Canadian Stocks Cap Second Week of Gains Amid Fed Stimulus Bets

Canadian stocks rose, capping a second week of gains for the benchmark index, on speculation the U.S. Federal Reserve will maintain monetary stimulus and as China’s ruling party announced changes to economic policy.

Potash Corp. of Saskatchewan Inc. added 0.8 percent amid speculation an agreement to sell OAO Uralkali by its owners may defuse a dispute between Russia and Belarus that roiled the global soil nutrient market. Bonavista Energy Corp. climbed 3.9 percent as Scotia Capital Inc. boosted the stock’s rating. West Fraser Timber Co. slipped 4.7 percent as RBC Capital Markets downgraded shares of the lumber producer.

The Standard & Poor’s/TSX Composite Index climbed 51.18 points, or 0.4 percent, to 13,482.56 at 4 p.m. in Toronto. Trading in the benchmark gauge’s shares was 8.6 percent below the 30-day average. The index advanced 0.8 percent this week, its fifth weekly gain in six.

“Yellen is going to continue Bernanke’s policies of extremely low short-term rates and being very slow to pull back from quantitative easing, so that is stimulative for risk assets,” Todd Johnson, a portfolio manager at Winnipeg, Manitoba-based BCV Asset Management, said in a phone interview. His firm oversees C$550 million ($526 million).

Equities rose yesterday after Janet Yellen, nominated to succeed Ben Bernanke as the next chairman of the Fed, said the central bank should take care not to withdraw stimulus, or quantitative easing, too early from an economy that is operating well below potential.

China Reforms

China’s government vowed to allow more private investment in the state sector, loosen its one-child policy and better protect farmers’ rights to land, according to the Communist Party policy decision published today by the official Xinhua News Agency today.

The document, covering 60 measures, follows a communique issued Nov. 12 after a four-day party conclave in Beijing that omitted detailed policies for the world’s second-largest economy.

“China’s growth is very positive for Canada, and liberalizing their financial sector and encouraging private sector consumption is a significant step forward for China’s normalization,” Johnson said.

Manufacturing in the New York region unexpectedly contracted in November, a report on the New York Fed’s general economic index showed today. In Canada, economic data were mixed, with factory sales rising in September to the highest in more than a year while existing home sales fell 3.2 percent in October from the previous month.

Uralkali Deal

Potash Corp. rose 0.8 percent to C$33.85. Billionaire Suleiman Kerimov and his business partners in Uralkali, a rival potash producer, may reach an agreement to sell their joint 33 percent stake as soon as next week, according to four people with knowledge of their discussions.

A sale may defuse a dispute between Russia and Belarus sparked by Uralkali’s July withdrawal from a partnership that marketed 40 percent of global exports. The falling-out and Uralkali’s plan to boost output roiled the $20 billion market for the soil nutrient. Belarus has called for a change in the company’s ownership before a reconciliation is possible.

Bonavista Energy rallied 3.9 percent to C$12.71. The oil and natural gas producer was raised to sector outperform from sector perform at Scotia Capital by equity analyst Patrick Bryden. The 12-month target price is C$18 a share.

Finning International Inc. advanced 5.8 percent to C$25.54. The seller of Caterpillar Inc. equipment was raised to outperform from sector perform at RBC Capital Markets by equity analyst Sara O’Brien after the company yesterday said third-quarter revenue beat estimates.

Raw-materials producers has the worst performance out of 10 groups in the S&P/TSX, falling 0.7 percent. OceanaGold Corp. dropped 5.2 percent to C$1.83 and Centerra Gold Inc. retreated 5.7 percent to C$3.15.

West Fraser Timber slid 4.7 percent to C$91.32. The lumber producer was cut to sector perform from outperform at RBC Capital Markets by equity analyst Paul Quinn.

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