Canadian Stocks Fall as Debt Crisis Weakens Oil, Copper Futures

Canadian stocks fell for a second day as oil and copper producers dropped on the lack of a deficit-reduction agreement in the U.S. and speculation the European debt crisis will spread to more countries.

Canadian Natural Resources Ltd. (CNQ), the country’s second- largest energy company by market value, declined 2.5 percent as crude futures fell 1.1 percent. Manulife Financial Corp. (MFC), Canada’s biggest insurer, retreated 3.3 percent as Italian, Spanish and Portuguese bond yields climbed to euro-era records relative to German bunds. First Quantum Minerals Ltd. (FM), Canada’s second-largest publicly traded copper producer, lost 4.1 percent as Chinese inflation topped economists’ forecasts.

The Standard & Poor’s/TSX Composite Index decreased 191.95 points, or 1.4 percent, the most in five weeks, to 13,179.75.

“People are possibly sending a message to Congress that they should start acting like adults,” said David Baskin, president of Baskin Financial Services Inc. in Toronto, which manages C$400 million ($413 million). “If governments can’t get their debt under control, you’re going to have hyperinflation and giant interest rates. It’s going to be terrible.”

The S&P/TSX climbed each of the past three weeks as Greece passed austerity measures in a bid to prevent default and oil and metals rallied. Energy and raw-materials companies make up 49 percent of Canadian stocks by market value, according to Bloomberg data.

U.S. President Barack Obama and Republican lawmakers remained divided over how to address the country’s budget deficit. Congress has yet to raise the country’s $14.3 trillion debt ceiling, which the Treasury Department says is necessary by Aug. 2 to avoid a default.

Italy Discussion

Finance ministers from countries that use the euro were to discuss Italy at their monthly gathering today, Austria’s Finance Minister Maria Fekter said before the start of the meeting.

Her German counterpart, Wolfgang Schaeuble, said “there’s no discussion whatsoever” of doubling the European Union’s rescue facility after Die Welt reported yesterday that the European Central Bank is seeking to increase the pool to 1.5 trillion euros ($2.11 trillion) to cover an Italian crisis.

The S&P/TSX Energy Index retreated as crude oil futures fell to a one-week low in New York.

Suncor, Imperial Oil

Canadian Natural dropped 2.5 percent to C$39.37. Suncor Energy Inc. (SU), the country’s largest oil and gas producer, declined 2.5 percent to C$38.30. Imperial Oil Ltd. (IMO), Canada’s second-biggest energy company by revenue, lost 3 percent to C$44.34. Oil-sands developer BlackPearl Resources Inc. (PXX) slid 5.9 percent to C$6.26.

All major base metals traded on the London Metal Exchange retreated after Chinese consumer and producer prices for June surpassed most economist forecasts in Bloomberg surveys. China is the world’s biggest user of industrial metals.

First Quantum decreased 4.1 percent to C$130.60. Quadra FNX Mining Ltd. (QUX), which produces base metals in Canada, the U.S. and Chile, retreated 4 percent to C$14.09.

Copper Fox Metals Inc. (CUU), which is developing a deposit in British Columbia, sank 14 percent to C$1.84 after releasing a resource estimate.

Peregrine Metals Ltd., which is developing a copper and gold deposit in Argentina, soared 221 percent to C$2.60 after agreeing to be bought by Stillwater Mining Co. in a deal the companies valued at C$3.16 a share.

Fifth Decline

The S&P/TSX Financials Index declined for a fifth day. Manulife lost 3.3 percent to C$16.31. Sun Life Financial Inc. (SLF), Canada’s third-biggest insurer, decreased 2.5 percent to C$28.22. Royal Bank of Canada (RY), the country’s largest lender by assets, slipped 0.9 percent to C$54.03.

Financial news and information provider Thomson Reuters Corp. (TRI) dropped 0.9 percent to a 17-month low of C$35.29.

Directory publisher Yellow Media Inc. (YLO) slumped 6.3 percent to C$2.25, adding to its 11 percent plunge from July 8, when Scott Cuthbertson, an analyst at Toronto-Dominion Bank, cut his rating on the stock to “reduce” from “hold.” The shares have tumbled 64 percent this year.

Sino-Forest Corp. (TRE), the forestry company fighting a short seller’s assertions of financial manipulation, retreated 8.5 percent to C$4.31. Moody’s Investors Service said the company and 60 others that operate in China are triggering “red flags” relating to corporate governance or accounting risks.

Sino-Forest has plunged 76 percent since June 1, the day before Muddy Waters LLC said its stated land holdings do not match Chinese city records.

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

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

Press spacebar to pause and continue. Press esc to stop.

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.