TORONTO (Reuters) - Canada’s main stock index fell on Friday after a robust U.S. jobs report revived worries that the U.S. Federal Reserve might be set to roll back its stimulus program, a concern that hit both bullion prices and gold-mining shares.
Shares of gold producers dropped nearly 3 percent as the jobs figures diminished the safe-haven appeal of bullion. Barrick Gold Corp (ABX.TO), the world’s largest gold miner, lost close to 5 percent of its market value and hit its lowest level in about 21 years.
Friday’s data showed U.S. job growth was stronger than expected in June and that the employment count for the previous two months was higher than initially reported.
“It’s good news for the economy but bad news for the people who think that quantitative easing is going to be here forever. It’s not,” said Irwin Michael, portfolio manager at ABC Funds.
“Once you get palpable results that the economy is getting better, you don’t want to see the Fed poking around too much,” he added. “You want to see the economy getting stronger on its own.”
The Toronto Stock Exchange’s S&P/TSX composite index .GSPTSE closed down 31.75 points, or 0.26 percent, at 12,134.91.
Six of the 10 main sectors on the index were in the red.
The materials sector, which includes mining stocks, declined the most among the major groups, giving back 1.6 percent. Most commodity prices fell on Friday as the jobs figures pushed up the U.S. dollar, which made greenback-priced commodities more expensive.
Gold miners, especially, tumbled as the price of the precious metal fell as the U.S. dollar rose. <GOL/> Barrick dropped to C$14.57, and early in the session hit its lowest level since May 1992, and Goldcorp Inc (G.TO) lost 1.4 percent to C$25.46.
“You’re going to see a lot of volatility in the sector going forward,” said Marcus Xu, portfolio manager at MY Capital Management Corp in Vancouver.
“If an investor likes gold at this point, given that it has pulled back quite a bit, it is better to buy the physical commodity rather than the (stock),” he added. “You need a very high gold price to support valuations on some of these companies.”
Shares of telecommunications providers gave back 0.5 percent. Rogers Communications Inc (RCIb.TO) dropped almost 1 percent to C$40.84.
Energy shares inched higher, and financials gained 0.1 percent. In the financials group, Bank of Montreal (BMO.TO) added 0.7 percent to C$61.61.
The jobs numbers offered another sign that the U.S. economic recovery is gathering speed and might prompt the Fed to tighten monetary policy this year. Some in the market, however, are betting that the Fed may prolong its bond buying or even intensify it, Xu said.
Investors “should be more focused on what’s happening on the underlying economy than on what the Fed is going to do,” he added. “Eventually the market has to be able to function on its own, without the support of the Fed.”
Additional reporting by Cameron French; Editing by Peter Galloway