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Energy stocks push TSX lower

North American stocks fell, after posting the best week this year, as energy producers tumbled with oil and economic data missed estimates

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North American stocks fell, after posting the best week this year, as energy producers tumbled with oil and economic data missed estimates. Brazilian assets dropped after a national election, while banks led European equities lower following balance-sheet tests of lenders.

Canada’s main stock index dropped on Monday as the price of oil tumbled after Goldman Sachs cut its outlook for the commodity, pushing down shares of energy producers.

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WTI will trade at $75 a barrel in the first quarter, down from an earlier estimate of $90, Goldman analysts including Jeffrey Currie in New York said in a report yesterday. Banks including Barclays Plc, Bank of America Corp. and Citigroup Inc. have already reduced their estimates after both grades collapsed into a bear market amid rising global supplies.

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The TSX’s decline on Monday follows the benchmark’s biggest weekly jump in more than a year. Fund managers said investors should expect more volatility in the coming months.

“I was expecting more of a U-shaped recovery, but it looks like it’s V-shaped. We’ll do a little sideways here,” said David Cockfield, portfolio manager at Northland Wealth Management, of the Canadian market’s recent choppy moves.

He said that while energy shares were looking attractive because of the multiples, he wasn’t rushing in to buy until there were signs that prices were stabilizing.

The Toronto Stock Exchange’s S&P/TSX composite index was down 71 points, or 0.49 percent, at 14,472.58.

The Standard & Poor’s 500 Index lost 0.4 percent at 12 p.m. in New York after rallying 4.1 percent last week. The Stoxx Europe 600 Index fell 0.6 percent. Brazil’s real weakened to a nine-year low against the dollar on closing basis and Petroleo Brasileiro SA tumbled 11 percent. West Texas Intermediate crude slid 0.6 percent after earlier touching a 28-month low. Raw sugar retreated 2.6 percent.

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President Dilma Rousseff’s re-election in Brazil damped speculation for a change in policies that left the economy in recession. Goldman Sachs Group Inc. cut its oil price forecasts. The European Central Bank settled $2.2 billion of covered-bond purchases last week in a renewed attempt to stave off deflation. Italian lenders led stocks lower after 25 banks failed Europe’s health check. Contracts to buy previously owned homes in the U.S. rose less than forecast last month and a gauge of manufacturing unexpectedly fell.

“There could be some profit-taking after that big move we had on Friday with investors reducing risk ahead of the Fed this week,” Todd Salamone, senior vice president of research at Cincinnati-based Schaeffer’s Investment Research, said by phone. “There could be some reaction to the banking stress tests. They weren’t disappointing, but there’s a lot of focus on Europe and what the ECB may do with stimulus.”

The S&P 500 surged 4.1 percent last week for its best performance since January 2013, halting a four-week slide amid better-than-estimated earnings and data signaling a strengthening economy even as the Federal Reserve prepares to end its bond purchases after its meeting this week.

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Data today indicated uneven economic growth in the world’s largest economy. Contracts to purchase previously owned homes rose less than forecast in September, showing housing will take time to gain momentum. Another release showed growth in services activity slowed this month, while the Dallas Fed’s gauge of regional manufacturing fell.

Among stocks moving, Newfield Exploration Co. sank 6.5 percent to lead energy producers in the S&P 500 lower by 2 percent. Merck & Co. slid 1.6 percent after cutting the top end of its sales forecast. Sarepta Therapeutics Inc. plunged 33 percent after saying regulators require more data on a new drug proposal.

European shares pared earlier declines of 1.1 percent after the ECB announced the size of its asset purchases last week, returning to the market for a third time in six years as part of a renewed attempt to stave off deflation and pump life into a moribund recovery.

A gauge of Germany’s business climate dropped for a sixth month to the lowest since 2012, data showed today, adding pressure to European assets.

Banca Monte dei Paschi di Siena SpA, the Italian lender with the biggest hole from Europe’s bank health check, sank 19 percent. The bank must replenish 2.1 billion euros ($2.7 billion) within nine months to meet ECB requirements for capital buffers.

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The MSCI Emerging Markets Index fell 0.8 percent as Brazilian equities slid the most in three years and the Shanghai Composite Index completed its longest losing streak of 2014.

The Ibovespa lost 4.1 percent. The yield on Brazil’s January 2025 dollar bond rose six basis points to 4.15 percent.

Rousseff, who has maintained record-low unemployment even as the economy recorded the slowest growth under any Brazilian president in more than two decades, had 52 percent of the vote with 99.99 percent of ballots counted by the electoral court in Brasilia.

The Ibovespa had lost 25 percent since Rousseff took office in January 2011, while shares of Petrobras tumbled 40 percent and the real weakened 33 percent against the dollar.

The Bloomberg Commodity Index of 22 raw materials fell 0.1 percent, earlier touching the lowest level since July 2009. Agriculture items produced by Brazil sank on speculation a slump in the country’s currency will fuel exports.

Raw sugar dropped to 15.99 cents a pound, the lowest since Oct. 2. Arabica coffee declined to $1.88 a pound and soybeans retreated 0.7 percent to $9.765 a bushel. Brazil is the biggest exporter of all three.

Brent crude slipped 0.3 percent to $85.84 a barrel and WTI oil dropped 0.6 percent at $80.54 a barrel, after earlier sliding below $80 to a 28-month low.

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