Bloomberg News

Canada Stocks Drop as Japan Currency Move Hurts Commodity Prices

October 31, 2011

Oct. 31 (Bloomberg) -- Canadian stocks fell, paring a monthly gain, as energy and raw material producers declined with commodity prices after Japan moved to weaken its currency against the U.S. dollar.

Barrick Gold Corp., the world’s largest producer of the metal, lost 2.6 percent as the U.S. Dollar Index surged the most since December 2008. Suncor Energy Inc., Canada’s largest oil and gas producer, dropped 4 percent. First Quantum Minerals Ltd., the country’s second-biggest publicly traded copper producer, slid 6.1 percent after the industrial metal declined as investors awaited details on European leaders’ revamped strategy for curbing the region’s debt crisis.

The Standard & Poor’s/TSX Composite Index decreased 267.45 points, or 2.1 percent, to 12,252.06.

“On the last day of the month anything can happen,” Brendan Caldwell, chief executive officer of Caldwell Investment Management Ltd. in Toronto, said in a telephone interview. The firm manages C$1 billion ($963 million). “The strength in the U.S. dollar has caused gold to come off. So much of the Canadian economy is still raw materials and not finished products that a move here or there makes a difference.”

The S&P/TSX rallied 5.4 percent this month for its biggest increase since May 2009 after falling each of the previous seven months. Oil and raw materials shares led gains as investors speculated European leaders’ move to boost the region’s rescue fund will prevent the debt crisis from weakening banks and the broader economy.

Japan sold yen for the third time this year and pledged more sales after the currency’s gain to a post-World War II high against the dollar threatened a recovery from the March earthquake and nuclear disaster.

The S&P/TSX Materials Index retreated, ending a six-day streak of advances.

Gold Miners

Gold producers fell after the metal dropped as the U.S. dollar surged, reducing demand for the precious metal as an alternative investment. Barrick lost 2.6 percent to C$49.21. Goldcorp Inc., the world’s second-largest company in the industry by market value, slipped 2.3 percent to C$48.50. Semafo Inc., which mines in West Africa, decreased 8.1 percent to C$7.65.

Energy shares retreated the most in four weeks as oil dropped. Suncor declined 4 percent to C$31.75. Cenovus Energy Inc., the country’s fifth-biggest energy company by revenue, declined 5.2 percent to C$34.14. Precision Drilling Corp., Canada’s largest contract drilling company, tumbled 7.4 percent to C$11.56.

Copper producers fell as the metal dropped after surging the most since at least 1988 last week. First Quantum lost 6.1 percent to C$20.91. Teck Resources Ltd., Canada’s largest base- metals and coal producer, decreased 3.7 percent to C$39.96. Lundin Mining Corp., which operates in Europe, retreated 4.6 percent to C$3.91.

Potash Corp.

Potash Corp. of Saskatchewan Inc., the world’s largest fertilizer producer by market value, sank 4.9 percent to C$47.18 as corn and wheat fell. Agricultural commodities declined as a stronger dollar eroded prospects for U.S. exports.

The S&P/TSX Industrials Index fell 2.6 percent, trimming the biggest monthly advance since November 2001. The index lost 19 percent in the third quarter, its worst slide since 2002.

Canadian Pacific Railway Ltd., the country’s second-biggest railroad, decreased 7.1 percent, the most since December 2008, to C$61.61 after jumping 7.9 percent Oct. 28, when William Ackman’s Pershing Square Capital Management LP bought a 12 percent stake in the company.

Cameron Doerksen, an analyst at National Bank of Canada, cut his rating on the shares to “underperform” from “sector perform,” while Turan Quettawala, an analyst at Bank of Nova Scotia, reduced his rating to “sector perform” from “sector outperform.” In a note to clients, Doerksen said Pershing Square’s acquisition may lead to management changes that are unlikely to affect earnings in the near term.

Monthly Surge

Canadian National Railway Co., the country’s largest railroad, lost 2.3 percent to C$78.08, trimming its biggest monthly gain since October 2006. Bombardier Inc., the maker of trains and airplanes, decreased 6.6 percent to C$4.12 after rallying 8.1 percent Oct. 28.

Grande Cache Coal Corp., which mines in Alberta, surged a record 68 percent to C$9.87 after China’s Winsway Coking Coal Holdings Ltd. and Japan’s Marubeni Corp. agreed to buy the Calgary-based metallurgical coal producer for C$10 a share in cash.

Cline Mining Corp., which is developing coal mines in Canada and the U.S., rallied 19 percent, the most this year, to C$2.11. The company may be the next in the industry to be acquired, Marc Johnson, an analyst at M Partners Inc., said in a note to clients.

Pacific Northern

Natural gas-pipeline company Pacific Northern Gas Ltd. rose a record 20 percent to C$36.67 after agreeing to be bought by AltaGas Ltd., a natural gas extraction and transmission company, for C$36.75 a share in cash. AltaGas fell 1.7 percent to C$29.41.

Technology-patent owner Wi-LAN Inc. gained 8 percent to C$7.42 after saying it doesn’t intend to raise its C$532 million bid for Mosaid Technologies Inc. Mosaid agreed Oct. 27 to be bought by Sterling Partners for C$590 million.

--Editors: Joanna Ossinger, Stephen Kleege

Matt Walcoff in Toronto at mwalcoff1@bloomberg.net

To contact the reporter on this story: Kaitlyn Kiernan in New York at kkiernan2@bloomberg.net

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


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