Canadian Stocks Advance to Nine-Month High on U.S. Budget Deal

Canadian stocks rose, sending the benchmark index to the highest level in nine months, after U.S. lawmakers passed a bill to avert many of the tax increases and spending cuts scheduled for this year.

Iron-ore producers, such as Labrador Iron Mines Holdings Ltd., rose after China Steel Corp. and South Korea’s Posco agreed to buy a 15 percent stake in ArcelorMittal Mines Canada Inc. Teck Resources Ltd., which produces steelmaking coal, rose 3.7 percent. Canadian Natural Resources Ltd. and Suncor Energy Inc. added at least 2 percent as crude climbed to its highest in three months. Barrick Gold Corp., the world’s largest producer of the metal, gained 0.8 percent as gold rallied to a two-week high.

The Standard & Poor’s/TSX Composite Index increased 107.24 points, or 0.9 percent, to 12,540.77 in Toronto, the highest close since March 26.

“Even though the markets were concerned, I don’t think anyone was seriously considering they would go over the fiscal cliff without doing something,” said Jamie Robertson, chief investment officer with McLean & Partners Wealth Management Ltd. in Calgary. The firm manages about C$1 billion ($1.02 billion). “Now it’s another formality we’ve dealt with and the markets can focus on economic growth, earnings growth and valuations for a change. It’s very constructive.”

Tax Deal

The U.S. House passed a bill undoing income tax increases for more than 99 percent of households. The 257-167 bipartisan vote breaks a yearlong impasse over how to head off $600 billion in tax increases and spending cuts that would have started taking effect yesterday.

Raw-materials and energy stocks contributed most to gains in the S&P/TSX as all 10 industries advanced. Trading volume was 12 percent lower than the 30-day average.

Canadian Natural Resources increased 2 percent to C$29.21 and Suncor added 2.1 percent to C$33.41. Crude for February delivery climbed 1.4 percent to settle at $93.12 a barrel in New York, the highest since Sept. 18.

Barrick rose 0.8 percent to C$35.08 and Goldcorp Inc., the world’s second-largest producer of the metal, advanced 1 percent as gold for February delivery rose 0.8 percent to settle at $1,688.80 an ounce in New York.

Labrador, Teck

Iron-ore producers jumped as a group led by China Steel and Posco agreed to pay $1.1 billion for access to two of ArcelorMittal’s Canadian iron mines. The mines produce about 40 percent of Canada’s iron ore, which is a key raw material in steelmaking.

Labrador Iron Mines, an iron ore producer with operations in the Labrador trough, soared 32 percent to C$1.45, its biggest gain since January 2010. Teck, Canada’s largest diversified miner including six metallurgical coal mines in British Columbia and Alberta, gained 3.7 percent to C$37.49. Metallurgical coal is also required to make steel.

Agrium Inc. rose 2.3 percent to C$101.43 and Potash Corp. of Saskatchewan Inc. gained 0.4 percent to C$40.66. The two fertilizer producers, along with Mosaic Co., agreed on Dec. 31 to sell 1 million metric tons of potash to China’s Sinofert Holdings Ltd. at $400 a ton, $70 lower than a March agreement.

“The shipments under the contract are higher than expected,” P.J. Juvekar, an analyst at Citigroup Inc., said in a note to clients. The deal provides some “clarity” for the market in early 2013, he said.

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