Canada Stocks Rise as Banks Gain on Europe Debt Crisis Optimism

Canadian stocks advanced the most in more than a month as banks and commodity futures gained on speculation Europe will act to stem its debt crisis.

Royal Bank of Canada (RY), the country’s largest lender by assets, advanced 4.1 percent amid rumors that the European Central Bank would create a European version of the U.S.’s Troubled Asset Relief Program, cut interest rates and restart covered-bond purchases. Ivanhoe Mines, which is building a copper and gold mine in Mongolia with Rio Tinto Group, plunged 9.2 percent after the government of Mongolia sought to increase its stake in the project. Suncor Energy Inc. rose 4.5 percent after natural gas futures advanced as warmer-than-normal weather increased demand for the power-plant fuel.

The Standard & Poor’s/TSX Composite Index gained 244.32 points, or 2.1 percent, to 11,707.19, the most since Aug. 23. The index swung between gains and losses before rallying after 2:30 p.m.

“The market didn’t really digest that rumor until this afternoon when it finally tuned into the sense of urgency in Europe,” Barry Schwartz, a money manager at Baskin Financial Services Inc., said in a telephone interview. The firm oversees C$420 million ($410 million).

Canada’s stock benchmark slumped 6.5 percent last week, the most since March 2009, as economic data from Europe, North America and China were more indicative of a slowdown than most economists had forecast in Bloomberg surveys. Crude oil declined 9.2 percent while gold sank 9.6 percent and silver plunged 26 percent as investors sold commodities to cover losses in other assets. Energy and raw-materials companies make up 47 percent of Canadian stocks by market value, according to Bloomberg data.

12-Month Loans

Canadian banks advanced amid speculation that the European Central Bank may restart covered-bond purchases next week and cut interest rates next month. The reintroduction of 12-month loans to banks will also be discussed at the ECB’s Oct. 6 policy meeting, a euro-region central bank official said, who spoke on condition of anonymity because the information is confidential.

Royal Bank of Canada climbed 4.1 percent to C$47.98. Toronto-Dominion Bank (TD), the country’s second-largest lender by assets, advanced 4.1 percent to C$73.85. Bank of Montreal (BMO), Canada’s fourth-largest lender by assets, rose 4.2 percent to C$58.29.

The S&P/TSX Energy Index rose 2.7 percent to end a six-day drop as crude futures advanced.

Natural Gas, Oil

Suncor Energy, the country’s biggest oil and gas producer, climbed 4.5 percent to C$27.66. Canadian Natural Resources Ltd., the country’s second-biggest energy company by market value, jumped 1.7 percent to C$31.55. Talisman Energy Inc., an oil and gas producer with operations in North America, gained 2.5 percent to C$13.69.

Gold fell, capping the biggest three-session slump since 1983, and silver closed below $30 an ounce on investor sales to cover losses in other assets.

Extorre Gold, which explores in Argentina, lost 6.1 percent to C$7.30. Detour Gold Corp. (DGC), the company exploring for gold in northern Ontario, decreased 2.7 percent to C$31.17.

Tahoe Resources slid for a third day, falling 8 percent to C$15.57. Michael Gray, an analyst at Macquarie Group Ltd., lowered his 12 month price estimate on the shares to C$23 from C$27.

Ivanhoe Mines erased 9.2 percent to C$15. The company is half-way through completion on a project in Mongolia that will be one of the world’s five-biggest copper mines, according to Rio Tinto Group.

The government of the Asian country is seeking to boost its stake in the mine to 50 percent from 34 percent, Dashdorj Zorigt, Mongolia’s minerals minister, told reporters at Oyu Tolgoi yesterday. Such an increase is permitted only after 30 years, according to a summary of the $10 billion project agreement from London-based Rio, which said the new proposal may alarm foreign investors.

To contact the reporter on this story: Kaitlyn Kiernan in New York at kkiernan2@bloomberg.net

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

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