Canadian Stocks Fall as European Sovereign Debt Concerns Spread

Canadian stocks fell for a third day, led by financial and energy companies, after a state election setback for German Chancellor Angela Merkel’s party fueled concern that the European debt crisis will worsen.

Royal Bank of Canada (RY), Canada’s largest lender by assets, dropped 1.5 percent as Greek bond yields climbed to a euro-era record. Suncor Energy Inc. (SU), the country’s biggest oil and gas producer, slid 2.4 percent as crude futures slipped 0.5 percent in New York. Barrick Gold Corp., the world’s largest producer of the metal, advanced 2.3 percent.

The Standard & Poor’s/TSX Composite Index decreased 83.87 points, or 0.7 percent, to 12,518.54.

“It’s how long do the Germans want to continue bailing out the Greeks or the Portuguese?” Philip Petursson, managing director of the Portfolio Advisory Group at Manulife Financial Corp. (MFC)’s asset-management unit in Toronto, said in a telephone interview. The unit oversees $217 billion. “The markets just want to know someone is in control of the situation, and apparently, now no one is in control, whether it’s the U.S. economic situation, the U.S. debt situation, European debt, the global economy.”

The index slipped 1.3 percent during the previous two days, including a 0.7 percent drop on Sept. 2 after a U.S. government report showed employers added no jobs in August. The Canadian stock benchmark has fallen 6.9 percent this year as energy, base-metals and insurance stocks have dropped on concern over the European debt crisis and signs of a slowing global recovery.

German Election

Bond yields in the most-heavily indebted European Union countries surged after Merkel’s party suffered its fifth election loss this year on Sept. 4 as she failed to sway voters in her home state with a campaign based on her handling of the euro-area debt crisis. Canadian markets were closed yesterday for the Labor Day holiday.

S&P/TSX financial companies declined after rallying 2.2 percent last week. Royal Bank lost 1.5 percent to C$48.22. Toronto-Dominion Bank (TD), its biggest domestic rival, slipped 0.8 percent to C$76.56. Bank of Nova Scotia (BNS), Canada’s third-largest lender by assets, decreased 1.4 percent to C$52.30.

Crude oil retreated after sliding 2.8 percent Sept. 2. Suncor fell 2.4 percent to C$29.28. Bankers Petroleum Ltd. (BNK), which operates in Albania, slumped 5.5 percent to C$4.64.

Encana Corp. (ECA), the country’s largest natural gas producer, tumbled 4.7 percent to C$23.37 after Andrew Potter, an analyst at Canadian Imperial Bank of Commerce, cut his price estimate on its U.S.-traded shares to $32 from $38.

Spinoff Plans

Oil and gas explorer Open Range Energy Corp. (ONR) soared 40 percent to a record C$8.95 after saying it will spin off its services and supply business into a new company.

The S&P/TSX Gold Index closed at a record high as the metal rallied as much as 2.5 percent before erasing its gains.

Barrick Gold Corp. (ABX), the world’s largest gold producer, gained 2.3 percent to C$53.15 after Peter Ward, an analyst at Jefferies Group Inc., began coverage of the company with a “buy” rating. In a note to clients, Ward cited the company’s July purchase of Equinox Minerals Ltd.

European Goldfields Ltd. (EGU), which operates in southern Europe, advanced 5.1 percent to C$12.66. Centerra Gold Inc. (CG), which mines in Kyrgyzstan and Mongolia, jumped 10 percent to a record C$23.12 after being featured in a technical-analysis story in the Globe & Mail.

Reporting Tomorrow

Harry Winston Diamond Corp. (HW), the co-owner of the Diavik mine featured in the TV series “Ice Road Truckers,” increased 6.4 percent to C$15.03. The company is scheduled to report second-quarter financial results tomorrow.

First Quantum Minerals Ltd. (FM), Canada’s second-largest publicly traded copper producer, retreated 3 percent to C$22.03 a day after Anindya Mohinta, an analyst at Citigroup Inc., cut his rating on the company to “hold” from “buy.”

SNC-Lavalin Group Inc. (SNC) slumped 4.5 percent to C$48.57. Police raided one of the construction company’s Canadian offices as part of probe related to Bangladeshi government contracts, according to the Canadian Press.

BlackBerry maker Research In Motion Ltd. (RIM) climbed 3.5 percent to C$30.63. Gus Papageorgiou, an analyst at Scotiabank, raised his rating on the shares to “sector outperform” from “sector perform” in a note dated yesterday.

Directory publisher Yellow Media Inc. (YLO) plunged 12 percent to 79 Canadian cents after saying its chief financial officer, Christian M. Paupe, will leave the company. Shares of the Montreal-based company have sunk 87 percent this year.

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

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