Bloomberg News

Canadian Stocks Fall as EU Signals Revisions to Greek Bailout

October 04, 2011

Oct. 4 (Bloomberg) -- Canadian stocks fell for a third day as financial companies dropped on speculation the European Union will require bondholders to face bigger losses on Greek debt and gold and silver retreated.

Royal Bank of Canada, the country’s largest lender by assets, declined 1.8 percent after Deutsche Bank AG scrapped its own profit forecast. Barrick Gold Corp., the world’s biggest gold producer, decreased 3 percent as the metal slipped the most in a week. First Quantum Minerals Ltd., Canada’s second-largest publicly traded copper producer, jumped 11 percent as base- metals and coal producers rallied the most since May 2009.

The Standard & Poor’s/TSX Composite Index dropped 73.93 points, or 0.7 percent, to 11,177.91 after closing at the lowest since July 2010 yesterday.

“Europe has some very difficult decisions to make, and the more they sit on their hands, the more difficult it’s going to get for the debt markets, the currency markets and, ultimately, the financial sector,” Arthur Salzer, the chief executive officer of Northland Wealth Management in Toronto, said in a telephone interview. The firm oversees about C$200 million ($188 million).

Canada’s stock benchmark tumbled 13 percent in the third quarter, the most since 2008, and declined in September for the seventh-straight month, the longest streak since 1984. The S&P/TSX sank 21 percent from April 5 through yesterday, meeting a common definition of a bear market. The index has plunged with world equities on concern about a potential Greek debt default and a slowdown in the global economic recovery.

Decision Delayed

European markets led losses in world stocks today as finance ministers meeting in Luxembourg considered revising a July agreement that would have investors contribute 50 billion euros ($66 billion) to a 159 billion-euro rescue of Greece. The EU officials pushed back a decision on the release of an 8 billion-euro payment to Greece until after Oct. 13.

Deutsche Bank said it would cut 500 jobs due in part to the continent’s debt crisis. France and Belgium pledged to support Dexia SA as shares of the Brussels-based lender touched a record low on concern it will require a second government bailout.

Thirty-nine of 43 S&P/TSX financial companies retreated. Royal Bank lost 1.8 percent to C$45.95. Toronto-Dominion Bank, its biggest domestic rival, slid 0.7 percent to C$71.14. Bank of Nova Scotia, Canada’s third-largest lender by assets, decreased 1.8 percent to C$50.20.

Gold Shares

Gold and silver futures retreated as some investors sold the metals to cover losses in other assets.

Barrick lost 3 percent to C$47.14. Goldcorp Inc., the world’s second-largest gold producer by market value, decreased 3.8 percent to C$45.94. Silver Wheaton Corp., Canada’s fourth- largest precious-metals company by market value, sank 5.5 percent to C$29.04. B2Gold Corp., which explores in Latin America, slumped 11 percent, the most since July 2009, to C$3.35.

Richmont Mines Inc., which produces gold in Canada, tumbled 18 percent, the most since January 2008, to C$8.98 after Tara Hassan, an analyst at National Bank of Canada, cut her rating on the company to “sector perform” from “outperform.”

Base-metals and coal producers in the S&P/TSX rebounded after closing at the lowest relative to forecast earnings since January 2009 yesterday. Industrial-metals prices are likely to rebound next year, Ralph Profiti, an analyst at Credit Suisse Group AG, said in a note to clients today. Profiti named First Quantum, Teck Resources Ltd. and Inmet Mining Corp. “preferred” stocks.

Fundamentally ‘Solid’

Investors had lost track of the supply and demand of industrial metals in their concern about a possible recession, David Sherlock, a money manager at McLean & Partners in Calgary, said in a telephone interview. The firm oversees C$1 billion. “The fundamental balance sheets and earnings of these companies are solid,” he said.

Teck, Canada’s largest company in the industry, gained 8 percent to C$30.99. First Quantum increased 11 percent, the most since April 2009, to C$14.68. Inmet, a copper and zinc producer advanced 10 percent, the most since May 2009, to C$45.92 after saying it expects to meet its production forecast for its Cobre Las Cruces mine in Spain.

SNC-Lavalin Group Inc., Canada’s largest engineering and construction company, fell 5.4 percent to C$40, the lowest since July 2009, after saying it will buy Derby, England-based railroad consultant Interfleet Technology Ltd.

U.S. Regulation

Pharmacy-benefits provider SXC Health Solutions Corp. lost 6.2 percent to C$51.21, extending its two-day retreat to 12 percent. U.S. regulators proposed a rule yesterday to require companies in the industry to disclose the markup they charge insurers for prescription medicines.

Propane distributor Superior Plus Corp. declined 5.4 percent to C$6.18 and increasing its five-day loss to 33 percent. The shares have tumbled on investor concern the company may cut its dividend, Paul Bloom, the manager of the C$218.1 million Blue Ribbon Income Fund, said in a telephone interview.

--Editor: Stephen Kleege

To contact the reporter on this story: Matt Walcoff in Toronto at mwalcoff1@bloomberg.net

To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net


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