TORONTO – The focus of the Toronto stock market will again be on earnings news this week after positive corporate data pushed the TSX above the 14,000-mark last week for the first time in almost three years.
Traders will take in a slate of earnings from the resource sector with base metal miners HudBay Minerals (TSX:HBM), Lundin Mining (TSX:LUN) and Sherritt International (TSX:S) delivering results. Gold miners Iamgold (TSX:IMG) and Yamana Gold (TSX:YRI) also post results.
The gold sector was the major advancer last week, up about 12 per cent and contributing largely to a gain of almost two per cent on the TSX even as Goldcorp (TSX:G) missed earnings estimates and Barrick Gold (TSX:ABX) delivered a huge quarterly loss.
Both companies also slashed their estimated reserves in a response to lower gold prices that have prompted a reassessment of the worth of their assets. That second look at asset value comes at a time when investors have different expectations for precious metal miners.
“The focus now is more on profitability than it is on production growth,” said Gareth Watson, vice-president, investment management and research, at Richardson GMP Ltd.
“During boom times, all you’re caring about is how can I get more production so I can benefit from these higher prices. But when you get into these crunch times, who cares if you have a mine where you can produce gold at $1400 an ounce — you’re not going to make money off of that.”
Bullion has been trading at between US$1,200 and US$1,300 an ounce this year.
The gold sector was the leading loser on the TSX in 2013, plunging almost 50 per cent as gold prices tumbled amid low global inflation and the U.S. Federal Reserve started to cut back on its bond purchases.
Other analysts point out that a recent spate of merger and acquisition activity has sparked renewed interest in the sector.
Goldcorp has made a $2.6-billion hostile takeover bid for Osisko Mining Corp. (TSX:OSK). And HudBay Minerals (TSX:HBM) is making a hostile, all-stock offer to acquire all the common shares of Augusta Resources Corp. (TSX:AZC) that it doesn’t already own in a deal that would be worth about $540 million.
“A lot of the strategists are saying, you know what, materials are looking very attractive,” said John Stephenson, portfolio manager at First Asset Funds.
“I think this quarter marks, broadly speaking, a transition from don’t even talk to me about mining to, you know what, mining is looking kind of interesting here.”
Other major corporations releasing earnings this week include grocer Loblaw (TSX:L) and home improvement chain Rona (TSX:RON).
On the economic front, the December reading on Canadian retail sales comes out Friday. Economists expect a decline of at least 0.4 per cent as ice storms and power outages closed some outlets and made travel difficult.
The January consumer price index also comes out Friday. The consensus calls for a 0.1 per cent increase over December, which would be the first increase in the past four months, boosted by higher natural gas and heating oil prices.
It is a shortened week with both Toronto and New York markets closed for holidays on Monday.