Canada Stocks Drop Most Since June on Concern Over China

Canadian stocks fell a second day, with the benchmark index dropping the most in seven months, as concern that a slowdown in China will hurt economic growth triggered a rout in global equities.

Thompson Creek Metals Co. and HudBay Minerals Inc. sank at least 4 percent to lead a gauge of mining stocks lower. Air Canada dropped 3.3 percent as industrial shares declined. Open Text Corp. soared 11 percent to an all-time high after saying it plans to spend another $3 billion on deals.

The Standard & Poor’s/TSX Composite Index (SPTSX) decreased 215.18 points, or 1.5 percent, to 13,717.79 at 4 p.m. in Toronto. The gauge lost 1.2 percent this week after closing Jan. 20 at the highest since April 2011. Trading in S&P/TSX stocks was 16 percent higher than the 30-day average at the close.

“People are concerned that if China starts to weaken they should worry about commodity prices,” Irwin Michael, a fund manager at ABC Funds in Toronto, said in a phone interview. His firm manages about C$850 million ($768 million). “The market was looking for an excuse to check back and they found it with PMI. The China number is just a smokescreen and we believe that the economic numbers will start to improve again.”

Emerging-market shares extended the worst start to a year since 2009, while a measure of European stocks tumbled the most since June and U.S. equities retreated a to a one-month low. The MSCI All-Country World Index declined 1.9 percent, the biggest drop since June.

China Output

Data yesterday from China indicated factory output may contract this month, based on a preliminary Purchasing Managers’ Index from HSBC Holdings Plc and Markit Economics. Prices for industrial metals sank as the data fell below economists’ forecasts. China is the world’s biggest consumer of the metals such as copper and Canada’s second-largest trading partner.

Copper tumbled to a one-month low in New York, while zinc reached a two-week low in London.

Investors also assessed a report from Canada today that showed the nation’s inflation rate last month accelerated less than forecast, reinforcing policy-maker warnings that gains will be sluggish.

Eight of the 10 main industries in the index retreated. Producers of raw materials plunged 1.9 percent, while energy companies dropped 1.3 percent.

Mining Stocks

The S&P/TSX Diversified Metals & Mining Index dropped 2 percent for a fourth straight decline, as nine of 10 members in the gauge retreated. Thompson Creek Metals Co. fell 6.7 percent to C$2.80. HudBay Minerals declined 4 percent to C$8.93 and Capstone Mining Corp. slipped 3.2 percent to C$3.01.

Industrial companies in the S&P/TSX dropped 2.6 percent as Air Canada’s Class B shares decreased 3.3 percent to C$9.23, extending losses for the carrier to almost 5 percent in two trading sessions.

The stock rallied 8 percent on Jan. 22 after the company said its Canadian pension plans are estimated to be in a small surplus position as of Jan. 1.

Open Text soared 11 percent to a record C$110.82. Chief Executive Officer Mark Barrenechea said the business software company is ready to spend $3 billion on acquisitions over the next five years.

Open Text bought GXS Group Inc., a seller of cloud-based software integration services, for $1.17 billion on Jan. 16. Yesterday, Waterloo, Ontario-based Open Text reported profit and sales that beat analysts’ average estimates and announced a 2-for-1 stock split.

To contact the reporter on this story: Callie Bost in New York at cbost2@bloomberg.net

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

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