Canadian shares lower as energy sector weighs on market

Canadian markets closed lower on Tuesday as the metals and energy sectors weighed on the benchmark index.

In the U.S., the Dow on Tuesday climbed past 26,000 for the 1st time ever

Material stocks were among the biggest losers in the Canadian market on Tuesday morning (Aaron Vincent Elkaim/Canadian Press)

Canadian shares closed lower on Tuesday as falling metals and oil prices weighed on the benchmark index.

The S&P/TSX Composite Index was down 0.5 per cent to 16,298.88 points at the end of the trading day.

Miners were among the biggest decliners as material stocks fell the most since October in early trading.

A stronger U.S. dollar, which is the currency that is used to price commodities, and supply issues in China with stockpiles of metals such as iron ore were putting pressure on metal prices, according to analysts.

"Everything this year [in commodity markets] has been largely about the dollar," said Credit Agricole foreign exchange strategist Manuel Oliveri.

Shares of Teck Resources and Kinross Gold were both down over four per cent.

On U.S. markets, the Dow Jones Industrial Average climbed past the 26,000 point mark for the first time in the morning, boosted by technology, healthcare and financial stocks. But by the afternoon, the benchmark index fell back below 26,000 to close flat at 25,792.86 points.

Oil falls from high

Canadian energy shares felt the pinch after oil prices, which were at three-year highs, fell for the first time in six days.

Analysts said oil's pullback on Tuesday after several days of gains was largely due to investors embarking on profit- taking.

Benchmark U.S. crude fell to $63.73 US per barrel in New York.

Shares of heavyweights such as Cenovus Energy were down over four per cent, while Encana Corp. fell five per cent.

Loonie higher ahead of rate decision

The Canadian dollar, meanwhile, traded in a range against its U.S. counterpart a day before the Bank of Canada's decision on interest rates.

The average value for the loonie was at 80.52 cents US, up from Monday's average of 80.50 cents US.

While markets are pointing to the likelihood of a rate hike by the Bank of Canada on Wednesday, Shaun Osborne, chief foreign exchange strategist at Scotiabank, said he thought the central bank would make no move on interest rates but would talk in its monetary policy report about the potential for future hikes.

"A more cautious approach to the immediate policy outlook is reflected in a range of factors — NAFTA risks remain significant, the immediate data run beyond the jobs numbers has been a little less impressive, the idea that the Bank of Canada "can't disappoint" market expectations is dispelled by the September rate hike," he said.

If the bank decides to keep interest rates unchanged tomorrow but gives a strong indication of more hikes this year, Osborne thinks weakness in the Canadian dollar would be limited before selling of the U.S. dollar re-emerges. 

Elsewhere, bitcoin's plunge overnight on fears of a regulatory crackdown in South Korea saw most cryptocurrencies post double digit losses.