Bloomberg News

Canada Stocks Drop as German Bond Sale Signals Spreading Crisis

November 24, 2011

Nov. 23 (Bloomberg) -- Canadian stocks fell for the fifth time in six days as raw material and energy shares sank on economic growth concerns, after Chinese manufacturing shrank and Germany failed to meet a bond sale target.

Suncor Energy Inc., Canada’s biggest oil and gas producer, dropped 4.6 percent. Barrick Gold Corp., the largest producer of the precious metal, slid 1.5 percent as the U.S. dollar strengthened. Royal Bank of Canada, the nation’s biggest lender, fell 2.3 percent as a gauge of financial shares fell to its lowest level in 28 months.

The Standard & Poor’s/TSX Composite Index lost 223.48 points, or 1.9 percent, to 11,571.71, its lowest level since Oct. 5.

“The global macro picture is really taking control of the market and the feelings of many investors,” Arthur Salzer, chief executive officer of Northland Wealth Management in Toronto, said in a telephone interview. The firm oversees about C$200 million ($191.5 million). “When we look at the weak bond auction out of Germany -- and Germany was one of the last bastions of hope for bond market investors -- it’s getting a lot of people nervous.”

The S&P/TSX has fallen 5.6 percent in November as it heads toward its eighth monthly loss this year. The benchmark index of Canadian stocks rose 5.4 percent in October to snap a seven- month streak of declines, the longest since 1984.

The debt crisis that began more than two years ago now risks engulfing Germany, which failed to reach its maximum sales target of 6 billion euros ($8 billion) at an auction of securities due in January 2022. Total bids amounted to 3.89 billion euros, falling short by 35 percent, according to data from the Bundesbank.

China Manufacturing

In Asia, a preliminary purchasing managers’ index indicated that Chinese manufacturing may contract in November by the most since March 2009 as home sales slide, adding to evidence the world’s second-biggest economy is slowing.

The reading of 48 reported by HSBC Holdings Plc and Markit Economics for November compares with a final number of 51 for October. A number below 50 indicates contraction.

A gauge of energy companies in the S&P/TSX fell 2.5 percent along with crude oil, leading declines among all 10 industry groups amid concern that slowing economic growth in China and Europe will reduce demand for the fuel.

Suncor erased 4.6 percent to C$29.01, its lowest price since Oct. 11. Canadian Natural Resources Ltd., the country’s second-largest energy company by market value, fell 3.1 percent to C$34.99. Cenovus Energy Inc., the country’s fifth-biggest energy company by revenue, declined 3.6 percent to C$30.42, its lowest price since December 2010.

Barrick, Teck Resources

Raw material companies fell as gold dropped after the U.S. dollar’s rally muted demand for the metal as an alternative investment.

Barrick slipped 1.5 percent to C$50.23. Goldcorp Inc., the world’s second-largest producer of the metal by market value, lost 3.2 percent, the most since Oct. 19, to C$50.71. Teck Resources Ltd., Canada’s largest base-metals producer, dropped 4 percent to C$33.02.

A gauge of financial companies dropped to its lowest level since July 22, 2009, as U.S. and European lenders also fell. The S&P/TSX Financial Index has erased 20 percent since its peak this year on April 4.

Royal Bank of Canada lost 2.3 percent to C$43.90, its lowest price since May 2009. Toronto-Dominion Bank, Canada’s second-biggest lender by assets, slipped 1.9 percent to C$69.23. Bank of Nova Scotia, the third-biggest lender, decreased 2.3 percent to C$48.79, the lowest since July 2010.

Research in Motion Ltd. fell 2.7 percent to C$17.03, the lowest price since January 2004. The BlackBerry maker has lost 71 percent this year as it struggles to maintain smartphone market share as it faces increased competition from Apple Inc.’s iPhone and phones running Google Inc.’s Android software.

--Editors: Joanna Ossinger, Stephen Kleege

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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