Canada Stocks Rise, Led by Banks, Energy Companies as Europe Crisis Eases

Canadian stocks gained for a third day as banks advanced on confidence the European debt crisis is easing and energy shares rose on a jump in natural gas prices.

Talisman Energy Inc., an oil and gas producer with operations in North America, the North Sea and Indonesia, advanced 4.4 percent after saying it may reduce capital spending. Potash Corp. of Saskatchewan Inc., Canada’s largest fertilizer producer, rallied 3 percent on an analyst upgrade. Bank of Montreal, the country’s fourth-largest bank, increased 2.5 percent after Barclays Plc raised its ratings on the industry in Canada.

The Standard & Poor’s/TSX Composite Index gained 195.47 points, or 1.6 percent, to 12,196.08.

“Now the market is focused back on the fundamentals, and the fundamentals are extremely strong,” said Gerry Brockelsby, who helps oversee C$125 million ($123 million) as a money manager at Marquest Asset Management Inc. in Toronto. “We just went through one of the strongest earnings seasons we’ve ever seen, where expectations are constantly being exceeded. The economy is exceeding people’s expectations, so now the market is coming back to focus on that.”

The S&P/TSX has advanced 4.3 percent this week, the biggest three-day gain in nine months, after the European Union announced a $1 trillion package to help indebted countries. The Canadian benchmark index slumped 4.2 percent last week, the most since July, on concern the European debt crisis may spread from Greece.

Strong Earnings

Sixty-one percent of companies in the S&P/TSX 60 index of largest Canadian companies and 82 percent of S&P 500 companies, have beaten their average analyst profit estimate this quarter. Canada reported record employment growth in April, and the U.S. reported the highest net job growth in four years.

“Investors got sidetracked from the fundamentals with this problem with Europe and Greece,” Brocklesby said.

Energy stocks gained as natural gas futures advanced 3.7 percent on foreign-trade data that indicated recovering industrial activity. Suncor Energy Inc., the country’s biggest oil and gas company, climbed 3 percent to C$32.91. Western Canadian energy producer Crew Energy Inc. soared 7.9 percent to C$18.75 after Toronto-Dominion Bank analyst Gregory Shaw raised his rating on the company to “buy” from “hold.”

Talisman advanced 4.4 percent to C$18.36. The company said it may reduce spending on shale-gas projects in North America by one-third next year if low gas prices persist.

Upgrade

Potash Corp. rose 3 percent from a 2010 low to C$106.75. Analyst John Redstone of Desjardins Securities increased his rating on the company to “buy” from “hold,” citing the stock’s 18 percent drop from Dec. 3 to yesterday.

Financial stocks gained for a third day after Barclays analyst John Aiken raised his view on Canada’s banking industry to “positive” from “neutral,” citing confidence in the economic recovery. “International focus has shifted to the Canadian banks based on their stability and current earnings strength,” he wrote in a note to clients.

Royal Bank of Canada, the country’s biggest bank, advanced 1.8 percent to C$61.13 after Aiken upgraded it to “equal weight” from “underweight.” Bank of Montreal, which Aiken moved to “overweight,” increased 2.5 percent to C$61.85. Sun Life Financial Inc., Canada’s third-largest insurer, climbed 2.8 percent to C$30.96 after company President Westley Thompson spoke to an investors’ conference in New York.

Magna International Inc., the largest Canada-based auto parts maker, rallied 6.3 percent to a 23-month high of C$77.59. Magna has surged 21 percent since announcing more than double the profit most analysts estimated and founder Frank Stronach’s plans to cede voting control of the company.

‘Resurgence’

“The North American car industry is creating quite a resurgence, albeit from a small base, but the rate of growth matters here,” Brocklesby said.

Pharmacy-benefits manager SXC Health Solutions Corp. jumped 7.2 percent to a record C$71.45, bringing its gain over the past week to 13 percent. Last week, SXC increased its profit forecast for the year after a stronger-than-estimated first quarter.

Aurizon Mines Ltd., which produces gold in Quebec, led the S&P/TSX with a 5.4 percent plunge to C$5.62 after its first- quarter earnings missed the average analyst estimate by 69 percent, excluding certain items.

Aircraft-parts maker Magellan Aerospace Corp. surged 30 percent to a 19-month high of C$2.88 after winning a 15-year contract from Rolls-Royce Group Plc it valued at $425 million. Magellan’s revenue totaled C$686.6 million last year.

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

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.