Canadian Stocks Slide to Four-Month Low as Financials Retreat

By Katherine Greene and Jeff Kearns

July 24 (Bloomberg) -- Canadian stocks dropped, pushing the main stock index to a four-month low, as concerns that the U.S. housing slump will worsen sent bank shares to their steepest slide in almost seven years.

Royal Bank of Canada and Toronto-Dominion Bank led declines in financial stocks after investor Bill Gross said housing losses will total $1 trillion. Bank of Nova Scotia and Canadian Imperial Bank of Commerce also tumbled. Kinross Gold Corp. fell the most in six years after agreeing to buy Aurelian Resources Inc. for C$1.2 billion ($1.18 billion) in stock.

``The housing crisis continues,'' said Doug Davis, president of Davis-Rea Ltd., which manages C$475 million in Toronto. ``There's no short-term solution here. The momentum in the market is still generally down.''

The Standard & Poor's/TSX Composite Index fell 2.3 percent to 13,206.14 in Toronto, extending its loss for this year to 4.5 percent. All 10 industry groups declined.

Canada is the only one of 23 developed nations in the MSCI World Index that hasn't fallen into a bear market, or drop of more than 20 percent, according to data compiled by Bloomberg. Canada's main stock index has lost 12 percent since reaching a record 15,073.13 on June 18 as energy and materials producers that had led the rally retreated.

A measure of financial stocks in the index lost 4 percent today, the biggest drop since September 2001, as all but three of 43 members fell. Gross, manager of the world's largest bond fund at Pacific Investment Management Co., said $5 trillion of mortgage loans belong to ``risky asset categories.'' Banks and brokerages worldwide have recorded $468 billion in losses and writedowns tied to the mortgage market since the start of last year, Bloomberg data show.

Royal Bank, Toronto-Dominion

Royal Bank of Canada, the country's largest lender, fell 4.6 percent to C$44.23. Toronto-Dominion, the second-biggest, dropped 5 percent to C$60.04.

Bank of Nova Scotia retreated 4.3 percent, the most since Jan. 21, to C$48.16. CIBC lost the most since August 2005, sliding 5.9 percent to C$59.58.

The S&P/TSX Materials Index dropped 2.1 percent to the lowest since May 1. Kinross, Canada's third-largest gold producer, led a decline in mining companies after announcing the Aurelian acquisition, which gives it control of Ecuador's largest gold deposit.

Kinross lost 10 percent to C$18.70. Aurelian rose 42 percent, the most in two years, to C$6.31.

Potash Profit

Potash Corp. of Saskatchewan Inc., the world's largest producer of crop nutrients by market value, fell 2.7 percent to C$196.85 even after it said second-quarter profit more than tripled to a record as rising global demand for crops lifted fertilizer prices. The shares, which have more than doubled in the past year, were reduced to ``sector perform'' from ``sector outperform'' by analyst Sam Kanes at Scotia Capital Inc. Agrium Inc., North America's third-largest fertilizer maker, also was cut to ``sector perform.'' The shares slipped 8.2 percent at $83.75, the most since Jan. 17.

Energy stocks, the biggest among 10 industry groups, fell 1 percent. Canadian Natural Resources Ltd. contributed the most to the group's drop, losing 2.7 percent to C$78.10.

Suncor Energy Inc. was the second-biggest contributor to the decline. The world's second-largest oil-sands producer cut its output forecast, sending the shares down 1.4 percent to C$52.91.

To contact the reporter on this story: Katherine Greene in New York at kgreene8@bloomberg.net. Jeff Kearns in New York at jkearns3@bloomberg.net.