Canadian Stocks Fall on European Debt Crisis Concern; Royal Bank Declines

Canadian stocks fell for a second day, led by financial shares, as concern increased that the debt crisis in Europe will spread to more countries.

Royal Bank of Canada, the country’s biggest bank, dropped 1.3 percent after Standard & Poor’s cut Spain’s long-term credit rating. Barrick Gold Corp., the world’s largest gold producer, gained 2.6 percent after reporting its net income more than doubled on higher gold prices. Husky Energy Inc., an integrated oil and gas company that operates in Canada and the U.S., lost 2.8 percent after its earnings missed analyst estimates.

The Standard & Poor’s/TSX Composite Index decreased 69.85 points, or 0.6 percent, to 12,076.89.

“It’s a reflection of people going, ‘OK, is Greece going to resolve? Is it going to affect other parts of Europe? Is European economic growth going to slow down?’” said Robert McWhirter, a money manager who oversees about C$140 million ($138 million) at Selective Asset Management Inc. in Toronto.

The S&P/TSX dropped 1.1 percent yesterday after S&P cut its ratings on Greek and Portuguese government debt. Yields on Greek 10-year government bonds have surged 330 basis points to 9.971 percent since April 12 on speculation a proposed European Union- International Monetary Fund bailout may not be enough to prevent default.

S&P today reduced its long-term credit ratings on Spain to AA from AA+ and said it has a negative outlook on the country.

Europe’s Budget Deficits

Like Greece and Spain, Ireland and the UK each had budget deficits of at least 10 percent of gross domestic product last year, while Italy’s national debt rose to 116 percent of GDP last year, according to the EU’s statistical agency.

Stock markets fell today in most European countries as the euro traded at its lowest level against the U.S. dollar in a year

Thirty-six of 39 Canadian financial stocks retreated. Royal Bank slipped 1.3 percent to C$60.58. Bank of Montreal, the country’s fourth-biggest bank, fell 1.3 percent to C$63.68. Manulife Financial Corp., Canada’s largest insurer, dropped 3.2 percent to a 2010 low of C$18.34.

S&P/TSX gold companies climbed for a sixth day as investors looking for an alternative to currency pushed the price of the metal to a 2010 high.

Goldcorp Inc., Canada’s second-largest gold-mining company, rallied 3.2 percent to C$42.99 before the release of its first- quarter earnings. Agnico-Eagle Mines Ltd., which produces in Quebec, rose 3.4 percent to C$64.24.

Barrick increased 2.6 percent to C$42.51 after saying it earned 75 cents a share in the first quarter, excluding certain items, exceeding the average of 18 analyst forecasts by 19 percent. Production of 2.08 million ounces topped the estimate of Toronto-Dominion Bank analyst Greg Barnes by 8.3 percent, with the company’s Cortez mine in Nevada performing stronger than the company planned.

TransCanada Corp., owner of Canada’s largest pipeline system, decreased 2.3 percent, the most since July, to C$36.31 after TC Pipelines LP, a U.S. unit it controls, reported first- quarter results. TC Pipelines matched the average analyst earnings estimate, excluding certain items, while missing the average sales forecast by 0.9 percent.

Three U.S. refineries sued TransCanada to break contracts to ship oil on a new pipeline that has had cost overruns, the Globe & Mail reported.

Enbridge Inc., Canada’s largest pipeline company, lost 2.1 percent to C$49.22.

Canadian Pacific Railway Ltd. and waste-management company IESI-BFC Ltd. each advanced at least 2.7 percent on higher-than- estimated profits.

Canadian Pacific Beats Estimates

CP, Canada’s second-largest railroad, rallied 2.7 percent to a 19-month high of C$59.71 after reporting profit of 60 cents a share, excluding certain items, beating the average of 21 analyst estimates by 20 percent. Royal Bank of Canada analyst Walter Spracklin told clients the earnings may come as a surprise to some “as we believe investors had discounted CP’s ability to significantly realign its cost base.”

IESI-BFC, the biggest Canadian publicly traded waste- management company, led the S&P/TSX with a 6.8 percent surge to a 19-month high of C$19.89. The company reported first-quarter earnings of 20 cents a share, excluding certain items, topping the average analyst forecast by 31 percent.

Husky Energy slumped 2.8 percent, the most in six months, to C$29.11. The company’s first-quarter profit of 43 cents a share, excluding certain items, missed the average analyst estimate by 12 percent. In a press release, the company said it was hurt by low natural gas prices and low price differences between crude oil and refined petroleum products.

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

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