Canadian Stocks Fall as U.S. Lawmakers Argue Over Debt Ceiling

Canadian stocks fell for a second day as financial companies dropped after President Barack Obama warned of a “deep economic crisis” if lawmakers there can’t agree on a plan to raise the debt ceiling by Aug. 2.

Toronto-Dominion Bank (TD), Canada’s second-largest lender by assets, decreased 1.9 percent. Rogers Communications Inc. (RCI/B), Canada’s largest wireless carrier, retreated 3.5 percent after reporting a decline in profits from its wireless unit. Canadian National Railway Co. (CNR), the country’s biggest railroad, lost 4.2 percent after an analyst at Dahlman Rose & Co. cut his rating on the shares.

“We have this issue in the U.S. that seems to be hanging around for a while,” Sadiq Adatia, chief investment officer at Sun Life Global Investments in Toronto, said in a telephone interview. The unit of Sun Life Financial Inc. manages C$2.3 billion ($2.4 billion) for clients. “Canada’s looking over its shoulder at the U.S. If they have an issue down there, it’s going to affect us as well.”

The Standard & Poor’s/TSX Composite Index dropped 135.39 points, or 1 percent, to 13,300.56.

The S&P/TSX rose 1 percent this month through yesterday as the European debt crisis and U.S. debt-ceiling deadlock led to gains in gold stocks and drops in financial companies’ shares. The S&P/TSX Financials Index, the biggest part of the equity benchmark, is on pace to fall for a fourth-straight month for the first time since February 2009.

Debt Battle

Canada’s six largest banks each retreated as Obama battled with U.S. Republicans over how to cut the country’s debt. TD decreased 1.9 percent to C$78.68. Bank of Nova Scotia (BNS), Canada’s third-biggest lender by assets, fell 2.1 percent, the most in 11 months, to C$55.91. Manulife Financial Corp. (MFC), North America’s fourth-largest insurer, slipped 1.4 percent to C$15.60.

S&P/TSX energy stocks retreated for the first time in six days as natural gas futures dropped. Canadian Natural Resources Ltd. (CNQ), Canada’s second-largest energy company by market value, lost 1.9 percent to C$40.62. TransCanada Corp. (TRP), the owner of Canada’s largest pipeline system, retreated 1.3 percent to C$40.25. Canadian Oil Sands Ltd., the largest owner of the Syncrude project, declined 2.4 percent to C$27.57.

Wireless Operations

Rogers dropped 3.5 percent, the most since October, to C$36.50. Profits excluding certain items from its wireless operations declined more than most analysts had estimated, Maher Yaghi, an analyst at Desjardins Securities, said in a note to clients.

CN lost 4.2 percent, the most in two years, to C$72.05 after reporting second-quarter earnings excluding certain items that surpassed the average analyst estimate in a Bloomberg survey by 0.6 percent. The profit trailed the forecast of Jason H. Seidl, an analyst at Dahlman Rose, by 3.1 percent. He cut his rating on CN to “hold” from “buy,” citing its share price and economic uncertainty. The shares had rallied 13 percent this year through yesterday.

Inmet Mining Corp. (IMN), which produces copper and zinc in Turkey, Spain and Finland, plunged 4.9 percent to C$66.60. The company’s second-quarter profit trailed the average estimate in a Bloomberg survey by 30 percent, excluding certain items. Orest Wowkodaw, an analyst at Canaccord Financial Inc., cut his 12- month price estimate on the shares to C$87 from C$90.

Sino-Forest

Sino-Forest Corp. (TRE), the forestry company fighting a short seller’s assertions of financial manipulation, rose 12 percent to C$7.12. The shares have doubled since July 18, the day before New Zealand billionaire Richard Chandler increased his stake in the company.

Cardiome Pharma Corp. (COM), which develops heart drugs, soared 28 percent to C$5.27 after saying it will transfer the North American development and commercialization rights for vernakalant (IV), also known as Kynapid, to Merck & Co. In a note to clients, Neil Maruoka, an analyst at Canaccord Financial Inc., raised his rating on the shares to “buy” from “hold.”

“The addition of Cardiome’s long-standing partner to this program provides new clarity of the potential path to approval for this drug,” Maruoka wrote in a note to clients.

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

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.