Canada S&P/TSX Rises as Banks Advance; Fording Soars on Sale

By John Kipphoff

July 29 (Bloomberg) -- Canada's main stock index rose, led by Royal Bank of Canada, after Merrill Lynch & Co.'s plan to sell stock raised confidence banks can withstand mortgage- related losses.

Fording Canadian Coal Trust soared on its sale to Teck Cominco Ltd. The market's advance was limited as sliding oil and metals prices dragged down commodity producers such as EnCana Corp. and Rogers Communications Inc. slid the most in 2008 on revenue that fell short of estimates.

The Standard & Poor's/TSX Composite Index rose 0.3 percent to 13,342.55 in Toronto as 107 stocks advanced and 142 declined. Canada's main equity benchmark has fallen 11 percent from its June 18 record of 15,073.13 on declining oil prices and concern that the U.S. mortgage crisis threatens global economic growth.

``People are moving from sector to sector,'' said Sergio di Vito, chief operating officer and head of trading at Toronto- based Mavrix Fund Management, which manages about $640 million. ``There has been money made in the commodities, and maybe people are taking it and buying something else, for example financials.''

Royal Bank, the nation's largest lender, added 4.3 percent to C$45.58. Rival Toronto-Dominion Bank gained 3.4 percent to C$61.54.

Canadian Imperial Bank of Commerce, the bank with the highest level of subprime-related writedowns among the country's financial institutions, added 5 percent to C$60.45. CIBC has taken C$6.66 billion in writedowns on CDOs it holds that are linked to U.S. subprime mortgages.

Merrill's Plan

Merrill Lynch plans to sell $8.5 billion of stock to replenish capital and also agreed to sell $30.6 billion of collateralized debt obligations -- the mortgage-related bonds that have caused most of the firm's losses -- for $6.7 billion. The sale will result in a third-quarter pretax writedown of $4.4 billion, Merrill said.

Merrill Lynch ``has put some sort of floor under these kinds of assets,'' di Vito said. ``People may be thinking that if this is the worst, then they can live with it. There's a linkage to CIBC.''

Fording Coal gained the most in six months, surging 7.8 percent to C$90.35. The second-largest exporter of metallurgical coal agreed to a $14.1 billion bid from by Teck Cominco. Teck, Canada's biggest diversified miner, rose the most since Feb. 1, climbing 6 percent to C$42.85.

A gauge of financial shares climbed 2.8 percent, paring their retreat this year to 12 percent. Measures of energy and materials producers fell 1.4 percent and 0.2 percent, respectively. They are the only two among 10 industries in the S&P/TSX's that have gained more than 1 percent in 2008.

Power Companies

EnCana, the biggest Canadian energy company by market value, fell 3.4 percent to C$72.41. Smaller rival Canadian Natural Resources Ltd. dropped 1.8 percent to C$77.30. Suncor Energy Inc., the world's second-biggest oil-sands producer, declined 1.2 percent to C$53.96.

Barrick Gold, the world's biggest bullion mining company, fell 4.3 percent to C$43.50. Goldcorp Inc., the second-biggest producer by market value, dropped 3.5 percent to C$40.49.

Crude oil fell to the lowest in 12 weeks in New York as the U.S. dollar strengthened to a one-month high against the euro and on signs gasoline demand may extend declines. Gold slid 1.2 percent to $926.40 an ounce.

Rogers dropped 6.9 percent to C$34.96, its steepest decline since Nov. 29. The Toronto-based phone and cable company said revenue rose 11 percent to C$2.80 billion. That missed the C$2.85 billion average of 10 analyst estimates compiled by Bloomberg.

To contact the reporter on this story: John Kipphoff in Montreal at jkipphoff@bloomberg.net.