Canada Stocks Rise, Led by Energy Companies on Oil; BCE Falls

By Elizabeth Stanton

June 30 (Bloomberg) -- Canadian stocks rose, capping the biggest quarterly gain in the main stock index in 1 1/2 years, as rising crude oil and natural gas prices lifted energy companies.

EnCana Corp., the country's largest natural-gas producer, led energy companies in the Standard & Poor's/TSX Composite Index to a 1.9 percent gain. Financial companies fell, limiting the market's advance, as U.S. banks slid to an almost 12-year low.

The Standard & Poor's/TSX Composite Index gained 112.23, or 0.8 percent, to 14,467.44 in Toronto. The index gained 9.3 percent this quarter and rose to a record close of 15,073.13 on June 18. Energy companies, which make up a third of the index by value, have gained 22 percent in the quarter, while materials stocks jumped 17 percent, on soaring oil and commodity prices.

``Our resource companies have been in great demand, and that's reflected in the strength of our stock market,'' said Bill Belovay, a fund manager at Jones Heward Investment Counsel in Toronto, which manages C$35 billion.

EnCana rose 3.9 percent to C$93.36 and contributed most to the index's advance. Petro-Canada, the third-largest Canadian oil company, gained 3.4 percent to $57.11.

Crude oil futures rose to a record above $143 a barrel on the New York Mercantile Exchange before erasing the gain to settle at $140, down 21 cents. Natural gas futures rose 1.3 percent to $13.363 per million British thermal units, a two-and-a-half-year high.

World's Best

The Canadian stock benchmark has advanced 4.6 percent this year, the best performance among the world's 20 biggest stock markets. Together energy and materials stocks account for about 53 percent of the market, compared with less than 20 percent of the Standard & Poor's 500 Index of U.S. companies.

Cameco Corp. rose 7.6 percent to C$43.80, the highest since Nov. 9. The world's largest uranium producer gained after Denver- based pricing service TradeTech LLC said uranium rose last week for the first time this year, ending a seven-month drop in which it declined almost 40 percent.

Denison Mines Corp. the owner of the McLean Lake uranium mine in Canada, rose 4.6 percent to C$8.91.

Royal Bank of Canada fell 19 cents to C$45.83, to lead financial companies in the index to their third straight drop. As a group they've lost 13 percent this year, the third-worst performance among the market's 10 industry groups.

Group Punishment

``They are being punished as a group,'' Royden Richardson, a fund manager at Fairlane Asset Management in Toronto, said of U.S. and Canadian banks. ``Our banks are yielding 5 to 6 percent, and I don't think their dividends are particularly at risk.'' Fairlane manages C$700 million.

U.S. banks fell after analysts said more dividend cuts are probably in the offing to conserve capital eroded by mortgage- related losses.

BCE Inc. fell 3.3 percent to C$35.55 on a report its sale to a group of investors may not close until the end of the year because lenders are pushing to lower the price.

The banks financing the takeover of Canada's biggest telephone company by a group led by the Ontario Teachers' Pension Plan are arguing in negotiations for a price lower than the agreed-to C$42.75 a share, the Globe and Mail reported, citing people it didn't identify.

The banks financing about C$32 billion ($31.7 billion) of the proposed C$52 billion purchase are insisting that BCE should be valued similar to rival Telus Corp., or a price of about C$35 to C$38 a share, the newspaper said.

To contact the reporter on this story: Elizabeth Stanton in New York at estanton@bloomberg.net
Last Updated: June 30, 2008 16:31 EDT