Canadian Stocks Rally Most in a Month Amid U.S. Budget Optimism

Canadian stocks rallied the most in a month as commodity producers gained amid concern over Middle East unrest and optimism a deal can be reached to avoid automatic U.S. spending cuts and tax increases.

Agnico-Eagle Mines Ltd. (AEM) advanced 5.8 percent as analysts at RBC Capital Markets raised the stock’s rating after a recent drop in the share price. Suncor Energy Inc. (SU) climbed 3.3 percent as oil rallied on concern Israel’s continued attack on Gaza may disrupt supply. Goldcorp Inc. (G) rose 2.2 percent as a weaker dollar pushed investors to seek the metal as an alternative investment.

The Standard & Poor’s/TSX Composite Index added 162.68 points, or 1.4 percent, to 12,040.40 in Toronto, the biggest gain since Oct. 16. The Canadian equity benchmark gauge is up 0.7 percent this year after erasing its 2012 gain last week. Trading volume was 8.4 percent higher than the 30-day average.

“Markets were vastly oversold last week,” Keith Richards, a fund manager with ValueTrend Wealth Management, said in a phone interview from Barrie, Ontario. His firm manages about C$100 million ($100 million). “Now, we’re seeing commodities moving and the fiscal cliff talks going on, it’s plain as daylight that the markets were going to rally. They were ripe for it.”

The S&P/TSX has fallen 3.1 percent this month amid concern that U.S. President Barack Obama and lawmakers may not reach a budget agreement in time to prevent spending cuts and tax increases from kicking in next year. Obama expressed confidence yesterday that he will reach a deal to avoid a $607 billion deficit-cutting package known as the fiscal cliff.

Commodities Rally

Gold and oil rallied as Israel’s Defense Minister Ehud Barak said the army was prepared to invade the Gaza Strip for the first time in almost four years. Energy and gold mining companies contributed most to the advance on the S&P/TSX as all 10 industries gained.

Agnico-Eagle rose 5.8 percent to C$55.20 after Stephen Walker, an analyst with RBC Capital Markets, raised his rating on the gold miner to outperform from sector perform while maintaining a $69 price target.

“After the recent pullback, we believe Agnico’s shares are attractively valued,” he said in a note to clients. Since touching a high this year on Nov. 8, the shares fell 8.5 percent over the following week.

Barrick Gold Corp. (ABX), the world’s largest producer of the metal, rose 1.2 percent to C$34.19 and Goldcorp, the world’s second-largest producer, added 2.2 percent to C$40.61. Gold for December delivery gained 1.1 percent to settle at $1,734.40 an ounce in New York.

Suncor Gains

Suncor, Canada’s largest oil producer, gained 3.3 percent to C$32.59 and Cenovus Energy Inc. (CVE) added 1.9 percent to C$32.99 as crude rose to the highest level in four weeks. Crude for January delivery increased 2.7 percent to $89.28 a barrel in New York, the biggest gain since Oct. 19. Futures are up 3.5 percent this month.

Agrium Inc. (AGU) increased 3.3 percent to C$101.01, its biggest gain since June, after hedge fund Jana Partners LLC, the fertilizer company’s largest shareholder, raised its stake to more than 6 percent and chose five nominees in preparation for a fight to dislodge the current board.

Jana is pressing Agrium to spin off its farm-supply retail network from its wholesale fertilizer arm.

Astral Media Inc. (ACM/A) climbed 3.1 percent to C$45.78. The Montreal-based media company has agreed to an amended takeover plan from BCE Inc. (BCE), Canada’s largest telecommunications company, after their initial proposal was blocked by regulators. The C$3.38 billion proposal addresses regulatory concerns, the companies said in a statement today.

Augusta Resource Corp. (AZC) fell 6.5 percent to C$2.44 after the company said permitting for its proposed Rosemont copper project near Tuscon, Arizona, is not expected until the first quarter of next year. Joseph Gallucci, an equity analyst with Dundee Securities Corp., lowered his rating on the stock to sell from neutral.

To contact the reporters on this story: Inyoung Hwang in New York at ihwang7@bloomberg.net; 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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