Canada Stocks Rise as Europe Debt Concern Diminishes

(Corrects analyst’s name in 14th paragraph in story that ran July 20.)

Canadian stocks rose for a second day as banks gained as surging European bonds signaled concern over debt is easing and precious-metals producers rallied as the U.S. dollar slipped.

Canadian National Railway Co. (CNR), the country’s largest railroad, declined 1.3 percent after an analyst at Raymond James Financial Inc. lowered his rating on the company. Zarlink Semiconductor Inc. (ZL) soared 51 percent after Microsemi Corp. said it offered to buy the company. Royal Bank of Canada (RY), the country’s largest lender by assets, increased 0.9 percent as investors speculated progress is being made to address the U.S. budget standoff and European debt crisis.

The Standard & Poor’s/TSX Composite Index advanced 7.91 points, or 0.1 percent, to 13,340.83.

“The potential resolution of both of these certainly paves the way for more risk-taking,” Robert “Hap” Sneddon, president of money manager CastleMoore Inc. in Oakville, Ontario and the Canadian Society of Technical Analysts, said in a telephone interview. “We had gotten pretty oversold and were due for some sort of a rally.”

The Canadian stock benchmark lost 2.9 percent in the three months ending yesterday as investors speculated the European debt crisis will spread beyond Greece and U.S. lawmakers failed to reach a deal to raise the country’s debt ceiling. Oil futures tumbled 9.9 percent during the period. Energy companies make up 27 percent of Canadian stocks by market value, according to Bloomberg data.

U.S. Debt Plan

U.S. President Barack Obama yesterday praised a $3.7 trillion debt-cutting plan proposed by a bipartisan group of senators. The deal faces opposition from Republicans in the House of Representatives opposed to tax increases. The government will hit its debt limit if lawmakers don’t raise the debt ceiling by Aug. 2, the Treasury Department says.

Bond yields fell in Spain, Italy, Greece and Portugal after a person close to the talks said European officials are considering steps previously rejected by Germany to prevent the spread of the debt crisis. The person declined to be named because negotiations are in progress.

The S&P/TSX Banks Index climbed for a second day. Royal Bank increased 0.9 percent to C$53.56. Bank of Montreal (BMO), the fourth-biggest lender by assets, rose 0.6 percent to C$60.87. Regional lender Canadian Western Bank (CWB) gained 1.1 percent to C$30.78.

Dollar Falls

Precious-metals producers rose as the U.S. dollar fell against all 16 other major currencies. Barrick Gold Corp., the world’s largest gold producer, gained 1.1 percent to $46.71 as the metal erased its losses for the day in electronic trading. Silver Wheaton Corp. (SLW), Canada’s fourth-largest precious-metals company by market value, advanced 2.1 percent to C$37.36.

Lake Shore Gold Corp. (LSG), which operates in Ontario, sank 24 percent, the most in nine years, to C$2.16 to extend its two-day plunge to 36 percent. At least five analysts have cut their ratings on the shares since Lake Shore reduced its production forecast yesterday.

Rogers Communications Inc. (RCI/B), Canada’s largest wireless carrier, decreased 2 percent to C$37.36. Investors should switch to competitor Telus Corp., Dvai Ghose, an analyst at Canaccord Financial Inc., said in a note to clients.

Ghose cited Rogers’ higher valuation based on enterprise value and earnings before interest, taxes, depreciation and amortization. In the first quarter, Rogers had a higher price according to that gauge than Telus for the first time since at least 1997. The analyst also pointed out Telus’s higher dividend yield. Rogers yields 3.8 percent and Telus 4.1 percent.

Canadian National

Canadian National fell 1.3 percent to C$73.53 after Steve Hansen, an analyst at Raymond James, cut the shares to “market perform” from “outperform.” In a note to clients, Hansen cited the stock’s recent gains. CN increased 12 percent this year through yesterday.

Canadian Pacific Railway Ltd. (CP), the country’s second-largest railroad, dropped 1.7 percent to C$58.58 as Hansen cut his price estimate on the shares.

Energy companies climbed after the U.S. reported a bigger weekly drop in crude inventories than all 15 analysts in a Bloomberg survey had forecast. Canadian Natural Resources Ltd. (CNQ), Canada’s second-biggest energy company by market value, rose 0.5 percent to C$40.67. Oilfield-services provider Ensign Energy Services Inc. (ESI) advanced 5.8 percent to C$20.51 after agreeing to buy the land drilling division of Rowan Cos. in a deal Ensign valued at $510 million.

Athabasca Oil Sands Corp. (ATH), PetroChina Co.’s partner in oil- sands development, rallied 3.5 percent to C$15.46 after Cnooc Ltd., China’s biggest offshore oil producer, agreed to buy Opti Canada Inc. for $2.1 billion and pledged to buy more energy assets globally. Opti, Nexen Inc.’s partner in the Long Lake project, filed for bankruptcy protection July 13. Nexen gained 1.9 percent to C$23.21.

Zarlink jumped 51 percent, the most in at least 27 years, to C$3.60 after Microsemi said the Ottawa-based company had rejected a takeover offer. Microsemi began an unsolicited bid of C$3.35 a share today.

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

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.