TORONTO (Reuters) - Canada’s benchmark stock index edged lower on Wednesday as a slump in oil prices pressured energy and financial shares, offsetting a rally in gold stocks as the U.S. dollar fell.
The Toronto Stock Exchange’s S&P/TSX composite index inched down 1.07 points, or 0.01 percent, to close at 15,148.53.
The dip left the index stuck below its 200-day moving average, which is widely seen as a bearish signal.
“You could see some more downside on the TSX as long as energy prices keep going down,” said Luciano Orengo, portfolio manager at Manulife Asset Management.
U.S. crude oil futures settled 2.3 percent lower at $42.53 a barrel after hitting a 10-month low in volatile trade, as concerns mounted over a global supply glut. Oil prices have fallen more than 20 percent from their January peak, indicating a bear market.
Cenovus Energy shares fell 3.2 percent to C$9.14 a day after being battered by news the company would replace its chief executive and sell some assets.
Encana Corp shed 3.8 percent to C$10.72, while the overall energy group lost 0.5 percent.
The drop in oil prices has reduced inflation prospects, contributing to a recent flattening in the yield curve, which tends to compress net interest margins for banks.
The spread between Canada’s 2- and 10-year yields narrowed by 0.9 basis point to a spread of 58.1 basis points, its narrowest gap since last October, as longer-dated bonds outperformed.
The financials group, which makes up roughly a third of the index’s weight, also retreated 0.5 percent. Manulife Financial Corp fell 2.1 percent to C$23.76 and Bank of Montreal retreated 0.9 percent to C$92.48.
Investors may also worry about how a drop in oil prices will impact loans to the energy sector.
“It is a confluence of many things that put a lid on financial stock prices,” Orengo said.
Just four of the index’s 10 main sector groups ended lower.
The materials group, which includes precious and base metals miners as well as fertilizer and lumber companies, added 1.5 percent.
Goldcorp Inc rose 3.1 percent to C$17.85 and Barrick Gold Corp gained 1.4 percent to C$20.96, while Teck Resources added 2.5 percent to trade at C$20.37.
Gold futures rose 0.1 percent to $1,242 an ounce as the U.S. dollar lost ground against a basket of major currencies, while copper prices advanced 1.2 percent to $5,725 a tonne.
Additional reporting by Solarina Ho, editing by G Crosse