Bloomberg News

Canadian Stocks Decline as Moody’s Plans Review of EU Ratings

December 12, 2011

Dec. 12 (Bloomberg) -- Canadian stocks fell, sending the country’s benchmark stock index to its lowest level this month, as commodity shares dropped after Moody’s Investors Service said it will review its ratings on all European Union countries.

Goldcorp Inc., the world’s second-biggest gold producer by market value, declined 3.3 percent as the U.S. Dollar Index rose the most in two weeks. Suncor Energy Inc., the country’s largest energy oil and natural gas producer, lost 2.7 percent as the fuels retreated. Royal Bank of Canada, the country’s largest lender by assets, dropped 1.8 percent after Moody’s said last week’s EU summit failed to produce “decisive policy measures” to end the region’s debt crisis.

The Standard & Poor’s/TSX Composite Index fell 126.86 points, or 1.1 percent, to 11,907.89, the lowest closing level since Nov. 29.

“The fundamentals investors would normally watch can easily be trumped by some of the political decisions in Europe as well as ratings-agency decisions,” said Andrew Pyle, an associate portfolio manager at Bank of Nova Scotia in Peterborough, Ontario. Pyle’s team oversees about C$200 million ($195 million). “A severe recession in the European economy will have an impact on other regions.”

The index has slumped 11 percent this year, led by financial, energy and materials companies, as the European debt crisis has intensified. The three industries make up 76 percent of Canadian stocks by market value, according to Bloomberg data.

Closer Union

Leaders of EU countries excluding the U.K. agreed last week to form a closer fiscal union that would limit budget deficits in an attempt to save the euro.

“Moody’s believes that the announcement offers few new measures and points out that many are similar to previously announced ones,” the ratings company said in a statement today. Bond yields climbed in Italy and Spain.

Stocks extended their fall after Fitch Ratings said in a statement that “a ‘comprehensive solution’ to the current crisis is not on offer” after the summit.

The Thomson Reuters/Jefferies CRB commodity index declined to the lowest level since Oct. 5 as the euro slipped. Gold futures retreated to the lowest in almost seven weeks.

Goldcorp lost 3.3 percent to C$49.52. Barrick Gold Corp., the world’s largest company in the industry, decreased 2.9 percent to C$49.23. Kinross Gold Corp., Canada’s third-biggest producer of the metal, dropped 4.2 percent to C$13.04. China Gold International Resources Corp. plunged 9 percent to C$2.54, the lowest since January 2010.

Takeover-Bid Report

Centerra Gold Inc., which mines in Kyrgyzstan and Mongolia, tumbled 4.4 percent to C$21.07 after the Sunday Times said it has offered to buy European Goldfields Ltd. The London-based newspaper cited unnamed sources. John Pearson, a spokesman for Centerra, said yesterday the company doesn’t comment on market speculation.

European Goldfields advanced for a fifth day, increasing 4.4 percent to C$13.43.

Natural gas futures fell to the lowest since September 2009 on forecasts for above-normal temperatures in parts of the U.S. Crude oil futures dropped on the New York Mercantile Exchange.

Suncor declined 2.7 percent to C$29.06. Encana Corp., the country’s biggest natural gas producer, lost 2.8 percent to C$19.01. Trican Well Service Ltd., Canada’s largest oilfield- services company, slumped 6.1 percent to C$16.47.

Producers of base metals and coal fell as all major industrial metals traded on the London Metal Exchange dropped after China reported the slowest export growth since 2009, excluding distortions in January and February.

Teck Slides

Teck Resources Ltd., Canada’s largest company in the industry, decreased 2.3 percent to C$37.05. Ivanhoe Mines Ltd., Rio Tinto Group’s partner in the Oyu Tolgoi copper project in Mongolia, retreated 4.2 percent to C$21.28. SouthGobi Resources Ltd., Ivanhoe Mines’ Mongolian coal-mining unit, tumbled 5.3 percent to C$6.61.

An index of S&P/TSX banks declined. Royal Bank fell 1.7 percent to C$48.64. Bank of Montreal, Canada’s fourth-largest lender by assets, slipped 1.2 percent to C$56. Manulife Financial Corp., North America’s fourth-biggest insurer, dropped 3.6 percent to C$10.91.

Sun Life Financial Inc., Canada’s third-largest insurer, surged 8.4 percent, the most since July 2009, to C$19.86 after Peter A. Rozenberg, an analyst at UBS AG, raised his rating on the shares to “buy” from “neutral.” The stock has fallen too far below the company’s book value, Rozenberg wrote in a note to clients. Sun Life closed at 75 percent of book value per share on Dec. 9.

--With assistance from Liezel Hill in Toronto. 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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