Canada Stocks Have Worst Week Since 2000 on Recession Concerns

By John Kipphoff

Oct. 3 (Bloomberg) -- Canadian stocks fell a third day, completing their steepest weekly slide in almost eight years, on concern the $700 billion U.S. plan to rescue banks won't avert a recession for the Canada's biggest trade partner.

Financial shares dropped, led by Manulife Financial Corp. and Brookfield Asset Management Inc., after borrowing costs climbed as the financial-system bailout headed for approval. Potash Corp. of Saskatchewan Inc. paced a record slide in mining companies and Canadian Natural Resources Ltd. led energy producers lower as crude oil posted its worst weekly drop since 2004.

The Standard & Poor's/TSX Composite Index fell 0.9 percent to 10,803.35 in Toronto after rising 4.2 percent earlier. Canada's main stock benchmark, which derives more than two- fifths of its value from raw-materials and energy shares, slid 10.9 percent this week as commodity prices plunged. The S&P/TSX fell 11.1 percent in the last week of October 2000.

``Sell on the news,'' said Paul Hand, managing director of equity trading at RBC Capital Markets in Toronto. ``This is only the beginning of the hard work of re-liquifying credit markets. A lot of people are getting off the materials trade, saying we'll still have a recession.''



Manulife Financial, Canada's largest insurance company, fell 2 percent to C$36.47 completing its worst weekly drop since June. Brookfield, the manager of $95 billion in assets including real estate and power stations, dropped 5.5 percent to C$26.16, the lowest since January. Toronto-Dominion Bank, the nation's second-biggest lender, slid 1.8 percent to C$59.43 after climbing as much as 3.6 percent earlier.

Reeling

U.S. Congress passed and President George W. Bush signed a mesure that authorizes the government to buy troubled assets from financial institutions reeling from record U.S. home foreclosures. The S&P/TSX fell 6.95 percent yesterday, and 6.93 percent on Sept. 29 when the House of Representatives' rejected the government's earlier rescue plan.

Global financial institutions have had almost $590 billion in losses and writedowns on mortgage-related securities. Canadian banks account for about $10.8 billion of the total. The London interbank offered rate that banks charge each other for loans in U.S. dollars rose the highest since January.

Canadian Imperial Bank of Commerce rose 1.2 percent to C$58.50 after Cerberus Capital Management LP agreed to invest more than $1 billion cash in the bank's troubled U.S. real- estate portfolio, helping reduce the lender's risk.

Industry Groups

Measures of financial companies in the S&P/TSX retreated 1.4 percent. An index of energy stocks dropped 1.6 percent today, while a gauge of raw-materials stocks added 1.9 percent. Energy producers and raw-materials companies' respective weekly drops of 15 percent and 20 percent were the groups' worst such performance since 1995 when the indexes began.

Canadian Natural, the country's second-largest natural-gas producer, fell 1.8 percent to C$63.92. Imperial Oil Ltd., the biggest oil and gas producer, dropped 4.5 percent to C$41.51. Enbridge Inc., Canada's biggest pipeline company, retreated 3.2 percent to C$39.42.

Crude oil futures fell 9 cents to $93.88 a barrel in New York, taking their weekly drop to 12 percent this week after fuel demand fell to the lowest since October 2001. Oil, copper and corn led commodities toward their worst week since at least 1956 this week, according to the Reuters/Jefferies CRB Index.

Potash Corp. advanced 1.2 percent to C$102.21 today. The biggest maker of crop nutrients fell 33 percent this week, the worst such drop since trading began in 1989, after declining commodity prices, missed earnings at Mosaic Co. and a downgrade to ``underperform'' at Merrill Lynch & Co. sparked a slump in Potash and other agricultural companies.

Barrick Gold Corp. added 5.1 percent to C$34.95 even as price of the precious metal fell for a second day. The biggest producer of gold dropped the most in two decades yesterday.

Magna International Inc. plunged after Russian billionaire Oleg Deripaska ceded his investment in the car-parts maker. Magna fell 5.9 percent to C$46.32, the lowest price since February 1996, after a bank financing Deripaska's $1.54 billion purchase of shares in the company asked for the money back.

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