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Canadian Stocks Drop on Economic Concerns; Financials Decline

Canadian stocks fell for the first time in five days, led by financial companies, after reports on initial jobless claims and manufacturing in the U.S. raised concern the economic recovery is in peril.

Toronto-Dominion Bank, the country’s second-largest, slipped 1.6 percent, leading the decline after Royal Bank of Canada reduced its earnings estimates on lenders. Suncor Energy Inc., Canada’s biggest oil and gas company, dropped 0.9 percent as crude futures slipped for a second day. Open Text Corp., Canada’s largest software company, rallied 17 percent after reporting fourth-quarter profit that beat the average analyst estimate.

The Standard & Poor’s/TSX Composite Index lost 70.9 points, or 0.6 percent, to 11,710.18. North American equities extended declines after the Federal Reserve said manufacturing in the Philadelphia region decreased this month for the first time in a year.

“The manufacturing indicator there was a complete surprise,” said Blair Falconer, who manages C$800 million ($771 million) at HSBC Securities (Canada) Inc. in Toronto. “That’s when the market really took it on the chin.”

The S&P/TSX rose 2.2 percent during its four-day streak of gains, lifted by BHP Billiton Ltd.’s $40 billion unsolicited bid for Potash Corp. of Saskatchewan Inc. Potash Corp., the world’s largest fertilizer producer, soared 30 percent during the period.

Unexpected Drop

Only two of 58 economists in a Bloomberg survey had forecast a drop in Philadelphia-area manufacturing. The report followed Labor Department data showing 500,000 Americans filed initial unemployment claims last week, the most since November and up from a revised 488,000 the previous week.

In Canada, June wholesale sales dropped 0.3 percent, contrary to the forecasts of most economists in a Bloomberg survey, Statistics Canada said. The agency’s index of leading indicators rose 0.4 percent in July, the slowest pace in a year.

“We tend to maybe overreact to American news but with 75 percent of our exports going south, it’s a big chunk of our economic activity,” Falconer said. “The Canadian indicators haven’t been particularly strong either.”

Canada’s eight publicly traded banks each declined after Royal Bank analyst Andre-Philippe Hardy reduced his third-quarter earnings estimates for all of them except Royal Bank by 4 percent to 8 percent. Hardy doesn’t cover RBC.

TD, Scotiabank

Toronto-Dominion Bank lost 1.6 percent to C$70.15. Bank of Nova Scotia, the No. 3 bank by assets, decreased 1 percent to C$50.60.

Manulife Financial Corp., North America’s third-largest insurer, retreated 2.3 percent to C$12.31. Most of the company’s revenue comes from the U.S.

Forty-eight of 55 S&P/TSX energy companies fell as crude oil slipped 1.3 percent on concern the U.S. economic recovery is slowing.

Suncor dropped 0.9 percent to C$32.99. Canadian Oil Sands Trust, the largest owner of the Syncrude project, declined 2.2 percent to C$25.50. Talisman Energy Inc., an oil and gas producer with operations in North America, the North Sea and Indonesia, slipped 1.4 percent to C$17.27.

An index of base-metals and coal producers retreated for the first time this week as copper futures decreased. Teck Resources Ltd., the largest company in the index, lost 3.6 percent to C$34.65. First Quantum Minerals Ltd., Canada’s second-biggest publicly traded copper producer, fell 3.4 percent to C$61.84.

Stock Sale

Lake Shore Gold Corp., which mines in Ontario and Quebec, had the biggest decline in the S&P/TSX with a 4 percent drop to C$3.60. The company said it will sell at least 21.5 million shares at C$3.50 a share.

Osisko Mining Corp., which explores for gold in Quebec, surged 7.8 percent to a record C$14.87 after Royal Bank analyst Michael D. Curran raised his 12-month share-price estimate to C$15 from C$13. Gold explorer Rubicon Minerals Corp. climbed for a second day after announcing drilling results from its Ontario site, gaining 6.5 percent to C$4.60.

Open Text jumped 17 percent, the most in nearly three years, to C$44.80 after the business software maker reported fourth-quarter earnings of 95 cents a share, excluding certain items, topping the average of 11 analyst estimates by 11 percent. Morgan Keegan & Co. analyst Brian S. Freed raised his rating on the company to “outperform” from “market perform.”

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