Bloomberg News

Canadian Stocks Drop for Fourth Week on Debt Contagion Concerns

November 25, 2011

Nov. 25 (Bloomberg) -- Canadian stocks fell for a third day to complete a fourth straight weekly decline as the country’s finance minister said contagion from the European debt crisis is spreading.

Suncor Energy Inc., Canada’s biggest oil and gas producer, fell 2.1 percent. Royal Bank of Canada, the nation’s biggest lender, fell 1.1 percent, leading a decline in financial shares. Teck Resources Ltd., Canada’s largest base-metals producer, dropped 2 percent as copper capped its fourth straight weekly drop.

The Standard & Poor’s/TSX Composite Index fell 23.26 points, or 0.2 percent, to 11,462.06, the lowest since Oct. 5. The index dropped 3.6 percent in the past five days completing its longest streak of weekly losses since July 2008.

“The Canadian economy is a very open economy with exports making up a large part of GDP, so there are a lot of worries about the global situation,” Stephen Gauthier, a portfolio manager at Fin-XO Securities in Montreal, said in a telephone interview. The firm oversees about C$600 million ($573.5 million). “We’ve been losing a lot of ground the last few days because we are waiting to see what is going to happen on a worldwide basis.”

The S&P/TSX fell 15 percent this year though yesterday as it heads toward its first yearly decrease since 2008 and second in nine years. S&P/TSX Materials and Energy indexes have lost 19 percent and 18 percent, respectively, this year as the European debt crisis threatened to curb global growth. Energy and raw- materials companies make up 47 percent of Canadian stocks by market value, the most among major developed markets, according to Bloomberg data.

Treaty Discussions

Stocks erased earlier gains after Reuters reported that Greece is demanding that new bonds issued to investors as part of a debt swap have a net present value of 25 percent, lower than the “high 40s the banks have in mind.” Jim Flaherty, the Canadian Minister of Finance, said in Toronto that Europe’s debt crisis is creating “contagion” outside the region and policy makers must act while the situation can still be stabilized.

Energy shares fell 0.7 percent as a group, the most out of 10 industry groups, after climbing as much as 0.5 percent earlier. Suncor fell 2.1 percent to C$28.14. Canadian Natural Resources Ltd., the country’s second-largest energy company by market value, dropped for a seventh day, slipping 2.3 percent to C$33.96. Cenovus Energy Inc., the country’s fifth-biggest energy company by revenue, declined 0.6 percent to C$30.15, its lowest price since November 2010.

Biggest Banks

Royal Bank of Canada slid 1.1 percent to C$43.40, its lowest price since May 2009. Toronto-Dominion Bank, the country’s second-largest lender by assets, lost 0.8 percent to C$68.18, its lowest price since March 2010.

Potash Corp. of Saskatchewan Inc., the world’s largest fertilizer producer by market value, fell to its lowest price since August 2010, declining 0.2 percent to C$42.94 as wheat futures decline to a 16-month low on speculation that demand will ebb as the global economy falters.

Teck Resources declined 2 percent to C$32.66. Capstone Mining Corp., which produces base metals in Mexico and Canada, sank 3.9 percent to C$2.48.

Guyana Goldfields Inc. gained 3.9 percent to C$8.44. The gold explorer signed confidentiality agreements with six parties interested in buying the company and its Aurora gold project in the South American country, Chief Operating Officer Claude Lemasson said.

Harry Winston Diamond Corp., the co-owner of the Diavik mine, climbed 0.8 percent to C$10.26 after diamond prices rose 0.2 percent this week.

--Editors: Stephen Kleege, Jeff Sutherland

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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