TSX Ends Lower On China Currency Move -- Canadian Commentary

(RTTNews) - Canadian stocks ended lower on Tuesday, tracking declining global equity markets as commodity prices slumped after after China devalued its currency by a near 2 percent, in an emergency measure to shore up the faltering Chinese economy.

The move had a catalytic effect with Canadian stocks tumbling, with miners under immense pressure after imports into China were made more expensive by the move.

China devalued yuan by the most in two decades to cushion its exports as the economy shows no solid signs of revival after the volatility in the stock market. China's central bank set the value of yuan at 6.2298 a dollar, prompting the biggest one-day loss since 1994, when it unified official rate with market rates.

The move has also diluted the chances for a U.S. rate hike in September, as the Federal Reserve would not want to risk exports by strengthening the dollar much more.

European stocks ended firmly in the red, with German shares getting hammered by news that China has devalued its currency. Shares with exposure to China, mainly auto stocks and luxury goods, retreated in response to the move. Nevertheless, there was some relief after Greece early Tuesday reached an agreement with its creditors over the terms of the third bailout.

Markets in the U.S. pulled back amid a negative reaction to news out of China, having moved sharply higher in the previous session. The major averages climbed off their worst levels going into the close but remained firmly in negative territory. The sell-off on Wall Street came on the heels of news of the People's Bank of China's surprise move to devalue its currency.

In other economic news, labor productivity in the U.S. rebounded in the second quarter, although the pace of growth was short of expectations, a report from the Labor Department showed Tuesday.

Meanwhile, wholesale inventories in the U.S. rose more than expected in June, reflecting a notable increase in inventories of non-durable goods, a Commerce Department report showed Tuesday.

The benchmark S&P/TSX Composite Index closed Tuesday at 14,414.67, down 51.72 points or 0.36 percent. The index scaled an intraday high of 14,414.67 and a low of 14,264.32.

On Tuesday, the index closed higher by 163.69 points or 1.14 percent, at 14,466.39. The index scaled an intraday high of 14,471.13 and a low of 14,343.09.

Gold futures ended higher on the back of a move by China's central bank to devalue the yuan in an effort to shore up the slowing Chinese economy.

The Gold Index added 2.40 percent, with gold for August delivery gaining $3.60 or 0.3 percent, to settle at $1,107.70 an ounce on the New York Mercantile Exchange Tuesday.

Among gold stocks, IAMGOLD Corp. (IMG.TO) added 1.87 percent, Yamana Gold Inc. (YRI.TO) advanced 2.22 percent, Kinross Gold Corp. (K.TO) added 2.63 percent, Barrick Gold Corp. (ABX.TO) gained 1.52 percent, and Eldorado Gold (ELD.TO) jumped 5.74 percent. Goldcorp Inc. (G.TO) moved up 1.77 percent.

The Capped Materials Index dipped 0.09 percent, with Potash Corporation of Saskatchewan Inc. (POT.TO) shedding 1.34 percent, Agnico Eagle Mines Limited (AEM.TO) adding 0.97 percent and Agrium Inc. (AGU.TO) inching up 0.16 percent.

Crude oil futures plummeted after China devalued its currency in a desperate effort to prop up the stuttering Chinese economy.

The Energy Index dropped 0.81 percent, with U.S. crude oil futures for September delivery, the most actively traded contract, plunging $1.88 or 4.2 percent, to settle at $43.08 a barrel on the New York Mercantile Exchange Tuesday.

Cenovus Energy Inc. (CVE.TO) dropped 1.84 percent, Suncor Energy Inc. (SU.TO) added 0.11 percent, and Encana Corp. (ECA.TO) fell 2.46 percent

Among other energy stocks, Canadian Natural Resources Limited (CNQ.TO) dipped 0.63 percent, Crescent Point Energy Corp. (CPG.TO) dived 4.86 percent, Canadian Oil Sands (COS.TO) fell 1.92 percent, and Baytex Energy Corp. (BTE.TO) plummeted 7.76 percent.

The Diversified Metals & Mining Index plummeted 4.90 percent, as Teck Resources Limited (TCK-B.TO) plunged 6.93 percent, Lundin Mining Corp. (LUN.TO) fell 2.28 percent, and First Quantum Minerals Ltd. (FM.TO) dived 7.75 percent.

The heavyweight Financial Index fell 0.64 percent, as National Bank of Canada (NA.TO) dropped 1.58 percent, Bank of Montreal (BMO.TO) shed 0.54 percent, and Royal Bank of Canada (RY.TO) surrendered 0.87 percent.

Canadian Imperial Bank of Commerce (CM.TO) fell 0.54 percent, Bank of Nova Scotia (BNS.TO) dropped 1.11 percent, and Toronto-Dominion Bank (TD.TO) dipped 0.54 percent.

The Capped Health Care Index shed 0.32 percent as Valeant Pharmaceuticals International, Inc. (VRX.TO) added 0.54 percent, Concordia Healthcare Corp. (CXR.TO) dropped 0.90 percent, and Extendicare Inc. (EXE.TO) fell 1.22 percent.

The Capped Information Technology Index fell 0.45 percent, as BlackBerry Limited (BB.TO) dropped 0.90 percent, Descartes Systems Group (DSG.TO) added 0.18 percent, and Constellation Software Inc. (CSU.TO) gained 1.05 percent.

The Capped Telecommunication Index surrendered 0.93 percent, as Rogers Communication (RCI-B.TO) fell 1.05 percent, BCE Inc. (BCE.TO) fell 0.74 percent and Manitoba Telecom Services Inc. (MBT.TO) dropped 1.65 percent.

Telecom giant TELUS Corp. (TU.TO) shed 0.27 percent.

The Capped Industrials Index shed 0.41 percent, as Bombardier (BBD.B.TO) fell 3.82 percent and Finning International Inc. (FTT.TO) moved up 0.50 percent.

NuVista Energy Ltd. (NVA.TO) gained 1.35 percent after reporting a second-quarter net loss that widened to C$21.36 million from C$11.84 million in the prior year.

On the economic front, labor productivity in the U.S. rebounded with productivity climbing 1.3 percent in the second quarter following a revised 1.1 percent decrease in the first quarter. Economists expected productivity to jump by 1.6 percent compared to the 3.1 percent drop reported for the previous quarter.

A Commerce Department report on Tuesday showed wholesale inventories in the U.S. rose by 0.9 percent in June following a revised 0.6 percent increase in May. Economists expected inventories to rise by 0.4 percent.

German economic confidence deteriorated sharply to a nine-month low in August, data from the Mannheim-based Centre for European Economic Research or ZEW showed Tuesday. The economic confidence index dropped unexpectedly by 4.7 points to 25 in August, the lowest score since November 2014. It was expected to rise to 31.9.

China devalued yuan by the most in two decades to cushion its exports as the economy shows no solid signs of revival after the volatility in the stock market. The bank set the value of yuan at 6.2298 a dollar, 1.9 percent lower than Monday's official fixing rate. This was the biggest one-day loss since 1994, when it unified official rate with market rates. The Chinese currency seldom fluctuates over the range.

Greece reached an agreement with its creditors over the terms of the third bailout which would help nation stay afloat. After intensive talks, external creditors namely the European Central Bank, the European Commission, the International Monetary Fund and the European Stability Mechanism finally wrapped up talks early Tuesday sealing a deal. This would likely unlock around EUR 86 billion loans for Greece. The agreement has to be passed by the Greek parliament ahead of the meeting of Eurozone finance ministers on Friday. It would help Athens to repay EUR 3.2 billion debt to the ECB, due on August 20.