Canada Stocks Drop Most Since 1987 on TD Bank Trading Loss, Oil

By John Kipphoff

Nov. 20 (Bloomberg) -- Canadian stocks fell the most since Black Monday 1987, led by banks and energy producers, after Toronto-Dominion Bank reported trading losses and oil prices fell below $50 a barrel for the first time in two years.

Manulife Financial Corp. slid 15 percent, while Canadian Natural Resources Ltd. dropped 22 percent. Teck Cominco Ltd. retreated to a two-decade low. Goldcorp Inc. rose as investors looked to gold and bullion stocks for a haven.

``The turbulent times will continue until we get a better sense of the depth and duration of the U.S. recession -- maybe in the New Year,'' said Laura Wallace, who helps oversee about $300 million as managing director at Coleford Investment Management Ltd. in Toronto. ``The problem with the S&P/TSX is that it's so undiversified. It reflects that valuations of some commodities went parabolic. Financials and commodities are the two sectors hardest hit in a recession.''

The Standard & Poor's/TSX Composite Index fell 9 percent to 7,724.76 in Toronto, the lowest in five years. The market's steepest drop since Oct. 19, 1987, extended its retreat this year to 44 percent. That would be the Canadian benchmark's worst annual plunge on record, surpassing a 37 percent slide in 1931.

The S&P/TSX, which gets almost three-quarters of its value from finance, energy and mining shares, has lost almost half its value, with its market capitalization sliding to C$1 trillion from a June record, as global credit losses topped $965 billion and commodity prices slumped.

Capitulation?

``Was that the day of capitulation? Who knows?'' said Gareth Watson, who helps manage $46 billion as associate director at ScotiaMcLeod's portfolio advisory group, based in Toronto. ``At this stage, with these markets, anything is possible. It's hard to turn the markets around when there is so little good news to talk about.''

Toronto-Dominion fell 13 percent to C$43.57, the most in at least a quarter century. Canada's second-biggest bank said it will have C$350 million ($274 million) in credit trading losses, and a deficit of C$153 million in its ``corporate'' segment from eroding investments, when it posts fourth-quarter results next month. The bank now expects profit of C$1.22 a share for the period, short of the C$1.30-a-share average analyst estimate.

Manulife Financial, the country's largest insurance company, dropped a record 17 percent to C$17.86, the most in its nine years of trading since demutualizing in 1999. Royal Bank of Canada, the biggest bank, slid 13 percent to C$35.65, also the most since 1983. Canadian Imperial Bank Of Commerce, the lender with the biggest writedowns among Canada's banks, slid 12 percent to C$42.28, the most in a decade.

Deepening Recession

Crude oil for December delivery fell 7.5 percent to $49.62 a barrel in New York, on concern a deepening recession in the U.S., Europe and Japan will cripple global energy demand. First- time claims for U.S. unemployment insurance rose last week to the highest level since 1992, the Labor Department said.

Copper prices tumbled 1.8 percent to $1.58 a pound and touched $1.552, the lowest since July 2005. Oil has slid 67 percent since reaching a record $147.27 in July. Copper has lost 63 percent this year. The Reuters/Jefferies CRB Index of 19 raw materials is down more than 50 percent from a peak in July. Gold rose 1.7 percent to $748.70 an ounce.\

Canadian Natural, the nation's third-biggest energy company by market value, dropped 22 percent to C$35.43 for its steepest drop since January 1989.

Retreat

EnCana Corp., Canada's largest energy company, fell 14 percent to C$43.86, the most in at least 25 years. Suncor Energy Inc., the second-biggest oil-sands company, retreated a record 15 percent to C$18.83.

Teck Cominco dropped 21 percent to C$4.10 and touched C$3.35, the lowest price in 20 years. Canada's biggest diversified mining company announced that it would halt dividends and cut spending to repay debt from last month's $10.4 billion purchase of Fording Canadian Coal Trust.

``Oh my goodness, look where Teck's trading,'' Wallace said. ``The Fording acquisition was very unfortunate.''

Major Drilling Group International Inc., the world's second-largest mineral-drilling contractor, slumped 18 percent to C$11, the lowest since May 2005. Mining companies including BHP Billiton Ltd., Rio Tinto Group and Xstrata Plc may cut capital spending by $12 billion next year as demand and metal prices fall, Sanford C. Bernstein & Co. said.

Potash Corp. of Saskatchewan Inc., the biggest maker of crop nutrients by market value, fell 12 percent to C$71.59, as corn, soybean and wheat prices extended declines on concern that the worsening economy will curb demand for food and feed. The stock peaked at C$244.03 on June 17.

Goldcorp, the second-largest bullion mining company by market value, advanced 6.1 percent to C$24.77

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