Canadian Stocks Rally the Most Since 1976 on Bank Rescue Plans

By John Kipphoff

Oct. 14 (Bloomberg) -- Canadian stocks surged, sending the main index to the biggest gain in 32 years, on speculation that U.S. plans to invest $250 billion in banks may help stem the financial crisis and bolster economic growth.

Royal Bank of Canada and Manulife Financial Corp. and EnCana Corp. led the rally, each jumping at least 15 percent. The U.S. announcement came after European countries committed $1.8 trillion to guarantee bank loans and take stakes in lenders.

``With all the action being taken by governments, the worst news is probably over,'' said Luc Girard, who helps oversee about $14.1 billion as director of Desjardins Securities' portfolio advisory group in Montreal. ``We have a very positive base for the next few years.''

The Standard & Poor's/TSX Composite Index jumped 890.50, or 9.8 percent, to 9,955.66 in Toronto, for its steepest advance since December 1976. Nine stocks gained for every one that fell. Canada's stock benchmark, which derives three-quarters of its value from financial, energy and mining stocks, earlier rose as much as 18 percent, the biggest intraday rally in 75 years.

The S&P/TSX fell the most since 1940 last week, capping a 40 percent slide from a June 18 record, on concern that bank losses and tighter credit will cause a recession, destroying demand for the country's energy and raw-materials exports. Canadian equity markets were closed yesterday for the Thanksgiving holiday.

Stocks climbed worldwide yesterday after the U.S. Federal Reserve said central banks will offer financial institutions unlimited dollar funds and Europe pledged to guarantee bank debt and permit governments to buy stakes. U.S. Treasury Secretary Henry Paulson said today he will use $250 billion to buy stakes in thousands of financial firms, urging companies getting the funds to ``deploy'' the money in loans to halt a credit freeze.

Banks Rally

A gauge of financial companies surged 12 percent for the biggest advance since at least December 1987. Royal Bank, the nation's biggest lender, gained 15 percent to C$47, the most in at least 25 years. Toronto-Dominion Bank increased 13 percent to C$58.74 as the second-largest bank was raised to ``buy'' from ``neutral'' by Merrill Lynch & Co. Bank of Nova Scotia, Canada's third-biggest lender, added 11 percent to C$44.50.

Manulife Financial Corp., Canada's biggest insurance company, rose 15 percent to C$30.50 for its biggest-ever gain. Chief Executive Officer Dominic D'Alessandro said he plans to maintain the dividend and will consider acquisitions.

Sun Life Financial Inc., the third-largest insurer, climbed 20 percent to C$30.79, the most in its eight years of trading since demutualization.

Energy Producers Jump

EnCana, Canada's biggest energy company by market value, climbed 17 percent to C$50.80, the most in at least 25 years. Talisman Energy Inc., the oil and natural-gas producer with about two-thirds of its reserves in North America or the North Sea, jumped 23 percent to C$12.20. Canadian Natural Resources Ltd. advanced 15 percent to C$55.23. Bankers Petroleum Ltd. surged 33 percent to C$1.46. Denison Mines Ltd., a uranium mining company, rose 21 percent to C$2.02.

Teck Cominco Ltd., Canada's biggest diversified mining company, rose 15 percent to C$18.75 for the steepest rise since 2002. Potash Corp. of Saskatchewan Inc., the largest maker of crop nutrients, increased 10 percent to C$113.01. Equinox Minerals Ltd., building Africa's biggest copper mine, soared 37 percent to C$1.90.

Gauges of energy and raw-material stocks gained 14 percent, and 6.3 percent, respectively. All 10 industries in the S&P/TSX advanced at least 1.6 percent.

Research In Motion Ltd., the maker of the Blackberry phones, rose 9.4 percent to C$70. Nortel Networks Corp., the biggest North American maker of phone gear, added 14 percent to C$2.

Canadian and U.S. stocks probably set a ``short-term bottom'' and will rally through the end of 2008 on bank-rescue plans, Scotia Capital Inc. Chief Strategist Vincent Delisle said.

``The near term response to the latest concerted measures should push equities higher through year-end,'' Delisle, based in Montreal, wrote in a note to clients. ``As with most bear markets, however, we are likely to retest the lows in the first half of 2009 before we can argue for the end of this bear.''

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