TSX dragged lower by US economic data, gold and silver producers rally on record spot price
The first day of trading for Canadian markets in August started off on a downbeat note, dragged down by a weaker open across the major exchanges in New York.
US futures started the day firmly in negative territory, and turned further into the red after the opening bell. The Dow Jones Industrial Average is currently trading close to its intraday low, down 101 points, or 0.84% at 12,029. The situation is similar on the tech laden NASDAQ and broader S&P 500, off 0.9% and 1.1% respectively.
Canadian markets actually opened with gains, but despite a strong showing from precious metal stocks, quickly moved into negative territory. The TSX is currently down 82 points (0.64%) to 12,863, but the smaller, more junior focused TSX Venture market is currently trading slightly higher, up 6 points, or 0.3% to 1,985. Of the eight main sectors on the TSX, only one was in positive territory today - utilities. The three worst performing sectors are financials, healthcare and industrials.
Last Friday Canadian markets were, hit by a double whammy of lower than expected GDP figures at home and south of the border this morning. Canadian GDP figures for the month of May disappointed, showing a contraction of 0.3%. The GDP drop was attributed to a combination of bad weather and forest fires which impacted a number of natural resources based industries. GDP figures south of border also failed to help, with US second quarter GDP coming in at 1.3%, well below consensus estimates of 1.6%. The GDP figure for the first quarter was also revised sharply down from an initial reading of 1.9% to just 0.4%.
This morning there was more disappointing economic data from the US, this time in the shape of personal income. In June personal income increased a seasonally adjusted 0.1% - the smallest gain since November 2010 - according to a report released from the Commerce Department, while consumer spending dropped 0.2%, the first decline in almost two years. The consumer spending reading was worst than analyst expectations, hitting market sentiment and raising fears that second quarter growth from the world’s largest economy is going to be more sluggish than many hoped.
The consumer spending figure hit the US dollar, and also pushed crude, natural gas and copper lower. Once again of the few beneficiaries was gold and silver – both moved higher, with gold adding 1.4%, or $22 to $1,644/ounce and silver jumping 2.7% to $40.37/ounce.
The strong rise in precious metals delivered a boost to gold producers, Kinross Gold (TSE:K), Yamana Gold (TSE:YRI) and Barrick Gold (TSE:ABX) rising 5%, 4.2% and 2.6% respectively, while Agnico-Eagle (TSE:AEM), Royal Gold (TSE:RGL) and Allied Nevada Gold (TSE:ANV) rose 5.3%, 5.4% and 6%.
Silver producers were also moving firmly higher today. Among the better performers were Coeur d’Alene Mines (TSE:CDM), Silver Standard (TSE:SSO), First Majestic Silver (TSE:FR) and Great Panther Silver (TSE:GPR, AMEX:GPL) all tacked on 6% or more.
Sino-Forest (TSE:TRE) yet again added to recent gain on continued strong volumes. Today the company tacked on another 3.8% this morning, continuing its strong rebound in recent weeks. Shares in the company, which hit a 52 week high of $25.85 and 52 week low of $1.99 just a few weeks ago have been in recovery mode, largely thanks to two large institutions taking stakes in the stock after it was hit by allegations from US firm Muddy Waters about the size of its forestry holdings in China.
Another stock in demand on the TSX today was U.S. Geothermal (TSX:GTH, AMEX:HTM), a renewable energy development company focused on the production and sale of electricity from geothermal energy. The company announced today that it has successfully completed the repair of production well RRG-7 at the Raft River geothermal power project in southeast Idaho, sending its shares 14% higher.
Solid drill results helped lift zinc explorer Zazu Metals (TSE:ZAZ). The company rose 9% after announcing the first drill results from a field program underway at its Lik property, located 22 kilometers from Teck (TSE:TCK.A) Red Dog Mine in Northwest Alaska.