TORONTO (Reuters) - Canada’s main stock index slipped on Friday, hit by a plunge in Barrick Gold Corp (ABX.TO) shares as the massive stock offering announced by the world’s largest gold miner the day before got a cold shoulder from the market.
While banks and industrial stocks rose, Barrick’s 7.7 percent fall to C$18.72 and smaller declines for a string of other gold miners pushed the index to a weekly decline after three weeks of gains.
Barrick said on Thursday it is issuing more than $3 billion in stock to help pay down debt.
“I gather that it has been a very tough issue to sell out there, from what I’ve heard,” said Michael Sprung, president at Sprung Investment Management Inc, who holds Barrick stock and declined to buy into the new issue.
Barrick had fallen almost 6 percent a day earlier after saying it would halt development of its Pascua-Lama mine in South America indefinitely, a surprise reversal on a project that has already cost it more than $5 billion.
“It (Barrick) certainly casts a pall on what investors might perceive as the environment for investing in that area right now,” Sprung said.
The sharpest weekly fall in the price of bullion in seven weeks added to the miners’ woes. <GOL/>
The Toronto Stock Exchange’s S&P/TSX composite index .GSPTSE ended down 23.80 points, or 0.18 percent, at 13,337.46. The index lost 0.47 percent on the week, ending three straight weeks of solid gains that took it to two-year highs.
The index rose sharply in October, outperforming U.S. indexes on the month after lagging Wall Street gains this year because of the poor performance of resource-based companies that make up a large chunk of the Canadian market.
Signs of global economic recovery are likely to boost Canada’s mining and energy companies, while investors have been emboldened by suggestions by the U.S. and Canadian central banks that stimulative monetary policy will remain in place for a while yet.
Domestic and Chinese manufacturing data both showed growth in October. The pace of growth in Canadian factories hit its strongest level in 2-1/2 years, while China’s numbers backed the country’s aim of sustainable growth.
“In theory, if we are seeing greater stability out of China we should see more stable demand for commodities and perhaps a slight pickup in commodity prices,” said Philip Petursson from the portfolio advisory group at Manulife Asset Management.
But he said a growing supply of copper, and Canadian miners’ focus on lowering costs, could limit any climb in stocks.
Canadian National Railways Co (CNR.TO) gained 1.1 percent to C$115.86, a day after it reached a tentative labor contract with the Teamsters union after weeks of negotiations.
Construction and engineering company SNC-Lavalin Group Inc (SNC.TO) gained 1.6 percent to C$44.52 despite reporting a quarterly loss as cost overruns hurt. The company had slashed its 2013 outlook in mid-October.
Manulife’s Petursson said record highs reached by bank stocks have made them appear expensive, given the amount of debt Canadians are looking to pay down.
“It’s difficult to justify their valuation, especially in light of the consumer debt situation, which could be a bit of a drag for the banks going forward,” he said.
Editing by Grant McCool; and Peter Galloway