Canada Stocks Fall With Commodities; TD Bank Slips on Purchase

Canadian stocks dropped for a third day, led by raw-material producers, as commodity prices fell on speculation that European measures to curb debt will erode economic growth.

Toronto-Dominion Bank, Canada’s second-largest bank, declined 1.9 percent after saying it is spending $191.6 million to buy a U.S. lender. Teck Resources Ltd. (TCK/B), the country’s biggest base-metals producer, tumbled 6.3 percent as an index of such companies dropped to a six-month low. Suncor Energy Inc. (SU), Canada’s largest oil and gas company, lost 2.5 percent as oil slipped to a 2010 low.

The Standard & Poor’s/TSX Composite Index (SPTSX) fell 201.97 points, or 1.7 percent, to 11,813 for its biggest three-day loss since January. The drop reduced to 1 percent the index’s gain since European leaders agreed to an almost $1 trillion loan package to tackle its debt crisis.

“It’s solved the problem in the short run, but now there will be less income going into the economy,” said Doug Davis, chief executive officer of Davis-Rea Ltd. in Toronto, which manages C$400 million ($387 million). “It’s the opposite of stimulus; it’s going to reduce the recovery by quite a bit.”

The S&P/TSX has slumped 3.8 percent since April 26, the day before S&P cut Greece’s credit rating to junk. Copper and oil futures have plunged 17 percent and 16 percent, respectively, in the period. The Reuters/Jefferies CRB Index of commodities fell to the lowest level since Oct. 2.

Copper, Coal

Base metals declined, spurred by concern China will seek to curb growth and a fifth-straight advance for the U.S. dollar. Copper slipped below $3 a pound for the first time in three months, while zinc fell to its lowest price since October.

Teck retreated 6.3 percent to C$33.11. Nickel-and copper-mining company FNX Mining Co. decreased 9.1 percent, the most in 10 months, to C$10.85. Western Coal Corp., which like Teck produces coal used in steel mills, sank 11 percent to C$4.70.

S&P/TSX gold companies fell as the U.S. dollar gained against most other major currencies, weakening the appeal of the metal as a hedge.

Barrick Gold Corp. (ABX), the world’s biggest gold-mining company, dropped 2.6 percent to C$45.87. Goldcorp Inc. (G), Canada’s second-largest gold producer, declined 1.9 percent to C$46.25. Eldorado Gold Corp. (ELD), which mines in Turkey and China, lost 2.5 percent to C$17.87.

Semafo Inc. (SMF), a gold-mining company with operations in Africa, slumped 5.7 percent from a record high to C$6.90 after announcing plans to sell at least 15 million shares at C$6.95 a share.

Manufacturing Surprise

Crude oil declined 2.2 percent to $70.06 a barrel after the Federal Reserve Bank of New York’s manufacturing index dropped to 19.1 from 31.9 in April. None of the 41 economists in a Bloomberg survey estimated the index would fall that much.

Suncor retreated 2.5 percent to C$31.26. Canadian Natural Resources Ltd. (CNQ), the country’s second-biggest energy company by market value, slipped 1.7 percent to C$71.37. Pacific Rubiales Energy Corp. (PRE), which produces heavy crude oil in Colombia, fell 6.1 percent to C$20.09 after missing analysts’ profit estimates in quarterly results announced May 14.

TD, North America’s sixth-largest bank by market value, dropped 1.9 percent to C$71.98. The company agreed to buy South Financial Group Inc. of Greenville, South Carolina, paying the U.S. government $130.6 million and common shareholders $61 million.

Other Lenders

Royal Bank of Canada (RY), the country’s biggest bank, declined 0.8 percent to C$59.49. Bank of Nova Scotia (BNS), the No. 3 bank by assets, decreased 2.7 percent to C$50.94.

Compression-equipment supplier Toromont Industries Ltd. (TIH) and Jazz Air Income Fund, a regional carrier that flies on behalf of Air Canada, both plunged after Royal Bank analysts cut their ratings on the stocks to “sector perform” from “outperform.”

Toromont lost 7.8 percent to C$26 after Royal Bank analyst Sara O’Brien called the company’s first-quarter results “very weak” and said she expects results won’t improve for a few quarters. Desjardins Securities analyst Benoit Poirier cut his rating on Toromont to “sell” from “buy.”

O’Brien’s colleague Walter Spracklin cited weaker-than-estimated quarterly results in his downgrade of Jazz Air, which sank 9.4 percent, the most in 11 months, to C$4.26. David Tyerman of Canaccord Financial Inc. also downgraded the airline.

Contractor Seacliff Construction Corp. surged 17 percent to a record C$17.01 after agreeing to a takeover offer of C$17.14 a share from Churchill Corp. (CUQ) Churchill dropped 3.9 percent to C$18.20.

To contact the reporter on this story: Matt Walcoff in Toronto at Mwalcoff1@bloomberg.net

To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net.

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