Canadian Stocks Are Falling On Geopolitical Concerns -- Canadian Commentary

(RTTNews) - The Canadian stock market is trading in the red Wednesday morning, as markets around the globe are falling on geopolitical concerns. Markets have been jittery since the start of 2016. Concerns over the Chinese economy and rising tensions between Saudi Arabia and Iran has had investors on edge the past few sessions.

North Korea then rocked the already shaky markets with claims that it has successfully tested its first hydrogen bomb, a more powerful type of nuclear weapon than the North has previously tested.

Economic data from China also remains poor. The services sector in China remained in expansion in December, albeit at a slower pace, the latest survey from Caixin showed on Wednesday with a 17-month low PMI score of 50.2. That's down from 51.2 in November, although it remains barely above the boom-or-bust line of 50 that separates expansion from contraction.

However, Chinese shares rallied after state media said a ban on short sales, due to expire on Friday, would remain in place until the China Securities Regulatory Commission implements a new policy to manage the pace of stakeholder sales.

Concerns over the Chinese economy have weighed on mining and resource stocks, which are among the weakest stocks in Canada this morning. Energy stocks are also under intense pressure after Saudi Arabia slashed prices for European customers.

Markets in Europe are trading firmly in negative territory Wednesday and U.S. markets are also under pressure in early trade.

Private sector employment in the U.S. increased by much more than expected in the month of December, according to a report released by payroll processor ADP on Wednesday. ADP said private sector employment jumped by 257,000 jobs in December after climbing by a revised 211,000 jobs in November.

Economists had expected employment to increase by about 190,000 jobs compared to the addition of 217,000 jobs originally reported for the previous month.

Partly reflecting a notable decrease in the value of imports, the Commerce Department released a report on Wednesday showing that the U.S. trade deficit narrowed in the month of November. The Commerce Department said the trade deficit shrank to $42.4 billion in November from a revised $44.6 billion in October.

Economists had expected the deficit to widen to $44.4 billion in November from the $43.9 billion originally reported for the previous month.

Citing faster deliveries, the Institute for Supply Management released a report on Wednesday showing an unexpected slowdown in the pace of growth in U.S. service sector activity in the month of December. The ISM said its non-manufacturing index edged down to 55.3 in December from 55.9 in November, although a reading above 50 continues to point to growth in the service sector.

The modest decrease came as a surprise to economists, who had expected the non-manufacturing index to inch up to 56.2.

The benchmark S&P/TSX Composite Index is down 138.29 points or 1.07 percent at 12,781.85.

On Tuesday, the index closed down 7.01 points or 0.05 percent, at 12,920.14. The index scaled an intraday high of 12,954.89 and a low of 12,839.79.

The Diversified Metal and Mining Index is declining 3.81 percent. First Quantum Minerals (FM.TO) is sinking 7.03 percent and HudBay Minerals (HBM.TO) is losing 3.05 percent. Capstone Mining (CS.TO) is decreasing 1.20 percent and Lundin Mining (LUN.TO) is down 4.44 percent. Sherritt International (S.TO) is lower by 2.74 percent and Teck Resources (TCK-B.TO) is falling 2.47 percent.

The Energy Index is decreasing 2.63 percent. Crude oil futures plunged near the lowest in eleven years Wednesday morning, as Saudi Arabia slashed prices for European customers in a bid to hurt Iran. The Saudis are desperate to retain market share as Iranian oil comes online following years of heavy sanctions.

The EIA announced this morning that U.S. oil inventories declined by 5.1 million barrels last week.

Crescent Point Energy (CPG.TO) is falling 3.29 percent and Cenovus Energy (CVE.TO) is down 1.38 percent. Canadian Natural Resources (CNQ.TO) is dropping 3.23 percent and Enbridge (ENB.TO) is losing 1.57 percent. Pacific Exploration & Production (PRE.TO) is lower by 7.74 percent and Husky Energy (HSE.TO) is slipping 2.24 percent. Imperial Oil (IMO.TO) is declining 1.44 percent and Encana (ECA.TO) is sinking 6.22 percent. Suncor Energy (SU.TO) is decreasing 2.63 percent and Canadian Oil Sands (COS.TO) is weakening by 4.72 percent.

The Capped Industrials Index is lower by 1.38 percent. AutoCanada (ACQ.TO) is losing 4.09 percent and Finning International (FTT.TO) is down 0.88 percent. Canadian Pacific Railway (CP.TO) is decreasing 3.33 percent and Canadian National Railway (CNR.TO) is surrendering 1.18 percent. Air Canada (AC.TO) is dipping 0.20 percent and Bombardier (BBD-A.TO) is weakening by 1.35 percent.

