Canada Stocks Gain on German Confidence, U.S. Budget Optimism

Canadian stocks rose for a third day after a measure of German investor confidence jumped and speculation grew that progress was being made in budget negotiations in the U.S.

Precision Drilling Corp. (PD) rose 6.6 percent after the company cut its capital spending next year and announced a dividend. MEG Energy Corp. fell 4.2 percent as analysts with FirstEnergy Capital Corp. cut the stock’s rating after the oil and gas producer announced its 2013 budget. Petrobank Energy & Resources Ltd. and Canadian Natural Resources Ltd. gained at least 1.3 percent.

The Standard & Poor’s/TSX Composite Index (SPTSX) advanced 70.66 points, or 0.6 percent, to 12,301.13 at 2:27 p.m. in Toronto. The equity gauge has gained 2.9 percent this year.

“There’s rising hope for the fiscal cliff talks and rising hope in Europe after yesterday everyone was worried about Italy,” said Keith Richards, a fund manager with ValueTrend Wealth Management, referring to Italian Prime Minister Mario Monti announcing on Dec. 9 his plan to resign. The firm, based in Barrie, Ontario, manages about C$100 million. “Everything is leveraged through the U.S., so if it’s good for Europe it’s really good for the States and somewhat good for Canada.”

Lawmakers returned to Washington today amid a potential thaw in the U.S. fiscal policy dispute. U.S. House Speaker John Boehner said on the House floor today in Washington he is “hopeful” policymakers will reach a budget agreement before the end of the year, while calling for U.S. President Barack Obama to offer proposed spending cuts as part of a compromise.

German Confidence

German investor confidence jumped more than economists forecast to a seven-month high in December on speculation Europe’s largest economy will gather momentum next year. The ZEW Center for European Economic Research’s index of German investor confidence jumped to 6.9 from minus 15.7 in November.

Bank of Nova Scotia rose 0.8 percent to C$56.39 and Royal Bank of Canada, the nation’s largest lender, added 0.8 percent to C$58.97 as bank stocks contributed most to gains in the S&P/TSX. Trading volume is 19 percent higher than the 30-day average at this time of the day.

Precision Drilling climbed 6.6 percent to C$8.22 after it said yesterday it will begin paying a quarterly dividend of 5 Canadian cents in the fourth quarter of 2012, payable Dec. 28. The Calgary-based driller has also cut its capital spending in 2013 to C$485 million from about C$920 million in 2012.

Petrobank rose 2.8 percent to C$11.93 and Canadian Natural Resources gained 1.3 percent to C$28.43 as crude swung between gains and losses. Crude for January delivery was unchanged at $85.56 a barrel in New York, erasing earlier gains of as much as 1 percent.

Tool Kit

Research In Motion Ltd. (RIM), which is preparing to unveil its BlackBerry 10 smartphone next February, rose 5 percent to C$12.33. The Waterloo, Ontario-based company released the “gold” build of its BlackBerry 10 developer tool kit, which includes the final tools and components necessary for developers to design applications for the smartphones.

Ivanhoe Energy Inc. (IE), a heavy-oil development and production company, soared 14 percent to 87 Canadian cents for a fourth day of gains. The Vancouver-based company is set to present its strategy and current activities at an investment conference in Toronto today.

MEG Energy slipped 4.2 percent to C$32.24 after the company announced its 2013 budget yesterday and a plan to sell C$800 million in shares.

Michael Dunn, analyst with FirstEnergy, said the company’s production guidance of 32,000 to 35,000 barrels a day was in line with his expectations, but capital spending of C$1.9 billion was “materially higher” than he estimated. He has lowered his rating for MEG to market perform from outperform, while also cutting his price target to C$41 from C$47.

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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