S. today — just because we’ve got the energy and materials sector making up a more significant contingent of the equity markets here in Canada.”

The S&P/TSX composite index was down 86.75 points at 20,215.36.

In New York, the Dow Jones industrial average was down 66.57 points at 34,894.12. The S&P 500 index was up 5.53 points at 4,405.80, while the Nasdaq composite was up 15.88 points at 14,541.79.

The Canadian dollar traded for 78.17 cents US compared with 79.18 cents US on Wednesday.

The October crude oil contract was down US$1.71 at US$63.50 per barrel and the September natural gas contract was down 2 cents at US$3.83 per mmBTU.

The December gold contract was down $1.30 at US$1,783.10 an ounce and the September copper contract was down eight cents at US$4.04 a pound.

Many Canadian mining and energy stocks declined on Thursday as commodity prices fell. Labrador Iron Ore Royalty Corp. was down 9.83 per cent at end of day, while mining giant Teck Resources and copper explorer Lundin Mining Corp were both down more than 7 per cent.

Crowther said investors are risk-averse right now right now due to growing global concerns about the potential economic impact of the COVID-19 Delta variant. When investors are nervous, they tend to divest from higher-risk sectors like minerals and metals. 

Oil is also extremely vulnerable to negative headlines about COVID-19, as public health lockdowns anywhere on the globe have a significant impact on fuel demand. On Thursday, oil fell to its lowest level since May at US$63.50 per barrel.

The S&P/TSX energy index was down 1.72 per cent Thursday.

Another reason markets were on the defensive Thursday, Crowther said, were minutes released this week from the U.S. Federal Reserve gathering in July, which indicate the central bank could make a formal decision on scaling back its bond buying program by year-end. This expected tapering of pandemic emergency relief programs is making some investors jittery, as the potential effect on consumer behaviour remains unclear.

It's unknown whether this week's market decline will be short-lived or whether it's the beginning of a trend, Crowther said — though he added investors should be careful.

"We’d be urging investors to use cautions when they’re looking at stocks to invest in . . . because I would view valuations in the market as being 'glass half-full' right now,” he said.

This report by The Canadian Press was first published Aug. 19, 2021.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD=X, TSX:LIF, TSX:LUN, TSX:TECK-B)

Amanda Stephenson, The Canadian Press