Canada Stocks Fall, Led by Suncor, Bombardier; Manulife Gains

By John Kipphoff

Oct. 1 (Bloomberg) -- Canadian stocks extended their decline, after the biggest monthly drop in a decade, as energy producers and industrial companies fell on concern that the $700 billion U.S. rescue plan for banks won't stave off a recession.

Suncor Energy Inc. paced today's drop among oil and gas shares after crude prices slid below $100 a barrel. Bombardier Inc. led industrial companies lower on signs that bank's unwillingness to extend credit will hurt corporate and consumer spending. Banks and insurers including Manulife Financial Corp. gained after the U.S. Senate scheduled a vote tonight on the financial-system bailout.

``People are focused on what's happening south of the border,'' said Michael Sprung, president of Sprung & Co. Investment Counsel, which manages about $50 million in Toronto. ``They are fearful that if the U.S. were to go into a major recession, that Canada would not be able to escape.''

The Standard & Poor's/TSX Composite Index fell 0.3 percent to 11,714.51 in Toronto. It dropped as much as 1.7 percent earlier. The S&P/TSX slid 15 percent in September, its worst month since the Asian financial crisis sent it 20 percent lower in August 1998. Commodity shares paced September's drop on concern that U.S. bank failures will deepen the credit contraction and curb demand in Canada's biggest export market.

Suncor Energy, the world's second-biggest oilsands producer, dropped 7.5 percent to C$40.70. EnCana Corp. declined 3.7 percent to C$65.46. Canadian Natural Resources Ltd. fell 2.1 percent to C$71.50 and Nexen Inc. slid 5.7 percent to C$23.30.

Oil Slides

Crude oil for November delivery fell 2.1 percent to $98.53 a barrel in New York, after U.S. supplies increased more than forecast as fuel consumption dropped to the lowest since 2001. Oil has slid 33 percent from the July 11 record of $147.27.

Bombardier, the third-largest maker of commercial aircraft, fell 6.2 percent to C$5.42.

Martinrea International Inc. slumped 8.9 percent to C$5.54. Canada's third-largest publicly traded auto-parts maker fell after carmakers including Ford Motor Co. reported that sales tumbled in September on tighter credit.

Magna International Inc., North America's biggest car-parts maker, dropped 2.9 percent to C$53.10, the lowest since July 11. UBS AG analyst Fadi Chamoun cut his share-price target on the stock by 11 percent to $65 (C$69.07), citing expectations of weaker European demand.

Manufacturing in the U.S., which takes about three quarters of Canadian exports, contracted in September at the fastest pace since the last recession. Elsewhere, the London interbank offered rate that banks charge each other for loans in euros climbed to an all-time high today on concern that more lenders will fail.

GE Falls

General Electric Co., the second-largest U.S. company, fell in U.S. trading even after unveiling plans to raise $3 billion from Warren Buffett and $12 billion in a share sale. Credit default swaps, contracts to protect against a default by GE Capital, jumped to a record before recovering on news of Buffett's investment. Deutsche Bank AG said GE's profit will be hurt by ``deterioration'' at its financial unit.

``There's concern about even the strongest, vibrant companies' access to capital,'' said Robert McWhirter, who oversees about $140 million at Selective Asset Management in Toronto. The bailout ``is a focus. It's a necessary piece, but it's not a cure-all.''

Measures of energy and industrial stocks fell 2 percent and 1.3 percent, respectively. A gauge of financial companies added 0.6 percent.

Manulife Financial, Canada's biggest insurance company, added 1.9 percent to C$39. Sun Life Financial Inc. rose 3.5 percent to C$38.50.

Established providers of wireless phone services such as Telus Corp. gained after the Globe and Mail reported that the credit crunch will help temper competition from new entrants into the market, whom analysts said may find it difficult to finance construction of networks

Telus, Canada's second-largest mobile-phone provider, advanced 6.7 percent to C$41.47, the most in two weeks. Rogers Communications Inc. added 5.4 percent to C$36.38. An index of telephone companies gained 2.2 percent.

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