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Canada Stocks Fall After German Short Restrictions Weaken Bullion Futures

Canadian stocks fell for a fifth day, led by gold producers, as the euro gained against all other major currencies a day after Germany put a temporary ban on certain types of bearish trades.

Goldcorp Inc., the country’s second-biggest gold producer, dropped 4.3 percent as the metal retreated the most in a month. Sears Canada Inc., the Canadian unit of the department store chain, rose 6.5 percent after announcing a special dividend. Canadian Imperial Bank of Commerce advanced 2.7 percent on an analyst upgrade.

The Standard & Poor’s/TSX Composite Index slid 98.74 points, or 0.8 percent, to 11,665.77 after Germany prohibited some bets against government bonds and financial institutions.

“It may be perceived that it’s going to cool out speculation in gold,” said Brendan Caldwell, chief executive officer of Caldwell Investment Management Ltd. in Toronto, which manages about C$1 billion ($955 million). “It might be the only thing they can do to prevent a continued run on everything European.”

The S&P/TSX has slumped 4.5 percent this month, in part on concern austerity measures in Europe may inhibit growth without fixing the continent’s worst fiscal gaps.

The Canadian benchmark has outperformed 20 of 22 other developed markets’ primary equity indexes this month as a rally in gold has offset some of its losses. Gold surged 11 percent this year through yesterday as investors sought an alternative to holding euros.

Euro’s Rebound

Germany’s BaFin markets regulator banned investors from naked short sales -- speculating on declines in companies they don’t own -- for 10 banks and insurers, as well as naked credit- default swaps on euro-area government bonds starting today.

Today, currency traders speculated central banks would intervene to support the euro or arrest the rise of the Swiss franc.

The European currency rose against all other major currencies today, including a 1.5 percent gain against the U.S. dollar, as it rebounded from a four-year low against the greenback.

The U.S. dollar fell after the U.S. Labor Department said its consumer price index dropped 0.1 percent in April, the first decline in 13 months. Most economists in a Bloomberg survey had forecast a gain in prices.

Subdued Inflation

Inflation in goods food and energy is likely to remain subdued this year, allowing the U.S. Federal Reserve to keep interest rates at a record low, Royal Bank of Canada economist Nathan Janzen said in a note.

S&P/TSX gold stocks retreated as the metal declined 1.8 percent to $1,193.10 an ounce. Barrick Gold Corp., the world’s largest producer, slumped 3.6 percent to C$44.46 to contribute the most to the S&P/TSX’s decline. Goldcorp lost 4.3 percent to C$44.11. Gammon Gold Inc., which mines in Mexico, tumbled 9.4 percent, the most in five months, to C$7.29.

Silver reseller Silver Wheaton Corp. sank 5.9 percent to C$19.84 as other precious metals retreated.

An index of base-metal and coal producers fell for a fifth day as zinc futures dropped from a seven-month low and copper declined.

Teck Resources Ltd., Canada’s largest base-metal producer, lost 2.5 percent to C$32.68. First Quantum Minerals Ltd., the second-biggest copper-mining company based in Canada, decreased 4.4 percent to a 10-month low of C$62.74. Ivanhoe Mines Ltd., which is building a $4.6 billion copper and gold mine in Mongolia with Rio Tinto Group, retreated 4.8 percent to C$14.38.

Banks Rise

Banks advanced after the U.S. inflation announcement indicated record-low interest rates will continue for the near future. Royal Bank, Canada’s largest, increased 0.7 percent to C$60.53. Bank of Montreal, the country’s fourth-biggest bank, climbed 0.6 percent to C$60.96.

CIBC, the No. 5 bank by assets, gained 2.7 percent to C$74.25. Bank of America Corp. analyst Steve Theriault increased his rating on the company to “buy” from “underperform.”

Sears Canada surged 6.5 percent, the most in 11 months, to C$28.75. The retailer, in which Sears Holdings Corp. has a 73 percent stake, said it will pay C$3.50 a share, or about C$376.7 million, on June 4 to shareholders of record on May 31.

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

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