Canadian Stocks Pare Gains as Financial, Power Companies Slump

Canadian stocks erased gains as financial and power companies slumped, offsetting an advance by energy shares as natural gas rallied.

Toronto-Dominion Bank (TD), Canada’s second-biggest lender by assets, slipped 0.7 percent amid concern European governments will struggle to resolve their debt crisis. Cameco Corp. (CCO), the world’s largest uranium producer, lost 3.4 percent after German Chancellor Angela Merkel’s coalition endorsed a plan to close all atomic-power plants by 2022. Power producer Fortis Inc. lost 2.1 percent after agreeing to buy Central Vermont Public Service Corp. Canadian Natural Resources Ltd. (CNQ) gained 1 percent.

The Standard & Poor’s/TSX Composite Index rose 11.53 points, or 0.1 percent, to 13,809.12 at 3:47 p.m. in Toronto after advancing as much as 0.4 percent. Trading volume for companies in the measure totaled 144.9 million shares, or 49 percent less than at the same time a week earlier, as U.S. markets were closed for the Memorial Day holiday.

“It’s a thin market, so you get more forced selling than there’s forced buying,” said Greg Taylor, a money manager at Aurion Capital Management in Toronto, which oversees C$5 billion ($5.1 billion). “Anytime there’s something perceived as negative, it can outweigh in thin trading.”

The S&P/TSX rose 3.1 percent in the two weeks that ended May 27 for the biggest two-week gain since Feb. 4. Raw-materials stocks surged 7 percent and energy companies gained 4.1 percent as analysts at banks including Deutsche Bank AG, Goldman Sachs Group Inc. and JPMorgan Chase & Co. forecast a rebound in commodity prices and gold, copper, corn, wheat and natural gas advanced. The resources industry makes up 49 percent of Canadian stocks by market value, according to Bloomberg data.

Weekly Drop

The index of S&P/TSX lenders fell after dropping the most in six months last week, when Royal Bank of Canada (RY), TD and Canadian Imperial Bank of Commerce reported earnings that missed analyst estimates. Financial stocks declined worldwide after Greek Prime Minister George Papandreou said he’ll press ahead with new austerity measures after failing to win backing from the main opposition parties as he races to keep bailout funds flowing and avoid default.

TD lost 0.7 percent to C$82.99. Royal Bank, Canada’s largest lender by assets, slipped 0.5 percent to C$57.08. Bank of Nova Scotia (BNS), the country’s No. 3 lender, decreased 0.4 percent to C$58.76 before the release of its second-quarter financial results.

Green Party

Cameco lost 3.4 percent to C$27.33. Uranium One Inc. (UUU), a mining company controlled by Moscow-based ARMZ Uranium Holding Co., slipped 3.2 percent to C$3.68. Merkel promised when re- elected in 2009 to extend the life of nuclear reactors. After Japan’s earthquake and tsunami in March caused the worst nuclear crisis since 1986, Merkel’s party finished behind the Green Party in a state election for the first time.

The S&P/TSX Utilities Index fell as much as 1.3 percent, the most intraday since March 15. The index closed at the highest level since June 18 on May 27 and the highest relative to forecast earnings since 2006.

“Utilities are such an expensive sector right now,” Taylor said.

Fortis declined 2.1 percent to C$32.94 after agreeing to buy Central Vermont Public Service for about $470 million, paying a 44 percent premium, to enter the U.S. regulated electricity market. Fortis, Canada’s largest publicly traded power producer, also said it will sell 9.1 million shares for C$33 each.

Canadian Utilities Ltd. (CU), the owner of the Atco family of companies, lost 2.7 percent to C$57.79 after losing as much as 3 percent, the most intraday since August.

Two-Month Surge

Juan Plessis, an analyst at Canaccord Financial Inc., cut his rating on the shares to “hold” from “buy” in a note dated May 27. Plessis cited the stock’s 21 percent surge from March 14 to May 26.

Energy shares gained after natural gas climbed 1.1 percent, adding to last week’s 6.8 percent surge, amid forecasts for warmer U.S. weather.

Canadian Natural, the country’s second-largest energy company by market value, rose 1 percent to C$41.98. Suncor Energy Inc. (SU), the country’s biggest energy company, gained 0.5 percent to C$40.96. Encana Corp. (ECA), Canada’s largest natural gas producer, advanced 0.6 percent to C$33.40.

Equinox Minerals Ltd. (EQN), the copper producer that Barrick Gold Corp. has agreed to buy, advanced 4.2 percent to C$7.92 on the Toronto Stock Exchange. The shares plunged to C$7.60, from C$8.09 the prior day, on May 27 after Barrick said talks with the Zambian government on the takeover are continuing. The African country’s competition agency had said it conditionally approved the purchase.

Teck, Semafo

Teck Resources Ltd. (TCK/B), Canada’s largest base-metals and coal producer, increased 1.2 percent to C$51 as copper climbed in Shanghai for a fourth day.

Semafo Inc. (SMF), which mines gold in Africa, climbed for an eighth day, soaring 4.9 percent to C$8.97 before the release of its first-quarter earnings.

“We see a lot of room for further appreciation as the company continues to provide updates on its underground development program and regional exploration updates,” Stuart McDougall, an analyst at Jennings Capital Inc., said in a note to clients.

S&P/TSX fertilizer producers climbed for a fifth day after 23 of 29 traders in a Bloomberg survey forecast corn prices will rise this week. Potash Corp. of Saskatchewan Inc., the world’s largest fertilizer producer, increased 0.7 percent to C$55.07. Agrium Inc. (AGU) gained 1.2 percent to C$85.50.

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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