Bloomberg News

Canadian Stocks Fall, Led by Financials; Royal Bank Drops

April 03, 2012

Canadian stocks fell the most in four weeks, led by lenders, after Royal Bank of Canada (RY) was sued by U.S. regulators over futures trades and lower-than-forecast U.S. factory orders fanned concern over economic growth.

Canada’s largest lender dropped 2.8 percent in Toronto Stock Exchange trading after the Commodity Futures Trading Commission claimed it engaged in trades worth hundreds of millions of dollars to garner tax benefits, and the bank said separately it would pay $1.1 billion for the 50 percent of RBC Dexia Investor Services Ltd. it doesn’t already own. Bank of Nova Scotia (BNS) fell 1.3 percent. Research in Motion Ltd. (RIM) plunged 9.5 percent as investors speculated that the BlackBerry maker’s possible acquirers are dropping off.

The Standard & Poor’s/TSX Composite Index (SPTSX) declined 183.45 points, or 1.5 percent, to 12,323.61 in Toronto, the biggest decrease since March 6.

“It’s never great to attract the attention of the CFTC,” Todd Johnson, a money manager at BCV Asset Management in Winnipeg, Manitoba, said in a telephone interview. The firm oversees C$340 million ($342 million). “It might detract some people that sell on macro news and headlines, but I don’t think it reflects longer-term loss of profitability.”

The benchmark equity gauge rose 3.7 percent in the first quarter this year as economic data surpassed estimates and investors speculated that the euro area would contain its sovereign-debt crisis. The Canadian index fell 2 percent in March, after two straight months of increases.

Not ‘Material’

Canadian financial companies fell for the fifth time in six days after Royal Bank was sued by the CFTC, which claimed in a complaint filed in Manhattan federal court that the lender made false and misleading statements about the trades from 2007 to 2010. Chief Executive Officer Gordon Nixon rejected the allegations and said that the financial impact of the lawsuit won’t be “material.”

The U.S. Commerce Department reported factory orders rose 1.3 percent in February, less than the 1.5 percent median of economist projections in a Bloomberg survey.

Royal Bank dropped 2.8 percent to C$57.10 on the Toronto exchange. Toronto-Dominion Bank (TD), Canada’s second-largest lender, declined 0.9 percent to C$83.79. Bank of Nova Scotia, the country’s third-biggest lender, fell 1.3 percent to C$55.45. The banks are the three most heavily-weighted stocks in the S&P/TSX, making up almost 15 percent of the index.

Energy stocks in the S&P/TSX decreased after oil fell, as supplies in the U.S. were forecast to climb to a seven-month high. Futures slid 1.2 percent as a Bloomberg News survey of analysts showed stockpiles probably increased 0.7 percent last week to 355.9 million barrels.

Oil, Gas

Suncor Energy Inc. (SU), Canada’s largest oil and gas producer, lost 1.4 percent to C$32.74. Imperial Oil Ltd. (IMO), Canada’s second- largest energy company, fell 1.9 percent to C$45.28. Canadian Natural Resources Ltd. (CNQ), the country’s third-largest energy company by market value, decreased 1.8 percent to C$33.13.

Materials companies in the benchmark index dropped as gold stocks extended losses on a strengthening U.S. dollar after minutes from the Federal Reserve’s latest policy meeting showed policy makers saw no need for more monetary stimulus unless economic growth slows.

Goldcorp. Inc., the world’s second-biggest producer of the metal, decreased 5.8 percent to C$43.10. Ivanhoe Mines Ltd., Rio Tinto Group’s partner in the Oyu Tolgoi Mongolian gold and copper mine, fell 7.9 percent to C$14.37 after being downgraded by both Toronto-Dominion and Bank of Montreal.

Research in Motion Ltd. decreased 9.5 percent to C$12.91. The technology company has dropped 13 percent this year.

To contact the reporter on this story: Joseph Ciolli in New York at jciolli@bloomberg.net

To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net


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