Canada Stocks Extend Rally as Petro-Canada, Barrick, Royal Soar

By John Kipphoff

Oct. 20 (Bloomberg) -- Canadian stocks rose for a second day, building on the main index's biggest weekly gain in six years, as commodity producers and financial companies climbed on higher crude-oil prices and lower borrowing costs.

Petro-Canada soared the most since trading began in 1991, helping energy stocks to their longest win streak in five weeks. Royal Bank of Canada led financial shares higher on speculation that the Bank of Canada will cut interest rates tomorrow, adding to recent global measures aimed at unlocking credit and boosting growth. Research In Motion Ltd. fell after an analyst said sales of its new Pearl Flip were ``disappointing.''

``Maybe all the bad things are in the market now,'' said Greg Eckel, who helps oversee about C$1 billion as a fund manager at Morgan Meighen & Associates in Toronto. ``Interest rates have come down. Clearly we still like our energy and materials stocks.''

The Standard & Poor's/TSX Composite Index rose 7.2 percent to 10,251.40 in Toronto, adding to a 5.5 percent gain last week. Canada's main stock benchmark has still slid 32 percent from its June 18 record as slumping commodities and more than $660 billion in credit losses at financial institutions worldwide dragged down the energy, raw-materials and financial shares that account for three-quarters of the index's value.

Stocks rallied around the globe today as money-market rates fell in Europe and Asia today after global central banks intensified efforts to combat a collapse in bank lending. The London interbank offered rate, or Libor, that banks charge each other for three-month loans in dollars fell by 36 basis points to 4.06 percent today, the British Bankers' Association said. The overnight Libor sank to the lowest in more than four years.

Energy Producers

Petro-Canada, the country's third-biggest oil and gas producer, jumped a record 20 percent to C$31. Canadian Natural Resources Ltd., the nation's fourth-largest energy company by market value, advanced 16 percent to C$58.55 for its steepest gain in 19 years.

Canadian Oil Sands Trust, lead partner in biggest oil-sands producer, rose a record 19 percent to C$31.32. Suncor Energy Inc., the world's second-biggest oil-sands mining company, added 16 percent to C$30.50, the most in 11 years. EnCana Corp., the nation's largest energy company, gained 14 percent to C$57.07. Imperial Oil Ltd., Canada largest oil and gas producer by output, gained 17 percent to C$42.75. Oilexco Inc. surged a record 34 percent to C$5.84.

Crude oil rose 3.3 percent to $74.25 a barrel in New York, on signs that the Organization of Petroleum Exporting Countries will cut output this week to halt a slide that has cut oil prices by half since July.

U.S. Rally

Energy companies also led the rally in the U.S.'s S&P 500 Index after oil shares including Exxon Mobil Corp., the parent of Canada's Imperial Oil, were raised to ``outperform'' at Oppenheimer & Co. on its profit prospects. Third-quarter earnings will be higher than in the previous year, and down ``sequentially'' because of the change in oil and gas prices, Oppenheimer analyst Fadel Gheit wrote in a report.

In Canada, energy producers including EnCana, Petro-Canada are scheduled to report third-quarter results this week.

Measures of energy and raw-materials producers climbed 13 percent and 10 percent, respectively, while an index of financial companies added 5 percent.

Potash Corp. of Saskatchewan Inc. and Barrick Gold Corp. led mining shares higher after prices for soybeans and corn advanced on speculation that the financial rescues in the U.S. and Europe may temper an economic slowdown. Gold and silver advanced in New York, while prices of copper and aluminum fell on expectations that demand for industrial metals will wane.

Miners' Shares

Barrick, the largest gold producer, gained 15 percent to C$32.33. Rival Goldcorp Inc. jumped 14 percent to C$26.75. Potash Corp., the world's biggest maker of crop nutrients, advanced 9.8 percent to C$97.43.

Royal Bank, the country's biggest lender by assets, advanced 7.7 percent to C$49.83. Manulife Financial Corp., Canada's biggest insurance company, added 6.8 percent to C$29.72. Canadian Imperial Bank of Commerce, the nation's fifth- largest bank, rose 5.2 percent to C$60.99. National Bank of Canada gained 5.2 percent to C$48.82.

The Bank of Canada said today that it will buy C$4 billion ($3.37 billion) of securities tomorrow from commercial banks and brokerages for 91 days to help credit markets function. The bank's move follows last weeks announcements by European and U.S. central banks and governments to inject $2 trillion in an effort to bail out banks and help restore investor confidence.

Rate Outlook

Canada's central bank will also cut borrowing costs tomorrow by as much as a half percentage point, according to forecasts from 23 economists surveyed by Bloomberg News. The Bank of Canada reduced its benchmark rate to 2.5 percent from 3 percent on Oct. 8 alongside other central banks to ease the credit crunch.

``Rates will probably come down again tomorrow,'' Eckel said. ``Financials have everything going in their favor now. We're starting to see some things working again. People have turned their minds back to earnings again.''

Research In Motion fell 7.6 percent to C$64.88, making a measure of computer-related shares the only one of 10 industries in the S&P/TSX to drop today. The gauge fell 5.7 percent.

Some stores have only sold one or two units of Research In Motion's new Pearl Flip handset since they went on sale in the U.S. on Oct. 13, according to a report today from Pacific Crest Securities analyst James Faucette in Portland, Oregon.

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