Canadian Stocks Drop as Looming U.S. Shutdown Overshadows Data

Canadian stocks fell, paring the biggest quarterly gain in a year, as a likely U.S. government shutdown weighed on global equities, overshadowing data showing a pickup in growth in the world’s 11th-largest economy.

Pacific Rubiales Energy Corp. fell 5.6 percent after agreeing to buy Petrominerales Ltd. for C$935 million ($912 million). Brookfield Office Properties Inc. jumped 14 percent after Brookfield Property Partners LP offered to buy the shares it doesn’t already own in the office landlord.

The Standard & Poor’s/TSX Composite Index declined 56.89 points, or 0.4 percent, to 12,787.19 at 4 p.m. in Toronto. The benchmark gauge for Canadian equities jumped 5.4 percent this quarter, its best performance since September 2012, and is up 2.8 percent in 2013. Trading volume was 10 percent above the 30-day average.

“No one expects the largest economy in the world to have a gridlock when it comes to the parliament and it’s unfortunate that it’s a very fractious environment,” Irwin Michael, portfolio manager with ABC Funds in Toronto, said in a phone interview. His firm manages C$800 million. “If there is no extended shutdown in the U.S. government, we expect the North American economy to start to become a little more positive in direction.”

The deadlocked U.S. Congress headed into the final hours before the first partial government shutdown in 17 years without any signs of averting widespread furloughs of government workers. The U.S. is Canada’s largest trading partner.

Government Shutdown

All 24 of the world’s developed stock markets retreated today, with the benchmark U.S. equity gauge sliding 0.6 percent.

A shutdown of the government would reduce fourth-quarter economic growth in the U.S. by as much as 1.4 percentage points depending on its length, economists at Moody’s Analytics Inc. estimated last week.

In Canada, gross domestic product grew 0.6 percent to an annualized C$1.58 trillion, the biggest gain since July 2011, as the economy recovered from a construction strike in Quebec and flooding in Alberta, Statistics Canada said today in Ottawa.

Consumer sentiment climbed to the highest in more than two years as employment rose and the housing market remained buoyant, according to the new Bloomberg Nanos Canadian Confidence Index.

All 10 main industries in the S&P/TSX fell. Health-care stocks slid 1.2 percent for the worst performance as Catamaran Corp. dropped 3.4 percent to C$47.32, its lowest close in 2013.

Oil Acquisition

Pacific Rubiales slipped 5.6 percent to C$20.34. The company agreed to buy Petrominerales as the world’s fastest-growing major crude producer seeks to reduce transport costs.

Petrominerales shareholders will receive C$11 a share and one share in a newly formed exploration and production company, Pacific Rubiales said it will also take on C$640 million in debt, including convertible bonds.

Shares of Petrominerales surged 51 percent to C$11.70.

Brookfield Office paced the gains, surging 14 percent to C$19.74, a five-year high. Brookfield Property, which currently owns 51 percent of Brookfield Office, said it’s planning a tender offer of the landlord’s shares for stock or cash at a value of $19.34 each. The acquisition will create a combined entity with 330 million square feet (31 million square meters) of office, retail and industrial space on four continents, the company said.

SNC-Lavalin Group Inc. rose 2.4 percent to C$42.35. Canada’s biggest engineering and construction company said it hired Morgan Stanley and Royal Bank of Canada to help sell an equity stake in its AltaLink power-transmission unit.

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