Bloomberg News

Canadian Stocks Fall as U.S. Reports Decline in New-Home Sales

January 26, 2012

Jan. 26 (Bloomberg) -- Canadian stocks fell from a four- month high as financial companies dropped after the U.S. reported a decline in monthly new-home sales.

Manulife Financial Corp., North America’s fourth-largest insurer, lost 5.1 percent after an analyst at UBS AG reduced his rating on the shares. Goldcorp Inc., the world’s second-largest gold producer by market value, gained 2.2 percent as the metal advanced for a second day after the U.S. Federal Reserve extended its low-interest-rate pledge. Encana Corp., Canada’s biggest natural gas producer, lost 4.9 percent as the fuel retreated for the first time in five days.

The S&P/TSX Composite Index slipped 74.89 points, or 0.6 percent, to 12,464.32 after rallying as much as 0.6 percent before the release of the housing data.

The home-sales number “is just a trigger,” Bob Decker, a money manager at Aurion Capital Management in Toronto, said in a telephone interview. The firm oversees about $5.5 billion. “Stocks are erasing their gain because people are wondering what lies ahead. We’re in a sell-on-news mode. It’s a second sober thought people are having about whether this Fed move indicates something more nefarious about their analysis.”

Canada’s benchmark stock gauge has gained 0.5 percent this week after advancing each of the five previous weeks. The S&P/TSX rose 7.8 percent from Dec. 16 to yesterday as employment and manufacturing data improved in the U.S. and the Fed said it expects to keep its benchmark interest rate near a record low until at least late 2014. Seventy-five percent of Canada’s exports went to the U.S. in 2010, according to Statistics Canada.

Housing Market

U.S. new-home sales fell 2.2 percent in December, the Commerce Department said today in Washington. All but six of 75 economists in a Bloomberg survey had forecast an increase.

The S&P/TSX Financials Index dropped the most in two months. Bank of Nova Scotia, Canada’s third-largest lender by assets, declined 1.5 percent to C$52.73. Toronto-Dominion Bank, the country’s No. 2 lender, lost 1.1 percent to C$77.86. Bank of Montreal, the fourth-biggest bank, slipped 1.7 percent to C$59.64.

Manulife and Sun Life Financial Inc. declined after Peter A. Rozenberg, an analyst at UBS AG, cut his ratings on the stocks to “neutral” from “buy.” Low interest rates will hold back profit, Rozenberg wrote in a note to clients.

Manulife lost 5.1 percent to C$11.91. Sun Life, the country’s third-biggest insurance company, slumped 5 percent to C$20.05.

Goldcorp, Franco-Nevada

Gold futures climbed to a seven-week high on the Comex in New York. Goldcorp rose 2.2 percent to C$48.75. Franco-Nevada Corp., which owns royalties on precious-metals production, gained 3.6 percent to C$44.50. Gabriel Resources Ltd., which is developing a gold mine in Romania, soared 8.7 percent to C$6.13 for its first gain since Jan. 16.

Natural gas retreated after rebounding 18 percent from a nine-year low over the previous four days. The fuel fell today on speculation a larger-than-average inventory decrease in the U.S. last week won’t be enough to resolve a supply glut.

Encana decreased 4.9 percent to C$19.74 after Thomas R. Driscoll, an analyst at Barclays Plc, reduced his price estimate on its U.S.-traded shares to $17 from $22. Talisman Energy Inc., an oil and gas producer with operations in North America, the North Sea and Indonesia, slipped 2.9 percent to C$11.90. Oilfield-services company Calfrac Well Services Ltd. tumbled 5 percent to C$25.70.

--With assistance from Christine Buurma in New York. Editors: Stephen Kleege, Joanna Ossinger

To contact the reporter on this story: Matt Walcoff in Toronto at mwalcoff1@bloomberg.net

To contact the editor responsible for this story: Michael P. Regan at mregan12@bloomberg.net


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