TSX falls as Fed speculation hurts commodity prices

TORONTO (Reuters) - Canada’s main stock index retreated on Wednesday as mining and energy stocks fell, pressured by lower commodity prices after the U.S. Federal Reserve signaled it could raise interest rates next month.

A man walks past an old Toronto Stock Exchange (TSX) sign in Toronto, June 23, 2014. REUTERS/Mark Blinch

The index has rallied 20 percent from an almost 3-1/2-year low in January, helped by a rebound in commodity prices. It touched a nearly seven-month high on Tuesday, just short of the 14,000 threshold.

The market got too complacent about the prospect of a Fed rate hike, said Steve Belisle, senior portfolio manager at Manulife Asset Management, who expects financial stocks to outperform some other sectors, particularly materials, if the Fed does tighten policy.

The materials group, which includes precious and base metals miners and fertilizer companies, tumbled 5.8 percent, including deep losses for gold stocks.[GOL/]

Barrick Gold Corp ABX.TO slumped 8.2 percent to C$22.94, while Goldcorp Inc G.TO was down 7.1 percent at C$22.15.

The energy group fell 1.7 percent as oil prices retreated from 2016 highs, while dry, windy weather was expected to push a wildfire in Alberta in the direction of Suncor SU.TO and Syncrude facilities, prolonging a shutdown that has cut Canadian oil output by a million barrels a day. [O/R]

Suncor Energy Inc fell 2.1 percent to C$34.40, while pipeline operator Enbridge Inc ENB.TO declined 0.8 percent to C$52.37.

Still Belisle expects the industry to work through its current difficulties and would add exposure to energy stocks on wildfire-related pullback in their prices.

Spot gold XAU= fell 1.7 percent and U.S. crude CLc1 prices declined 0.3 percent as the U.S. dollar rallied on the potential for higher interest rates.

U.S. Federal Reserve officials said it would be appropriate to raise interest rates in June if economic data points to stronger second-quarter growth as well as firming inflation and employment, according to minutes from their policy meeting last month.

The Toronto Stock Exchange's S&P/TSX composite index .GSPTSE closed down 91.09 points, or 0.65 percent, at 13,826.01. Five of the index's 10 main groups ended lower.

Financials rose 1 percent, including gains for life insurance companies as long-term bond yields moved higher. Low interest rates hurt insurer investment returns and the profitability of insurance products with guaranteed returns.

Manulife Financial Corp MFC.TO rose 2.6 percent to C$18.69, and Sun Life Financial Inc SLF.TO gained 1.7 percent to C$44.36.

The country's main banks were also higher, including a 1.7 percent advance in the shares of Royal Bank of Canada RY.TO to C$78.16.

Additional reporting by Alastair Sharp; Editing by Lisa Von Ahn and Alan Crosby