Canadian Stocks Fall on U.S. Recession Concern, Led by EnCana

By John Kipphoff

Oct. 15 (Bloomberg) -- Canadian stocks fell, wiping out two-thirds of their biggest gain in 32 years, as commodity and financial shares sank on speculation global bank bailouts won't be enough to prop up the economy and demand for raw materials.

EnCana Corp. paced a record decline in energy producers after crude oil sank below $75 a barrel for the first time in a year and the company delayed a split into separate oil and gas units. Manulife Financial Corp. led banks and insurers lower after helping the main index rally the most since 1976 yesterday on U.S. plans to rescue banks, unlock credit and bolster growth.

``Even if we get through the credit crisis, we still have a U.S. recession to deal with,'' said Gareth Watson who helps manage about $65 billion as associate director at ScotiaMcLeod's portfolio advisory group, based in Toronto. ``There's a question of demand for particular commodities. Canada won't escape the U.S. weakness.''

The Standard & Poor's/TSX Composite Index dropped 6.4 percent to 9,323.83 in Toronto after jumping 9.8 percent yesterday when the U.S. outlined details of a $250 billion plan to buy equity stakes in banks. Canada's main equity benchmark is trading 38 percent below its June 18 record.

Reports today suggested that the economy in the U.S., Canada's biggest trading partner, is slowing. Retail sales fell 1.2 percent in September and prices paid to U.S. producers fell 0.4 percent. The Federal Reserve Bank of New York's general economic index dropped to the lowest level in October since 2001. San Francisco Federal Reserve President Janet Yellen said yesterday that the U.S. may already be in a recession.

Retreat

EnCana, Canada's biggest energy company by market value, fell 13 percent to C$44.30 after jumping 17 percent yesterday. Canadian Oil Sands Trust, lead partner in the world's largest oil-sands mining company, slid 21 percent to C$22.19 for its worst drop since trading began in 1995.

Suncor Energy Inc., the second-biggest oil-sands producer, slid a record 14 percent to C$24.99. Canadian Natural Resources Ltd. declined 15 percent to C$47.01. Birchcliff Energy Ltd., the oil and gas producer whose biggest shareholder is Canadian billionaire Seymour Schulich, dropped 19 percent to C$5.21, the most in four years.

Crude oil for November delivery fell 5.3 percent to $74.50 in New York, slipping below $75 a barrel for the first time since September 2007. The Organization of Petroleum Exporting Countries cut its 2009 demand forecast for a second month, citing ``dramatically worsening'' conditions in financial markets. The U.S. takes about three-quarters of Canada's total exports and is the biggest buyer of the Canadian oil and gas.

Energy Drop

A gauge of energy companies fell 11 percent, the most since the index was started in December 1987. A measure of raw- materials producers slipped 9.7 percent as prices of industrial metals retreated.

Potash Corp. of Saskatchewan Inc., the largest maker of crop nutrients, dropped 19 percent to C$91.51, more than wiping out yesterday's 10 percent gain. Teck Cominco Ltd., Canada's biggest diversified mining company, fell 18 percent to C$15.46 for its biggest loss in eight years. Inmet Mining Corp. slid 15 percent to C$25.39, the lowest since December 2005.

Copper tumbled, leading a decline in industrial metals today, as a slump in shipping costs heightened speculation that demand will weaken. Soybean, corn and wheat slid in Chicago.

Pessimism on stocks soared to an all-time high as a growing conviction the global economy is in a recession spurred investors to shun commodity shares, a Merrill Lynch & Co. survey showed. A measure of confidence in the global economy plunged in October to the lowest reading on record, according to the Bloomberg Professional Global Confidence Index.

`Still Scared'

``A lot of people are still scared and are saying, `get me out of here before it goes down again,''' Stephen Jarislowsky, who helps oversee about $43 billion as chairman of Montreal- based money manager Jarislowsky Fraser Ltd. said yesterday. ``A lot of people have sworn off the stock markets altogether.''

Financial stocks fell 3.4 percent as a group even as the Bank of Canada lent banks and brokers C$10 billion ($8.54 billion) for 28 days, putting emergency cash into the system to encourage lending.

Manulife, North America's biggest insurance company by assets, slid 4.8 percent to C$29.05, after a 15 percent gain. Royal Bank of Canada, the nation's biggest lender, fell 4.3 percent to C$45. Toronto-Dominion Bank, the second-largest, slid 3.5 percent to C$56.68.

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