Bloomberg News

Canadian Stocks Rise as Europeans Agree to Closer Fiscal Union

December 09, 2011

Dec. 9 (Bloomberg) -- Canadian stocks rose, paring a weekly decline, after European nations other than the U.K. agreed to adopt tougher budget rules to save the euro currency.

Canadian Natural Resources Ltd., Canada’s second-largest energy company by market value, gained 1.6 percent as oil and gas producers advanced. Royal Bank of Canada, the country’s biggest lender by assets, increased 1.4 percent as banks climbed. First Quantum Minerals Ltd., Canada’s second-largest publicly traded copper producer, surged 5.4 percent as copper futures rallied.

The Standard & Poor’s/TSX Composite Index rose 82.96 points, or 0.7 percent, to 12,034.75, trimming its weekly retreat to 0.3 percent.

“It’s half a victory,” Irwin Michael, a money manager at ABC Funds in Toronto, said in a telephone interview. The firm oversees about C$1 billion ($980 million). “We’d like to see unanimous agreement. For us to have financial peace and prosperity in North America, we have to have some semblance of tranquility in Europe and Asia.”

The S&P/TSX is set to underperform the S&P 500 this year for the first time since 2003 as companies most-closely tied to the economy have declined on concern the European debt crisis will hamper growth. The Canadian index has slumped 10 percent this year after rallying 50 percent in 2009-2010.

Euro-region leaders agreed to develop “a new fiscal compact” that would limit budget deficits. Because the U.K. declined to participate, a new treaty would have to be written to put the rules into effect. Today’s agreement also adds 200 billion euros ($267 billion) to the International Monetary Fund’s crisis-fighting resources.

Energy Producers

The S&P/TSX Energy Index contributed the most to stocks’ gains. Canadian Natural advanced 1.6 percent to C$37.66. Pacific Rubiales Energy Corp., an energy producer with operations in Colombia, rebounded 5 percent to C$20.56 after sinking 5.4 percent yesterday. Precision Drilling Corp., Canada’s largest contract drilling company, increased 5.5 percent to C$11.15.

All S&P/TSX banks and insurers climbed after the European agreement. Royal Bank increased 1.4 percent to C$49.47. Bank of Nova Scotia, the country’s third-biggest lender by assets, advanced 1 percent to C$48.98. Manulife Financial Corp., North America’s fourth-largest insurance company, rose 1.4 percent to C$11.32.

National Bank of Canada, the country’s sixth-largest lender by assets, gained 1.6 percent to C$68.10 after Mario Mendonca, an analyst at Canaccord Financial Inc., and Darko Mihelic, an analyst at Cormark, raised their ratings on the company. Mendonca boosted National Bank to “buy” from “hold,” telling clients in a note that it is less expensive than other lenders relative to forecast 2012 earnings.

Industrial Metals

Base-metals and coal producers in the S&P/TSX extended weekly gains as copper advanced. First Quantum jumped 5.4 percent to C$20.55. Teck Resources Ltd., the country’s largest company in the industry, climbed 1.5 percent to C$37.92.

Silver producers rose as the precious metal with industrial uses rallied. Silver Standard Resources Inc., which mines in Latin America, gained 4.9 percent to C$15.41. First Majestic Silver Corp., which owns mines in Mexico, advanced 6.5 percent to C$17.13.

Technology-patent owner Wi-LAN Inc. increased 5.8 percent to C$5.49. The company said it bought more than 1,400 TV and video patents and patent applications for $8 million and said it will buy back up to 5 percent of its shares.

Yoga-wear retailer Lululemon Athletica Inc. climbed 3.8 percent to C$48.67 after Howard Tubin, an analyst at Royal Bank, reiterated his “outperform” rating on the shares. Higher same- store sales in the third quarter demonstrate the strength of the Lululemon brand, Tubin wrote in a note to clients.

Valeant Pharmaceuticals International Inc., Canada’s largest drugmaker, rose 3.5 percent to C$47.92 after a person with knowledge of the deal said the company increased the size of a term loan to $500 million from $350 million. Valeant will use the money to help fund its A$700 million ($715 million) purchase of Sydney-based iNova Pharmaceuticals (Australia) Pty.

--With assistance from Michael Amato in New York. Editors: Stephen Kleege, Jeff Sutherland

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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