Canadian Stocks Fall on Concern Rating Cuts Will Worsen Crisis

Canadian stocks fell, paring a weekly gain, as the U.S. dollar climbed and fuels and metals dropped on concern that lower credit ratings will worsen Europe’s sovereign debt crisis.

Canadian Natural Resources Ltd. (CNQ), the country’s second- biggest energy company by market value, declined 1.2 percent as crude oil retreated to a three-week low. Teck Resources Ltd. (TCK/B), Canada’s largest base-metals and coal producer, decreased 1.6 percent as copper retreated. Canadian National Railway Co. (CNR), the country’s largest railroad, lost 1.3 percent after an analyst at JPMorgan Chase & Co. cut his rating on the shares.

The S&P/TSX Composite Index (SPTSX) slid 43.26 points, or 0.4 percent, to 12,231.06 in Toronto. The 0.4 percent gain since Jan. 6 extends the index’s streak of weekly gains to four, the longest since April.

“People feel there’s going to be a recession in Europe,” David Baskin, president of Baskin Financial Services Inc. in Toronto, said in a telephone interview. The firm manages about C$440 million ($429 million). “The Greeks still can’t get their act together. People are still edgy about it.”

The index increased 6.4 percent from Dec. 19 to yesterday as economic data indicating growth in the U.S. and speculation China may ease monetary policy overshadowed the European debt crisis. The S&P/TSX fell nine of the 10 months ending in December as concern that the crisis would limit global economic growth weakened shares of commodity producers.

Ratings Cut

Stocks slumped as European government officials said S&P was poised to cut some sovereign debt ratings in the region. After the close of trading in the U.S. and Canada, S&P said it had lowered ratings on France, Cyprus, Italy, Portugal and Spain while affirming those of seven countries including Germany.

Stocks extended their losses after the Institute of International Finance, which represents Greece’s bank creditors, said talks with the government have halted after failing to produce a “constructive consolidated response by all parties.”

The euro completed its sixth-straight weekly retreat against the U.S. dollar, the longest streak since February 2010.

The S&P/TSX Energy Index (STENRS) dropped for a third day. Canadian Natural declined 1.2 percent to C$37.91.

Lower Gas Prices

Birchcliff Energy Ltd. (BIR), a western Canadian oil and gas producer, decreased 3.8 percent to C$12.10 after Kurt Molnar, an analyst at Stifel Financial Corp., cut his rating on the stock to “hold” from “buy.” Molnar cited lower natural gas prices in a note to clients. Calfrac Well Services Ltd. dropped 7.6 percent, the biggest decline since Oct. 3, to C$26.49.

Raw-materials companies in the S&P/TSX retreated as base and precious metals fell. Teck dropped 1.6 percent to C$39.35 as copper futures declined from a 10-week high.

A gauge of gold stocks in the S&P/TSX fell for the first time in five days. Barrick Gold Corp. (ABX), the world’s largest producer, lost 0.4 percent to C$49.44. AuRico Gold Inc., which operates in Mexico, slumped 1.6 percent to C$8.77 after saying “adverse ground conditions” at its Ocampo mine reduced production.

Lake Shore Gold Corp. retreated 8.6 percent to C$1.39, the biggest drop in more than a month. The company forecast 2012 production of as much as 100,000 ounces of gold, 30 percent below Bank of Montreal’s estimate. Ivanhoe Mines Ltd. rose 5.3 percent to C$20.30, the highest price in a month.

Fertilizer Producers

Agrium Inc. rose 4.4 percent to C$79.13, while Potash Corp. of Saskatchewan gained 3.6 percent to C$45.80 as natural gas fell for a fifth day and the Rosario Cereals Exchange said corn farmers in Argentina will produce “significantly” less than forecast in the current growing season.

The biggest Canadian fertilizer producers will benefit from lower gas prices and higher demand for grains from South America, said Don Carson, a New York-based analyst at Susquehanna Financial Group.

The S&P/TSX Financials Index (STFINL) declined for the first time in a week after JPMorgan reported fourth-quarter revenue that trailed the average analyst estimate in a Bloomberg survey. Royal Bank of Canada (RY), the country’s largest lender by assets, slipped 1.3 percent to C$52.09.

Canadian National decreased 1.3 percent to C$78.25 after Thomas R. Wadewitz, an analyst at JPMorgan, cut his rating on the shares to “underweight” from “neutral.” CN is likely to raise prices less quickly than its U.S. peers, Wadewitz wrote in a note to clients.

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

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