Bloomberg News

Canadian Stocks Advance as U.S. Jobless Claims Trail Forecasts

October 06, 2011

Oct. 6 (Bloomberg) -- Canadian stocks rose for a second day after the European Commission proposed coordinated action to aid the region’s banks and the U.S. reported a smaller increase in initial jobless claims than most economists had forecast.

Ivanhoe Mines Ltd., which is building a copper and gold mine in Mongolia with Rio Tinto Group, surged 13 percent after the government agreed not to increase its stake in the project. Suncor Energy Inc., Canada’s largest oil and gas producer, advanced 4.3 percent as crude surpassed $82 a barrel. Potash Corp. of Saskatchewan Inc., the world’s largest fertilizer producer by market value, climbed 3.9 percent after the U.S. reported an increase in corn exports.

The Standard & Poor’s/TSX Composite Index rose 322.85 points, or 2.8 percent, to 11,780.07, completing its biggest two-day gain since May 2009.

“It’s euphoric hopes on the euro side,” Danielle Park, a partner at Venable Park Investment Counsel Inc. in Barrie, Ontario, said in a telephone interview. The firm manages at least C$1 million ($960,000) each for more than 250 families. “You’re seeing the typical rebound in the commodity side. It’s not fundamental demand. It’s the same old culprits: fast-money, traders trying to make a buck before the next leg comes down.”

The S&P/TSX rebounded 2.5 percent from a 14-month low yesterday after the Institute for Supply Management’s monthly index of the U.S. service industry fell less than most economists in a Bloomberg survey had forecast. Canada’s stock benchmark gauge tumbled 20 percent in the six months ending yesterday on concern about the European debt crisis and the possibility of a new global recession.

‘Coordinated Action’

The European Commission, the executive branch of the European Union, is proposing “a coordinated action to recapitalize banks,” commission President Jose Barroso said today.

First-time unemployment claims in the U.S. totaled 401,000 last week, up from a revised 395,000 the previous week, the Labor Department said today in Washington. Economists had forecast an increase to 410,000, according to the median estimate in a Bloomberg survey.

Copper futures gained 4.5 percent in New York. A gauge of base-metal and coal producers in the S&P/TSX advanced 7.8 percent to extend their three-day rally to 24 percent, the biggest surge since January 2009.

Teck, First Quantum

Teck Resources Ltd., Canada’s largest company in the industry, climbed 4.6 percent to C$35.32. First Quantum Minerals Ltd., the country’s second-largest publicly traded copper producer, jumped 12 percent to C$16.57. Inmet Mining Corp., a copper and zinc producer, soared 13 percent, the most since May 2009, to C$52.65.

Ivanhoe Mines rallied 13 percent to C$17.57 after Mongolia said it won’t seek to increase its stake in the $10 billion Oyu Tolgoi project to 50 percent from 34 percent. The existing agreement meets national laws, the parties said in a statement.

SouthGobi Resources Ltd., which mines coal in the Asian country, surged 20 percent, the most since July 2009, to C$7.50.

The S&P/TSX Energy Index climbed for a third day. Suncor rose 4.3 percent to C$28.69. Encana Corp., Canada’s largest natural gas producer, gained 5.4 percent to C$20.65. Petrominerales Ltd., which produces oil and gas in Colombia increased 9.6 percent, the most since February 2010, to C$23.01.

“Overweight” Rating

Talisman Energy Inc., an oil and gas producer with operations in North America, the North Sea and Indonesia, advanced 6 percent to C$12.46 after closing at the lowest since March 2009 yesterday. Katherine Lucas Minyard, an analyst at JPMorgan Chase & Co., raised her rating on the shares to “overweight” from “neutral,” citing Talisman’s production growth in a note to clients.

Precious-metals producers climbed as silver futures rose 5.4 percent, palladium 5 percent and gold 0.7 percent.

Barrick Gold Corp., the world’s largest gold producer, gained 3 percent to C$49.50. Centerra Gold Inc., which mines in Kyrgyzstan and Mongolia, increased 7.2 percent to C$19.72. Extorre Gold Mines Ltd., which explores in Argentina, surged 21 percent, the most since it began trading in March 2010, to C$7.62. North American Palladium Ltd. soared 19 percent, the most since February 2010, to C$2.66.

Fertilizer producers gained after the U.S. Agriculture Department said corn exports doubled last week from a year earlier. Potash Corp. advanced 3.9 percent to C$48.36 after soaring 7.2 percent yesterday. Agrium Inc., a fertilizer producer and farm retailer, increased 4.9 percent to C$73.74.

Financials Rally

All S&P/TSX insurers and banks climbed. Royal Bank of Canada, the country’s biggest lender by assets, rose 2.7 percent to C$47.96. Toronto-Dominion Bank, its largest domestic rival, advanced 1.7 percent to C$73.57. Great-West Lifeco Inc., Canada’s second-largest insurance company, gained 2.8 percent to C$21.47.

SNC-Lavalin Group Inc., Canada’s largest engineering and construction company, climbed 5.6 percent to C$45.09 to complete its biggest two-day surge since November 2008. Pierre Lacroix, an analyst at Desjardins Securities Inc., boosted his rating on the stock to “top pick” from “buy” today, citing the shares’ recent declines in a note to clients. SNC-Lavalin sank 32 percent in the three months ending Oct. 4.

--Editors: Joanna Ossinger, 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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