Bloomberg News

Canadian Stocks Fall as ECB’s Draghi Cites Risks to Economy

December 20, 2011

Dec. 19 (Bloomberg) -- Canadian stocks fell, led by raw- materials producers, after European Central Bank President Mario Draghi said “substantial” risks to the economy remain and the law forbids him from increasing bond purchases.

Eldorado Gold Corp., the country’s fifth-largest gold producer by market value, slumped 13 percent after agreeing to buy European Goldfields Ltd. for about C$2.5 billion ($2.4 billion). Teck Resources Ltd., the country’s biggest base-metals and coal producer, slipped 2.8 percent as copper retreated. Rogers Communications Inc., Canada’s biggest wireless carrier, rose 3.2 percent as phone stocks advanced.

The Standard & Poor’s/TSX Composite Index declined 95.68 points, or 0.8 percent, to 11,539.70.

“These guys make things worse every time they remind the market they’re unable to help out,” Barry Schwartz, a money manager at Baskin Financial Services Inc. in Toronto, said in a telephone interview. The firm oversees about C$400 million ($386 million). “These reminders are not helpful.”

The S&P/TSX retreated 3.3 percent last week, led by raw- materials companies, as the U.S. dollar rallied on demand for a haven from the European debt crisis. Canada’s benchmark stock index has sunk 14 percent this year and is set to underperform the S&P 500 for the first year since 2003.

Stocks fell today after Draghi spoke to the European Parliament in Brussels. He told lawmakers that monetary financing of member governments “would negatively affect the credibility of our institution.”

Purchase Agreement

Eldorado tumbled 13 percent, the most since December 2008, to C$13.46 after agreeing to buy European Goldfields for about C$13.08 a share in shares and cash. European Goldfields, which is developing projects in Greece, Romania and Turkey, slipped 4.7 percent to C$11.28. European Goldfields’ shares surged 22 percent Dec. 6 after the company said it had received inquiries regarding potential deals.

Other raw-materials stocks declined as metals retreated after China, the world’s biggest user of industrial metals, said home prices dropped in 49 cities last month, the most this year.

Teck decreased 2.8 percent to C$34.21. SouthGobi Resources Ltd., which mines coal in Mongolia, plunged 7 percent to C$6.16, the lowest since December 2008. Ivanhoe Mines Ltd., Rio Tinto Group’s partner in the Oyu Tolgoi project in Mongolia, slumped 4.8 percent to C$16.54.

Gold and silver futures retreated as the U.S. dollar gained against the euro. Goldcorp Inc., the world’s second-largest gold producer by market value, lost 2.9 percent to C$46.14. NovaGold Resources Inc., which is developing gold and base-metals properties, sank 6.4 percent to C$8.73.

Gas Drops

Energy producers retreated as natural gas dropped to the lowest price since September 2009 on the New York Mercantile Exchange.

Canadian Natural Resources Ltd., the country’s second- largest energy company by market value, declined 2.7 percent to C$35.12. Suncor Energy Inc., Canada’s biggest company in the industry, lost 1 percent to C$27.51. Encana Corp., the country’s largest natural gas producer, decreased 2.5 percent to C$18.56, the lowest price since January 2005.

Rogers gained 3.2 percent to C$37.79 after Canadian Press reported the company will close 40 percent of its video stores by the end of January. The news service cited Sian Doyle, the company’s vice president of retail.

Dividend Payers

Rogers has advanced 9.2 percent this year. Telephone stocks in the S&P/TSX have rallied 15 percent in 2011 as investors have sought dividend-paying companies less dependent on economic growth.

The S&P/TSX Financials Index dropped as insurers slipped. Manulife Financial Corp., North America’s fourth-biggest insurer, lost 1.5 percent to C$10.25, matching the post-March 2009 low set Dec. 15. Sun Life Financial Inc., Canada’s third- largest insurance company, decreased 4.6 percent to C$18.50.

RuggedCom Inc., which makes networking equipment and software, soared a record 67 percent to C$22.69 after Belden Inc. said it will offer C$22 a share in cash for the company. In a statement, RuggedCom said a board committee charged with evaluating the bid believes it “clearly undervalues RuggedCom.”

Chorus Aviation Inc., which operates Air Canada Jazz flights, jumped 8.7 percent, the most since July 2009, to C$3 after Tim James, an analyst at Toronto-Dominion Bank, raised his rating on the shares to “action list buy” from “buy.” In a note to clients, James cited the shares’ indicated dividend yield of 22 percent as of Dec. 16 and price relative to cash flow.

--Editor: Nick Baker, Stephen Kleege

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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