Canada Stocks Fall, Led by Oil Shares, Suncor; Manulife Gains

By Whitney Kisling and John Kipphoff

Nov. 3 (Bloomberg) -- Canadian stocks fell for a second day, adding to the main index's worst monthly drop in a decade, as energy producers slid along with oil prices on expectations that a recession will hurt commodity demand and profits.

Suncor Energy Inc. and Canadian Natural Resources Ltd. each dropped more than five percent. Losses were limited as banks and insurers advanced, led by Manulife Financial Corp., after global borrowing costs fell and the Bank of Canada announced plans to make additional injections of money to ease the credit crisis.

``Today was a day of consolidation,'' said Rick Hutcheon, who manages about $140 million as chief investment officer at RKH Financial in Toronto. ``The recession is now pretty much priced in. I wouldn't be surprised if oil goes to a new low.''

The Standard & Poor's/TSX Composite Index slipped 0.4 percent to 9,721.26 in Toronto after rising as much as 1.2 percent earlier. Canada's main equity benchmark slid 17 percent in October as the price of oil and other raw materials slumped on expectations that the credit contraction and slower economic growth will cut demand for commodities.

Suncor Energy, the world's second-largest oil-sands mining company, dropped 6.2 percent to C$27.17. Canadian Natural, the country's second-biggest natural-gas producer, declined 5.4 percent to C$57.51. EnCana Corp., the nation's largest energy company by market value, fell 4.5 percent to C$58.50. Petro- Canada retreated 4.6 percent to C$28.74

Crude oil for December delivery fell 5.8 percent to $63.91 a barrel in New York, after manufacturing in the U.S. contracted in October at the fastest pace in 26 years, suggesting that fuel consumption will decline. Prices tumbled 33 percent in October, a record, amid the global economic slowdown.

Market Breakdown

A measure of energy shares dropped 3.1 percent while a gauge of financial stocks added 1.2 percent. The two groups account for about three-fifths of the S&P/TSX's value.

Manulife, North America's biggest insurance company by assets, gained for the first time in three days, adding 8.2 percent to C$26.11.

Sun Life Financial Inc., the country's third-largest insurance company, advanced 4.1 percent today to C$29.50. Power Corp. of Canada, owner of the country's biggest mutual fund company and second-largest insurer, rose 4.4 percent to C$27.35.

``The Canadian stock market is really about two sectors: energy and financials,'' Vincent Delisle, chief strategist at Scotia Capital Inc. in Montreal. ``Financials will always do much, much better when energy is going lower''

Key Interest Rate

The London interbank offered rate, or Libor, that banks charge for three-month loans in dollars dropped to its lowest level since the Sept. 15 collapse of Lehman Brothers Holdings Inc., falling 17 basis points to 2.86 percent. The Bank of Canada plans to increase the total amount of money it's putting in the banking system to deal with the credit crisis to C$27 billion by the end of the year.

The decline in Libor ``shows there's a little more optimism that we're coming through the credit crisis,'' said Laura Wallace, who helps oversee about $300 million as managing director at Coleford Investment Management Ltd. in Toronto.

Bank of Nova Scotia fell 2.9 percent to C$39.03. Canada's third-largest bank by assets was cut to ``neutral'' from ``buy'' by Sumit Malhotra at Merrill Lynch & Co. The Toronto-based analyst cut his earnings estimate for next year, saying in a note that loan growth may slow and credit losses may increase.

To contact the reporter on this story: John Kipphoff in Toronto at jkipphoff@bloomberg.net; Whitney Kisling in New York at wkisling@bloomberg.net.