Canada Stocks Rebound as Rogers Earnings Offsets Valeant's Slide

  • Valeant extends losses as Quebec regulator monitors situation
  • Rogers, Teck top profit estimates as earnings season begins

Canadian stocks rebounded from the biggest drop in three weeks as better-than-forecast earnings and a jump in retail sales offset a continuing slide in Valeant Pharmaceuticals International Inc.

The nation’s equities joined a global rally in riskier assets sparked by a signal from the European Central Bank that it is prepared to support growth. U.S. shares surged 1.7 percent to bring their gain from a summer swoon toward 10 percent. Rogers Communications Inc. and Teck Resources Ltd. advanced at least 5.1 percent Thursday after posting third-quarter earnings ahead of analysts’ estimates.

The Standard & Poor’s/TSX Composite Index rose 173.92 points, or 1.3 percent, to 13,878.11 at 4 p.m. in Toronto, rebounding from the biggest drop since Sept. 28 Wednesday. The benchmark Canadian equity gauge has risen 4.3 percent in October as it tries to recover from the worst quarter since 2011. 

Data today showed Canadian retail sales rose faster than economists predicted in August, led by automobile and parts dealers. About 13 of 242 companies in the S&P/TSXhave reported earnings in the current period thus far, with more than 50 expected to disclose results through next week.

Laval, Quebec-based drugmaker Valeant extended losses for a fourth day after Quebec’s Autorite des Marches Financiers said in an e-mailed statement allegations about the company are “worrisome” and it is checking to see if they ran afoul of any regulations. Valeant erased a fifth of its market value Wednesday after Citron Research published a report examining the drugmaker’s pricing practices. Smaller peer Concordia Healthcare Corp. rebounded from a May 2014 low Wednesday.

Valeant slid 6.6 percent, recovering some losses in the final hours of trading. The stock’s decline for the week is on pace for a record 37 percent. Scrutiny of the company is intensifying after a Citron Research report Wednesday accused the company of inflating sales using the pharmacies. In the report, Citron, a stock commentary site published by short seller Andrew Left, claimed that Valeant had recorded fake sales to phony customers, using closely associated specialty pharmacies to help drive the business.

Valeant called Citron’s accusations “erroneous” and denied the report. The company will hold an investor call Oct. 26 including Chief Executive Officer Michael Pearson and members of the board’s audit and risk committee, the company said.

Valeant, briefly the largest stock in the S&P/TSX by market capitalization this year, along with Concordia had been the two best performers among Canadian equities after pursuing aggressive acquisition strategies in the first half of 2015.

Valeant has since plummeted 58 percent from an Aug. 5 all-time high, amid increasing scrutiny from U.S. lawmakers over the industry’s pricing models for prescription drugs. Valeant has been the subject of subpoenas from attorneys’ offices in Manhattan and Massachusetts seeking additional information.

The rise and rapid fall in the shares of Valeant is eerily familiar to Canadian investors still smarting from the legacy of past market stalwarts BlackBerry Ltd. and Nortel Networks Corp. Both companies had previously ascended to the global stage while dominating the Canadian market, only to crumble when problems exposed them to harsh investor scrutiny.

BlackBerry, previously known as Research In Motion, has not recovered since losing its dominance in the smartphone market while Nortel filed for Bankruptcy protection in 2009.

Rogers gained 5.2 percent, extending a two-year high, after Canada’s largest wireless operator added more customers than projected in the third quarter. Sales grew to C$3.38 billion, compared with projections for C$3.32 billion.

Rogers also owns Major League Baseball’s Toronto Blue Jays, which snapped a 21-year playoff drought in October and are currently battling the Kansas City Royals in the American League Championship Series. The team’s recent success has driven the Jays’ value to about $1.5 billion, a 10-fold gain from when Rogers bought the team in 2000, according to new calculations from sports valuation experts.

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