Canada Stocks Rise as Gold Shares Rally on Growth Concern; Potash Declines

Canadian stocks rose for a second day as gold producers gained on demand for the precious metal after China reported its highest inflation in 18 months and optimism over the European bailout plan waned.

Barrick Gold Corp., the world’s largest gold producer, gained 4.3 percent as the metal closed at a record price. Teck Resources Ltd., Canada’s largest base-metals producer, lost 7.8 percent as zinc fell to a three-month low.

The Standard & Poor’s/TSX Composite Index increased 52.71 points, or 0.4 percent, to 12,000.61, gaining the most among 23 developed-country equity benchmarks. The S&P/TSX had its biggest two-day gain since Feb. 2.

“There’s still some discussion with what’s happening in Europe and the fact they’re going to have to have rates lower for longer,” said Gareth Watson, director of Canadian equities at ScotiaMcLeod in Toronto, which manages C$65 billion ($64 billion). “Inflation is still a concern.”

The S&P/TSX gained the most in five months yesterday after European finance ministers agreed to a loan package to try to prevent the continent’s debt crisis from worsening. The benchmark index sank 4.2 percent last week, the most since July, on concern fiscal gaps of more than 10 percent of gross domestic product may lead to default in Greece and other European countries.

Optimism over the bailout cooled today, boosting demand for gold as an alternative asset. European Central Bank council member Axel Weber said the bank’s purchase of government bonds poses “significant” risks, Germany’s Boersen-Zeitung newspaper reported today. Marek Belka, director of the International Monetary Fund’s European department, said yesterday the lending package isn’t a “panacea.”

Reality Check

“Yesterday was kind of a sigh of relief,” Watson said. “Today there is the recognition that, look, the European bailout was not a solution. It’s something that gives Europe time to get its books in order.”

Chinese consumer prices rose 2.8 percent in April from a year earlier, with property prices jumping 12.8 percent, the country’s statistics bureau said today. The Shanghai Composite Index retreated 1.9 percent, sending the index into a bear market with a 20 percent slump since November.

The People’s Bank of China has ordered lenders to set aside more deposits as reserves three times this year in an attempt to prevent its economy from overheating.

Nearing Record

Gold climbed 2.8 percent to $1,133.90 an ounce, topping the record of $1,227.50 an ounce set Dec. 3. An index of S&P/TSX gold companies advanced the most in three months.

Barrick rallied 4.3 percent to a five-month high of C$46.87. Goldcorp Inc., Canada’s second-largest gold producer, rose 5.9 percent to C$47.21. Semafo Inc., which mines the metal in Africa, led the S&P/TSX with a 12 percent surge to a record C$7.13.

Producers of base metals declined on concern higher interest rates in China or a failure to control the European debt crisis will jeopardize economic growth.

First Quantum Minerals Ltd., Canada’s second-biggest copper producer, lost 4.7 percent to C$70.01 after reporting earnings that missed analyst estimates. Teck, which also sells coal to Chinese steel mills, dropped 7.8 percent to C$36.46 after soaring 8.8 percent yesterday.

Production Forecast

Ivanhoe Mines Ltd., which is developing a copper and gold mine in Mongolia with Rio Tinto Group, slumped 6.4 percent to C$15.49 after providing an update on the project. The company’s copper-production forecast for the life of the mine was 34 percent lower than the estimate of Bank of Montreal analyst John Hayes.

Energy companies retreated as oil and natural gas futures gave back some of their gains from yesterday. Suncor Energy Inc., Canada’s largest oil and gas producer, slipped 2.1 percent to C$31.94. Nexen Inc., an energy producer that operates on five continents, lost 2.4 percent to C$22.69.

Oilfield services company Trican Well Service Ltd. jumped 8.4 percent, the most in eight months, to C$12.85. The company reported first-quarter profit of 28 cents a share, more than double the average of 10 analyst estimates.

BlackBerry maker Research In Motion Inc. advanced 1.3 percent to C$69.31. Research firm Avian Securities LLC said BlackBerry market share has remained stable in Europe “despite an aging portfolio and increased competition.”

Potash Corp. of Saskatchewan Inc. and Agrium Inc. declined after the U.S. Department of Agriculture released supply and demand estimates that JPMorgan Chase & Co. analyst Jeffrey J. Zekauskas told clients were “negative” for North American fertilizer producers.

Potash Corp., the world’s largest fertilizer producer, lost 2.5 percent to C$103.60, a six-month low. Agrium, Canada’s second-biggest company in the industry, decreased 2.8 percent to C$58.74.

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

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