Canadian Stocks Rally, Led by Manulife, on Bailout Talk, Oil

By John Kipphoff

Sept. 30 (Bloomberg) -- Canadian stocks rallied from their biggest drop in almost eight years, led by financial and energy companies, on speculation the U.S. government will revive its $700 billion bank rescue and temper an economic slowdown.

Manulife Financial Corp. climbed the most since 2003, pacing a rally among banks and insurers. Canadian Natural Resources Ltd. led energy shares higher after oil prices rebounded to above $100. Research In Motion Ltd. advanced on speculation that a two-day selloff was overdone. Canada's main stock index still completed its worst quarter in a decade.

``The bottom line is that some sort of package will get done,'' said Andrew Martyn, who helps manage about C$450 million at Toronto-based Davis-Rea Ltd. ``Otherwise half the U.S. bank branches will close down. If it doesn't get done, make sure you have a healthy stock of cash underneath your mattress.''

The Standard & Poor's/TSX Composite Index added 4.2 percent to 11,752.90 in Toronto, bouncing back after yesterday's 6.9 percent drop. The S&P/TSX fell 19 percent in the three months since June, its worst such drop since a 24 percent quarterly decline a decade ago.

Manulife Financial Corp., the country's biggest insurance company, added 5.6 percent to C$38.28. Royal Bank of Canada, the country's largest lender by assets, advanced 6.3 percent to C$50.50 and Toronto-Dominion Bank rose 6.7 percent to C$64.08. Canadian Imperial Bank of Commerce gained 7.4 percent to C$61.08. Bank of Montreal climbed 9.4 percent to C$45.95 for the biggest gain among financial shares in the S&P/TSX today, after a 9.3 percent drop yesterday.

Only Gainer

A measure of financial shares rose 5.3 percent today, swinging to a quarterly gain of 1.7 percent. The group, with a 31 percent weighting in the S&P/TSX, is the only one among the index's 10 industries to have risen since June 30.

Canadian Natural climbed 12 percent to C$73 for its steepest gain in 15 years. The nation's second-biggest natural- gas producer dropped 19 percent yesterday, the most since 1989.

EnCana Corp. added 4.6 percent to C$67.96. Suncor Energy Inc. gained 7 percent to C$44. Nexen Inc. climbed 10 percent to C$24.70, the most in more than three years.

Crude oil rose 4.4 percent to $100.64 a barrel in New York, recovering from its biggest drop in seven years, after U.S. lawmakers said they intend to salvage the bank bailout. Senate Majority Leader Harry Reid said that approving the rescue legislation remains a top priority. Congress will take action on the plan this week, Senate Minority Leader Mitch McConnell said.

Crude oil futures slid 28 percent in the third quarter for their biggest quarterly drop since 1991. Soybeans had their worst quarter in 35 years and copper the biggest drop on record.

Takeover Approved

Fording Canadian Coal Trust jumped 10 percent to C$87.27, the most in two weeks. Shareholders of the second-biggest exporter of coal used in making steel approved its $13.3 billion takeover by Teck Cominco Ltd. today and Teck said it completed agreements for $9.8 billion in loans to help finance the acquisition. Teck, Canada's biggest diversified mining company, added 4.5 percent to C$30.22.

Gains among mining companies were limited as bullion producers fell along with gold prices. Barrick Gold Corp., the biggest miner of the metal, fell 3.6 percent to C$38.97.

Gauges of energy and materials shares, which account for more than two fifths of the S&P/TSX's value, added 5.4 percent and 0.7 percent today. In the quarter, they've led the index lower, dropped 28 percent and 34 percent, respectively.

``We're pretty much in a hold mood,'' said John Kinsey, who helps manage about C$1 billion for Caldwell Securities Ltd. in Toronto. ``This may be a dead cat bounce.''

Research In Motion climbed 8.7 percent to C$71.71. The maker of the BlackBerry e-mail phone lost about C$20 billion of its market value in the previous two days after giving lower- than-expected profit forecasts on Sept. 25. RIM was raised to ``market outperform'' from ``market perform'' by JMP Securities analyst Samuel Wilson in San Francisco, who said the stock's set to exceed expectations following its retreat, and on new products.

``Some stocks have come off so far so fast, they're starting to show some value,'' Martyn said, citing EnCana and Teck Cominco among others. ``You can start to look at RIM.''

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