Bloomberg News

Canadian Stocks Snap Four-Day Slump as Gold Shares Rally

May 17, 2012

Canadian stocks rose, breaking a four-day losing streak, as a rally in gold helped equities avoid declines seen in the U.S. and Europe.

Barrick Gold Corp. (ABX), Goldcorp Inc. (G) and Yamana Gold Inc. increased more than 4.5 percent. Canadian Natural Resources Ltd. (CNQ) climbed 1.5 percent. China Gold International Resources Corp. gained 7.1 percent after a Bloomberg News survey showed that China’s economic growth is likely to accelerate in the third quarter. Royal Bank of Canada (RY) and Toronto-Dominion Bank fell at least 1.6 percent.

The Standard & Poor’s/TSX Composite Index (SPTSX) advanced 4.60 points, or less than 0.1 percent, to 11,330.68 Toronto time, trimming an earlier gain of as much as 0.9 percent. The index slumped 3.5 percent during the previous four days, and had declined in 10 out of the past 11 sessions.

“This is a weak bounce-back day,” Todd Johnson, a money manager at BCV Asset Management in Winnipeg, Manitoba, said in a telephone interview. The firm oversees C$340 million ($335 million). “Markets don’t do straight down forever. Maybe investors are getting a little exhausted from all the negative Spanish and European news.”

Equities fell in the U.S. and Europe as Spain’s borrowing costs rose at an auction, stoking concern that the region’s financial contagion is spreading from Greece. After the close of regular trading, Moody’s Investors Service downgraded the credit ratings of Spanish banks.

Weekly Decline

The S&P/TSX is heading for its third straight weekly decline as concerns mount that the Greek debt crisis, European elections and a slowing Chinese economy may curb demand for commodities. Energy and raw-material companies account for 44 percent of Canadian stocks by market value, according to data compiled by Bloomberg.

Materials stocks in the S&P/TSX rose for a second straight day as gold rallied for the first time in five sessions. The metal jumped the most since October as speculation that the Federal Reserve will announce more stimulus for the U.S. economy boosted demand for the precious metal.

Barrick Gold, the world’s largest producer of the metal, rose 6.9 percent to C$38.16. Goldcorp, the second-largest producer of the metal, gained 6.9 percent to C$35.48. Yamana Gold Inc. (YRI), Canada’s third-largest company in the industry by market value, increased 4.6 percent to C$13.79.

China Gold, which explores and develops projects throughout Asia, gained 7.1 percent to C$3.30. China’s third-quarter economic growth will rebound to 8.3 percent from 7.9 percent this quarter, the first increase in seven periods, according to the median estimate of 21 economists surveyed by Bloomberg News.

Financial companies in the benchmark index tumbled after the Federal Reserve Bank of Philadelphia’s general economic index decreased to minus 5.8 in May, indicating an unexpected contraction in manufacturing. Economists forecast the gauge would rise to 10.

Royal Bank of Canada, the nation’s biggest lender, slipped 2 percent to C$51.96. Toronto-Dominion Bank (TD), Canada’s second- largest lender, decreased 1.6 percent to C$77.65.

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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