The heavyweight Financial Index is falling 1.09 percent. National Bank of Canada (NA.TO) is declining 1.25 percent and Toronto-Dominion Bank (TD.TO) is down 0.51 percent. Bank of Montreal (BMO.TO) is lower by 1.53 percent and Canadian Imperial Bank of Commerce (CM.TO) is losing 0.90 percent. Bank of Nova Scotia (BNS.TO) is also surrendering 1.51 percent.

Royal Bank of Canada (RY.TO) is decreasing 0.99 percent. The Globe and Mail reports that the company is set to raise mortgage rates.

The Capped Information Technology Index is down 0.66 percent. Descartes Systems Group (DSG.TO) is falling 0.98 percent and Constellation Software (CSU.TO) is lower by 0.90 percent. Avigilon (AVO.TO) is losing 0.80 percent and Sierra Wireless (SW.TO) is weakening by 1.71 percent.

The Capped Telecommunication Services Index is losing 0.22 percent. TELUS (T.TO) is falling 0.68 percent and Rogers Communication (RCI-A.TO) is down 0.35 percent.

BCE (BCE.TO) is increasing 0.50 percent. Online music source iHeartRadio has signed partnership with Bell Media for Canada.

The Gold Index is climbing 3.21 percent. Gold prices continued to rise Wednesday morning, helped by bullion's safe haven appeal amid plunging stocks and geopolitical turmoil.

Barrick Gold (ABX.TO) is advancing 4.21 percent and Eldorado Gold (ELD.TO) is rising 1.43 percent. Goldcorp (G.TO) is increasing 4.44 percent and Royal Gold (RGL.TO) is adding 2.91 percent. Kinross Gold (K.TO) is climbing 2.32 percent and IAMGOLD (IMG.TO) is up 0.90 percent. Yamana Gold (YRI.TO) is higher by 5.20 percent and B2Gold (BTO.TO) is gaining 1.39 percent.

The Capped Materials Index is also up 0.65 percent. Franco-Nevada (FNV.TO) is rising 4.47 percent and Agnico Eagle Mines (AEM.TO) is gaining 4.09 percent. Silver Wheaton (SLW.TO) is adding 0.82 percent.

The Capped Health Care Index is higher by 0.01 percent. Concordia Healthcare (CXR.TO) is climbing 0.45 percent.

Valeant Pharmaceuticals International (VRX.TO) is also higher by 1.96 percent. The company announced that Howard Schiller has been appointed interim chief executive officer, effective immediately. Michael Pearson remains in the hospital where he is being treated for severe pneumonia.

Extendicare (EXE.TO) is falling 0.11 percent after it announced several changes to its Board of Directors.

Calfrac Well Services (CFW.TO) is sinking 12.39 percent. The company announced today that that its CFO Michael J. (Mick) McNulty intends to retire by March 2016.

On the economic front, Statistics Canada reported Wednesday morning that the Canadian trade deficit narrowed to C$1.99 billion in November, from C$2.49 billion in October. Economists had expected a deficit of C$2.6 billion.

Eurozone producer prices decreased at a stable pace for the second straight month in November, in line with expectations, Eurostat reported Wednesday. The producer price index fell 3.2 percent year-over-year in November, the same rate of decrease as in the previous month, which was revised from a 3.1 percent drop reported earlier. The figure was also matched with consensus estimate.

Eurozone private sector activity expanded at a faster than initially estimated pace in December, final data from Markit showed Wednesday. The composite output index rose to 54.3 in December from 54.2 in November. It was above the flash score of 54.

Germany's private sector expanded at the fastest pace in 17 months in December, final data from Markit showed Wednesday. The composite output index rose to 55.5 in December from 55.2 in November. The flash score was 54.9.

French service providers reported a reduction in activity for the first time in almost a year in December, final data from Markit showed Wednesday. The services Purchasing Managers' Index fell to 49.8 from 51 in November. The flash score was 50.

French consumer confidence remained unchanged in December, survey results from the statistical office Insee showed Wednesday. The consumer sentiment index came in at 96 in December, the same reading as seen in November. It was forecast to drop to 95.

Although the British service sector expanded at a solid pace in December, underpinned by a sharp rise in new business, the pace of growth eased slightly from November as expectations fell to a near three-year low.

The Purchasing Managers' Index dropped slightly to 55.5 from 55.9 in November, survey data from Markit and the Chartered Institute of Procurement & Supply revealed Wednesday. The reading was forecast to drop to 55.6.

Shop prices in the United Kingdom continued to decline in December, the British Retail Consortium said on Wednesday, falling 2.0 percent on year. That follows the 2.1 percent decline in November.

In commodities, crude oil futures for February delivery are down $1.20 or 3.34 percent at $34.77 a barrel.

Natural gas for February is up 0.028 or 1.20 percent at $2.353 per million btu.

Gold futures for February are up $10.60 or 0.98 percent at $1,089.00 an ounce.

Silver for March is down $0.006 or 0.04 percent at $13.965 an ounce.