Bloomberg News

Canadian Stocks Rise on Euro-Area Optimism as Commodities Gain

August 21, 2012

Canadian stocks rose, sending the benchmark index to the highest level since May, on increasing optimism that European leaders will make progress in addressing the region’s debt crisis and as commodities rallied into a bull market.

Enerplus Corp. (ERF) jumped 4 percent after selling its stake in a private oil sands company for C$141 million yesterday. CGI Group (GIB/A) Inc. climbed 3.8 percent to its highest level in more than 12 years. Eldorado Gold Corp. (ELD) gained 5.7 percent. Gold and crude prices rallied to three-month highs.

The Standard & Poor’s/TSX Composite Index (SPTSX) advanced 40.89 points, or 0.3 percent, to 12,116.92 in Toronto. The index jumped as much as 1 percent earlier in the day. It has gained 1.4 percent in 2012.

“A move is afoot to generate another round of economic stimulation from policy makers once they stabilize the solvency issues in Italy and Spain,” Bob Decker, portfolio manager with Aurion Capital Management, said in a phone interview from Toronto. The firm manages about C$6 billion ($6 billion). “And there has been a natural recovery from the slowdown of the second quarter in terms of sentiment around commodities. Some of the speculators are returning to the market.”

Commodities Rise

Oil jumped 0.7 percent. The Standard & Poor’s GSCI gauge of 24 raw materials rose 0.9 percent to 675.55, the highest level since May. The gauge has climbed 21 percent from this year’s lowest close of 559 on June 21. A gain of more than 20 percent is the common definition of a bull market.

There is mounting speculation European leaders will make progress on Greece’s debt crisis this week. Luxembourg Prime Minister Jean-Claude Juncker, head of the group of euro-area finance ministers, visits Athens tomorrow to listen to a request by Greek Prime Minister Antonis Samaras for a two-year extension to the country’s fiscal-adjustment program. French President Francois Hollande and German Chancellor Angela Merkel meet in Berlin on Aug. 23.

Norbert Barthle, a senior lawmaker with Merkel’s ruling party, said concessions are possible for Greece, including interest and maturity adjustments on loans, as long as the country shows willingness to meet the main targets set out in its bailout program.

Gold Shares

Eldorado Gold advanced 5.7 percent to C$12.43. Kirkland Lake Gold Inc. (KGI) surged 7.1 percent to C$13.40. Gold futures for December delivery increased 1.2 percent to settle at $1,642.90 an ounce in New York.

Barrick Gold Corp. (ABX) increased 1.3 percent to C$36.48. Goldcorp Inc. (G) rose 2.5 percent to C$38.88.

Silvercorp Metals Inc. (SVM) jumped 5.9 percent to C$5.76, its biggest percentage gain since May. Silver gained 2.9 percent to $29.51 in New York.

CGI Group, a Montreal-based supplier of technology services to retailers, utilities and banks, added 3.8 percent to C$25.10, the highest price since March 2000. The company recently closed its C$2.7 billion acquisition of Britain’s Logica Plc.

Enerplus surged 4 percent to C$16 after agreeing to sell its stake in Laricina Energy Ltd. Enerplus plans to use the cash to pay down debt. Kristopher Zack, an analyst with Raymond James, upgraded Enerplus to outperform from market perform, with a one-year target price of C$18.

Cenovus Energy Inc. (CVE) climbed 1.3 percent to C$33.31 after crude futures jumped 0.7 percent to $96.68 a barrel in New York.

Baja Mining Corp. (BAJ) slid 13 percent to 6.5 Canadian cents, its biggest decline in two weeks after the company said it hadn’t received financing committed by its Korean partners by yesterday’s deadline. The miner has struggled to contain expenses to build a copper mine in Mexico and has plunged 92 percent this year.

To contact the reporter on this story: Eric Lam in Toronto at elam87@bloomberg.net

To contact the editor responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net


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