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Canadian Stocks Fall After Fitch Cuts Ratings on Italy, Spain

Canadian stocks fell, wiping out the week’s gain, as raw-materials and energy shares dropped after Fitch Ratings downgraded the government debt of Spain and Italy.

Canadian Natural Resources Ltd., Canada’s second-largest energy company by market value, declined 4 percent as natural gas futures retreated. Goldcorp Inc., the world’s second-biggest gold producer by market value, lost 2.3 percent as precious metals slipped. Potash Corp. of Saskatchewan Inc., the world’s largest fertilizer producer by market value, decreased 4.1 percent after a Citigroup Inc. analyst said U.S. ethanol legislation may weaken grain prices.

The Standard & Poor’s/TSX Composite Index fell 191.71 points, or 1.6 percent, to 11,588.36 at the close in Toronto for a weekly retreat of 0.3 percent.

“In the last few days, the markets had a bit of an upside, but the cloud on Europe continues to be there,” Sadiq S. Adatia, chief investment officer at Sun Life Financial Inc.’s Sun Life Global Investments unit, said in a telephone interview. The unit oversees C$3.2 billion ($3.1 billion) for clients. “I don’t think anyone is holding stocks for the long term. They’re all worried about what’s going on in the economy.”

The index jumped 5.4 percent during the previous two days, the most in a similar period since May 2009. Stocks rose from a 14-month low after the Institute for Supply Management’s monthly index of the U.S. service industry fell less than most economists in a Bloomberg survey had forecast and investors speculated European officials will reach an agreement to aid the continent’s banks.

Debt Downgrades

Fitch reduced its ratings on Spain to AA- from AA+ and cut Italy to A+ from AA-. The agency cited the vulnerability of the countries to the European debt crisis.

The S&P/TSX Energy Index retreated for the first time in four days as natural gas dropped to an 11-month low on speculation U.S. inventories will approach a record.

Canadian Natural declined 4 percent to C$30.20. Encana Corp., the country’s largest natural gas producer, lost 4.6 percent to C$19.71. Oil-sands developer MEG Energy Corp. decreased 6.6 percent to C$37.74 after jumping 16 percent in the previous two days.

Gold and silver retreated as investors sold precious metals to cover losses in other assets, Adatia said. Goldcorp dropped 2.3 percent to C$48.12. Barrick Gold Corp., the world’s largest producer of the metal, lost 2.1 percent to C$48.44. San Gold Corp., which mines in Manitoba, slumped 8.6 percent to C$2.12 after reporting third-quarter production that trailed the estimate of Andrew Kaip, an analyst at Bank of Montreal.

‘Clear Negative’

Fertilizer producers fell after David Driscoll, an analyst at Citigroup, said bills in Congress to reduce ethanol requirements for gasoline represent “a continued assault on the ethanol industry and a clear negative.” Corn futures also fell on forecasts for warm, dry weather in the U.S. Midwest.

Potash Corp. declined 4.1 percent to C$46.40 after surging 11 percent in the previous two days. Agrium Inc., a fertilizer producer and farm retailer, lost 3.5 percent to C$71.16.

A gauge of base-metals and coal producers in the S&P/TSX retreated 4.6 percent after soaring 24 percent, the most since January 2009, in the previous three days.

Teck Resources Ltd., Canada’s largest company in the industry, decreased 4.7 percent to C$33.65. Inmet Mining Corp., a copper and zinc producer, dropped 6.5 percent to C$49.21. Uranium One Inc., a mining company controlled by Moscow-based ARMZ Uranium Holding, lost 6.6 percent to C$2.11.

Financials Retreat

The S&P/TSX Financials Index declined. Royal Bank of Canada, the country’s largest lender by assets, slipped 1.4 percent to C$47.30. Bank of Nova Scotia, the country’s third-biggest bank, fell 1.4 percent to C$51.78. Manulife Financial Corp., North America’s fourth-biggest insurer, retreated 2.9 percent to C$11.88.

BlackBerry maker Research In Motion Ltd. dropped 4.3 percent to C$24.30 after soaring 19 percent from a seven-year low in the previous four days. Microsoft Corp. is unlikely to buy RIM, as Microsoft is reluctant to acquire a hardware business and RIM’s chiefs would oppose a deal, Pierre Ferragu, an analyst at Sanford C. Bernstein & Co., said in a note to clients.

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