Most Canadian Stocks Drop as Base-Metals, Crude Producers Fall

Most Canadian stocks fell, led by energy producers, as an Alaska pipeline prepared to restart and Chinese stocks dropped the most in two months.

Penn West Petroleum Ltd., which produces oil and gas in western Canada, lost 1 percent as oil retreated. Barrick Gold Corp., the world’s largest gold producer, rose 1.3 percent as the metal gained for the first time in three days. Tim Hortons Inc., Canada’s biggest fast-food chain, lost 1.7 percent after Irene Nattel, an analyst at Royal Bank of Canada, cut her rating on the stock.

The Standard & Poor’s/TSX Composite Index slipped 3.97 points, or less than 0.1 percent, to 13,460.09 at 1:44 p.m. in Toronto. Among S&P/TSX stocks, 105 gained, 130 declined and 10 were unchanged.

“China took a selloff, which was a delayed reaction to the rate hike. That got a bit of a negative bias to the commodity trade,” said Greg Taylor, who helps oversee C$5 billion ($5.07 billion) as a money manager at Aurion Capital Management in Toronto. “Having Shanghai roll over is enough of a reason for people to start taking some profits. It starts the fear that a bit of a correction comes in some of the” most-volatile stocks.

The S&P/TSX has gained 0.1 percent this month after surging 19 percent in the second half of 2010. The benchmark’s raw- materials stocks have plunged 5 percent. Raw-materials companies make up 23 percent of Canadian stocks by market value.

An index of S&P/TSX energy companies retreated for the first time in five days as crude futures fell as much as 0.8 percent. Alyeska Pipeline Service Co. said oil should begin flowing through the Trans Alaska Pipeline System today after a Jan. 8 breach.

Oil, Gas Stocks

Penn West dropped from a 27-month high to C$25.05. EnCana Corp., Canada’s natural gas producer, decreased 0.8 percent to C$30.97. Pacific Rubiales Energy Corp., which produces oil in Colombia, declined 1.7 percent to C$32.06.

Oil and gas producer Ivanhoe Energy Inc. soared 8.6 percent to C$3.40 after announcing a natural gas discovery in China.

Gasfrac Energy Services Inc., an oilfield services company, sank 20 percent, the most since going public in a reverse takeover in August, to C$9.39. On Jan. 16, the company said it has suspended operations at one location due to a leak and fire. Michael Mazar, an analyst at Bank of Montreal, reduced his rating on the stock to “underperform” from “outperform.”

S&P/TSX gold stocks rebounded after tumbling 11 percent this month through Jan. 14. Barrick Gold Corp., the world’s largest producer of the metal, rose 1.1 percent to C$47.10. Goldcorp Inc., the world’s No. 2 producer by market value, gained 0.8 percent to C$40.47.

Gold Stocks

The ratio between the level of the S&P/TSX Gold Index and the price of gold fell to the lowest since November 2008 on Jan. 14.

“Gold stocks have started to underperform the commodity, so they never really priced in the extent of the upwards move,” Taylor said. “That shows stocks may be a better move than the commodity right now.”

High River Gold Mines Ltd., which mines in Russia and Africa, jumped 12 percent to C$1.35 after earlier today surging as much as 19 percent, the most in a year. OAO Severstal, which owns a majority stake in High River, began an initial public offering of its Nord Gold NV unit.

Nautilus Minerals Inc., which plans to mine gold and copper from beneath the ocean floor, soared 18 percent to C$2.59 after saying it has received a mining lease from Papua New Guinea.

Most S&P/TSX raw-materials stocks retreated today after the Shanghai Composite Index sank 3 percent. China is the world’s largest consumer of metals used in industry.

China Demand

Growth of copper consumption in China may decline almost 50 percent in 2011 as the country tries to cool its economy, Michael Jansen, a metals strategist at JPMorgan Chase & Co., said at a Shanghai conference Jan. 15.

Teck Resources Ltd., Canada’s largest base-metals and coal producer, lost 0.5 percent to C$61.90. First Quantum Minerals Ltd., Canada’s second-biggest publicly traded copper producer, fell 0.7 percent to C$119.44. Equinox Minerals Ltd., which mines copper in Africa, dropped 1.4 percent to C$5.78.

Tim Hortons dropped 1.7 percent to C$41.42 after earlier today sinking as much as 2.5 percent, the most in four months. Nattel cut her rating to “sector perform” after rating it “outperform” since at least 2006. In a note to clients, the analyst said the stock is more expensive per dollar of forecast profit than McDonald’s Corp.

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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