Canadian Stocks Fall as European Sovereign Debt Crisis Worsens

Canadian stocks fell for a fourth day, led by banks and commodity producers, as concern the European debt crisis is worsening overshadowed corporate earnings that beat analyst estimates.

Royal Bank of Canada, the country’s biggest bank, dropped 2.7 percent as lenders declined the most since October. Barrick Gold Corp., the world’s largest producer of the metal, climbed 4.5 percent as gold futures rallied to the highest since Dec. 3. Magna International Inc., the country’s biggest auto parts maker, surged 14 percent after the family of Chairman Frank Stronach agreed to cede voting control of the company in a deal valued at $863 million.

The Standard & Poor’s/TSX Composite Index declined 32.7 points, or 0.3 percent, to 11,842.43. The index last fell four straight days in December.

“If you look at bonds for Portugal, Greece, Spain, the yields keep going up. If we believe the crisis is over, the bonds should go down,” said Paul Ma, who manages C$500 million ($478 million) as a money manager at McLean & Partners in Calgary. “If one of our major trading partners, Europe, is falling apart, we’re not going to do too well.”

The S&P/TSX has slumped 3 percent this week as bond yields rose in European countries facing wider-than-average budget deficits, indicating some investors are concerned that the threat of default remains. Oil and copper futures have fallen to the lowest since February.

Afternoon Slide

The Canadian benchmark briefly tumbled as much as 452.4 points before regaining more than 200 points in less than 15 minutes. The S&P 500 plunged as much as 8.6 percent before rebounding.

NYSE Euronext cited “a number of erroneous trades” as the origin of the anomaly. The Nasdaq and the Investment Industry Regulatory Organization of Canada said they are investigating.

Greece’s parliament today approved austerity measures demanded by the European Union and International Monetary Fund as a condition of a 110 billion-euro ($140 billion) bailout. The EU is Canada’s second-largest trading partner, behind the U.S.

Royal Bank dropped 2.7 percent to C$59.57 to contribute the most to the S&P/TSX’s retreat. Bank of Nova Scotia, Canada’s third-biggest bank, declined 2.1 percent to C$50.51. Bank of Montreal, the No. 4 bank by assets, lost 3.1 percent to C$59.07.

Producers of commodities used in industry dropped as the U.S. dollar climbed to a 12-month high against a basket of world currencies. Copper futures decreased for a fourth day and oil for a third day.

Commodity Shares

First Quantum Minerals Ltd., Canada’s second-largest copper producer, slumped 5.5 percent to C$67.94. Canadian Natural Resources Ltd., the country’s second-biggest energy company by market value, fell 1.5 percent to C$72.70. Ivanhoe Energy Inc., the developer of the Tamarack oil sands project, sank 8.8 percent to a 2010 low of C$2.69.

Gold futures rose the most in two months as investors sought a haven in hard assets from the European sovereign debt crisis. The European Central Bank resisted calls to consider buying government bonds to help relieve the continent’s spreading fiscal crisis.

Barrick, the world’s largest gold producer, gained 4.5 percent to C$46.12. Goldcorp Inc., Canada’s second-biggest producer of the metal, advanced 4.4 percent to C$45.75. Eldorado Gold Corp., which mines in Turkey and China, increased 4.9 percent to C$16.85.

Magna Soars

Magna soared 14 percent to a 23-month high of C$73.26 after reporting profit more than double the average of 14 analyst estimates.

Magna also agreed to buy out Stronach’s Class A shares, eliminating the dual share class structure through which Stronach controlled the company. Magna shareholders are to vote on the agreement in June or July, the company said.

Linamar Corp., Canada’s second-largest auto parts maker, surged 4.1 percent to a two-year high of C$22.07 after beating the average of seven analysts’ profit estimates for the first quarter by 63 percent.

Aerospace and defense contractor MacDonald, Dettwiler and Associates Ltd. climbed 8.2 percent to C$42.17. Analysts at GMP Capital Inc., Toronto-Dominion Bank and Canadian Imperial Bank of Commerce each raised their rating on the shares, saying earnings surpassed their estimates.

Other S&P/TSX companies to rally after reporting financial results included Gerdau Ameristeel Corp., which increased 6.1 percent to C$7.66 after surprising most analysts by reporting a profit, and pharmacy-benefits manager SXC Health Solutions Corp., which advanced 6.3 percent to C$66.98 after boosting its 2010 earnings forecast.

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