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Canadian Stocks Retreat as Raw Material Shares Slide

Feb. 20 (Bloomberg) -- Canadian stocks fell, giving the benchmark index its biggest loss since January, as home resale prices slid for a fifth month and commodities dropped amid speculation a hedge fund was selling positions.

OceanaGold Corp. and Premier Gold Mines Ltd. slumped at least 6.3 percent as gold futures fell for a fifth straight day. Industrial Alliance Insurance & Financial Services Inc. lost 4.1 percent after Canaccord Genuity Corp. cut the insurer to hold from buy. Silver Wheaton Corp. retreated 6.3 percent after the company’s chief executive officer said it is seeking a second purchase this year after buying Vale SA’s gold.

The Standard & Poor’s/TSX Composite Index declined 96.16 points, or 0.8 percent, to 12,714.05, the biggest drop since Jan. 31. The S&P/TSX has risen 2.3 percent this year.

“It’s somewhat of a dour mood for commodities right now,” Paul Vaillancourt, managing director at Montreal-based Fiera Capital Corp., which oversees $66 billion, said in a telephone interview. “There’s a general slowdown. GDP numbers are not impressive. Earnings growth has cooled. Housing prices’ rate of growth is decelerating in Canada, which makes for a less euphoric backdrop.”

Canadian home resale prices fell for a fifth straight month in January, the longest string of declines since the country’s 2009 recession, according to the Teranet-National Bank Composite House Price Index. Government data in the U.S. showed builders broke ground on the most single-family homes in more than four years, while total housing starts trailed economists’ estimates.

Raw Materials

Gold futures for April delivery slipped 1.6 percent to settle at $1,578 an ounce on the Comex in New York. The metal fell for a fifth straight day, the longest slump in more than a year. Silver futures led the losses among the S&P GSCI Spot Index of 24 raw materials, retreating as much as 4 percent.

Commodity producers had the biggest decline among 10 groups in the benchmark equities index. OceanaGold fell 16 Canadian cents to C$2.38. Premier Gold Mines lost 32 Canadian cents to C$2.78.

“Commodities will give investors the most challenges,” Patrick Blais, senior equity analyst at Toronto-based Manulife Asset Management Ltd., which oversees C$238 billion, said in a telephone interview. “Canada is very resource-driven. Just the demand for oil as well as base metals and gold -- there’s definitely a slowdown in demand for those products.”

Silver Wheaton lost C$2.27 to C$32.77. The world’s largest buyer of precious-metal output rights from copper, zinc and lead mines is seeking a second purchase this year after paying $1.9 billion for gold from Vale, Chief Executive Officer Randy Smallwood said.

Energy Shares

MEG Energy Corporation, the Canadian oil-sands developer, fell 3 percent to C$33.45. Legacy Oil + Gas Inc., an intermediate oil and natural gas company, dropped 4.3 percent to C$6.66.

Talisman Energy Inc. declined 0.8 percent to C$12.60. The Calgary-based company plans to fire 90 employees as it reduces spending on gas operations, it said in a statement today.

West Texas Intermediate oil for March delivery tumbled 2.3 percent to close at $94.46 a barrel on speculation that a commodity fund is selling positions. Gasoline futures slid for a second day from the highest level since September.

“There is a rumor that a fund is blowing up,” Stephen Schork, president of the Schork Group Inc. in Villanova, Pennsylvania, told Bloomberg News. Schork has spent 17 years in physical commodity and derivatives trading including stints at Glencore Ltd. and Novarco Ltd., Marc Rich’s last venture in the global energy trading, and his clients include OPEC and major oil companies. “Metals are getting hit and it’s spreading over to oil.”

Banks Gains

Health-care and financial stocks were the only industries to gain among the 10 groups in the S&P/TSX, adding at least 0.1 percent. Bank of Nova Scotia rose 1.5 percent to C$60.01 after Barclays Plc raised its recommendation to overweight from equalweight.

Industrial Alliance Insurance fell C$1.59 to C$37 after Mario Mendonca, an analyst at Canaccord, cut the company to hold from buy and lowered its price estimate to $C40.

Bombardier Inc. gained 4.4 percent to C$4.28. The planemaker said Russia’s Ilyushin Finance Co. converted a letter of intent into an order for CSeries jets that could be worth at least $2.56 billion.

Softchoice Corp. added 18 percent to C$15. The business-to-business direct marketer of software products reported fourth-quarter earnings that topped analysts’ estimates and boosted its quarterly dividend.

To contact the reporter on this story: Leslie Picker in New York at lpicker2@bloomberg.net

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

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