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Canada Stocks Decline Amid Disappointing U.S. Economic Reports

Canadian stocks fell for the sixth time in seven days as data showed U.S. business activity unexpectedly contracted for the first time in three years.

Bank of Nova Scotia fell 1.5 percent. Canadian Natural Resources Inc. lost 1.7 percent. Energy companies and lenders contributed most to declines. Research In Motion Ltd. (RIM) soared 8.1 percent after reporting better-than-expected results.

The Standard & Poor’s/TSX Composite Index (SPTSX) fell 21.39 points, or 0.2 percent, to 12,317.46 in Toronto, paring earlier losses of as much as 0.7 percent after Spain released the results of stress tests on its banking system. The benchmark Canadian gauge advanced 3.1 percent this month, its biggest gain since January.

“U.S. economic numbers are mildy positive, then mildly negative,” said Paul Harris, portfolio manager with Avenue Investment Management in Toronto. The firm manages about C$275 million ($279 million). “They keep telling us they’re not going to be growing quickly and that weighs on the marketplace. With Europe, it’s one step forward and two steps back. The issues are not being solved, so people are constantly worried.”

The Institute for Supply Management-Chicago Inc. said today its business barometer fell to 49.7 this month from 53 in August. A reading of 50 is the dividing line between expansion and contraction. Consumer spending in the U.S. barely rose in August after adjusting for inflation, showing the economic expansion is struggling to gain momentum.

Spain’s banks have a combined capital shortfall of 59.3 billion euros ($76.3 billion), less than previously estimated, according to a stress test designed to remove doubts about a financial industry pummeled by real estate losses. Spain commissioned the independent stress test, conducted by management consultants Oliver Wyman, as part of the conditions agreed in July for a European bailout of as much as 100 billion euros for its banking system.

Financials Slump

The S&P/TSX Energy Index retreated 0.4 percent as six of 10 industries on the Toronto Stock Exchange declined.

Scotiabank fell 1.5 percent to C$53.92 and Royal Bank of Canada, the nation’s largest lender, slipped 0.3 percent to C$56.54.

Canadian Natural Resources fell 1.7 percent to C$30.33 and Legacy Oil + Gas Inc. (LEG) lost 3.3 percent to C$6.72. Oil fell for a second week on concerns that slower U.S. economic growth will reduce demand. Crude for November delivery rose 0.4 percent to settle at $92.19 a barrel in New York. Prices dropped 0.8 percent this week and 4.4 percent for the month.

Finning International Inc. (FTT), which sells, finances and services Caterpillar equipment, fell 2.9 percent to C$23.84 after analysts with Bank of America Merrill Lynch reinstated coverage of the company with an underperform rating and a C$24 price target.

RIM Soars

RIM soared 8.1 percent to C$7.52 on the Toronto Stock Exchange after the BlackBerry smartphone maker beat analyst estimates with its second-quarter results. The Waterloo, Ontario-based company sold 7.4 million smartphones, about 500,000 more than analysts had estimated.

Richard Tse, analyst with Cormark Securities Inc., upgraded the stock to a buy from market perform, with a $12 price target. “The risk right now is not owning it ahead of a potential turnaround,” he said in a note today.

Osisko Mining Corp. (OSK), which holds interests in the Malartic gold deposit in Quebec, added 3.5 percent to C$9.74 after Dan Rollins, analyst with RBC Capital Markets, raised his rating to outperform from sector perform, and increased his one-year price target to C$13 from C$10.

To contact the reporter on this story: Eric Lam in Toronto at elam87@bloomberg.net

To contact the editor responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net

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