Canada Stocks Gain as Energy, Banks Rise on U.S. Budget Optimism

Canadian stocks rose as energy and financial shares advanced on optimism U.S. policymakers are moving closer to a budget compromise.

Athabasca Oil Corp. added 4.8 percent after it outlined its 2013 budget and analysts with UBS Securities raised the stock’s rating. Rubicon Minerals Corp. dropped 6.5 percent after saying the Wabauskang First Nation filed a lawsuit related to its gold project in Ontario, citing media reports. Canadian Natural Resources Ltd. and Encana Corp. increased at least 1.2 percent as crude oil gained for a third day.

The Standard & Poor’s/TSX Composite Index rose 52.99 points, or 0.4 percent, to 12,334.34 in Toronto. The equity gauge has gained 3.2 percent this year.

“What’s driving the Canadian market is what’s driving the U.S. and global markets at this point, and that is the fiscal cliff,” said Anish Chopra, managing director and fund manager with TD Asset Management Inc. in Toronto. The firm manages about C$204 billion ($207 billion). “As negotiations appear more favorable for a resolution, we’ll see a risk-on trade.”

U.S. President Barack Obama lowered his tax revenue demand by $200 billion and offered to start tax rate increases at $400,000 in income instead of $250,000. House Speaker John Boehner said he will push a budget “plan B” measure that will include tax increases on income of more than $1 million, while he continues to negotiate with Obama.

Government leaders are negotiating to avoid more than $600 billion in automatic spending cuts and tax increases set to begin in the new year.

Energy, Financials

Manulife Financial Corp. advanced 3.3 percent to C$13.43 and Bank of Nova Scotia rose 1.1 percent to C$57.28 as bank and energy stocks contributed most to gains in the S&P/TSX. Eight of 10 industries advanced, with trading volume 39 percent higher than the 30-day average.

Canadian Natural Resources gained 2.2 percent to C$28.25 and Encana increased 1.2 percent to C$19.99. Crude for January delivery advanced 0.8 percent to settle at $87.93 a barrel in New York.

Athabasca climbed 4.8 percent to C$10.80. Chad Friess, analyst with UBS, raised his rating to buy from neutral while cutting his price target to C$13 from C$14 on higher oil sands spending after the company outlined a “fairly conservative” 2013 capital budget of $236 million for its light oil business. This was offset by a surprisingly large $502 million budget on the thermal side of its business, Friess said in a note to clients.

“The 2013 budget is well funded and we see upside to production guidance,” he said.

Wabauskang Lawsuit

Rubicon Minerals slumped 6.5 percent to C$2.45. The company said it has not yet received notice of the lawsuit from the Wabauskang First Nation relating to its Phoenix Gold project in Red Lake, Ontario.

Daniel Earle, an analyst with TD Securities, said the group is objecting to the ability of the province to approve the mine over the group’s concerns, citing a media report.

“We would stress that the Phoenix Gold project is fully permitted and the objections of the Wabauskang First Nation appear to be as much with the province and the mine review process as it is with the company,” he said in a note to clients.

AuRico Gold Inc. dropped 4.2 percent to C$7.92 after David Haughton, co-head of metals and mining research with BMO Capital Markets, downgraded the stock to market perform from outperform. “The company now trades at a premium to BMO Research mid-tier gold stocks,” he said in a note today.

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