Canada Stocks Fall Most in 21 Years Led by EnCana, Financials

By Whitney Kisling

Dec. 1 (Bloomberg) -- Canadian stocks fell the most in 21 years, led by energy producers and financial companies, as a six day rally ended on sliding oil prices and a newspaper report that banks may announce more writedowns helped.

EnCana Corp., led a decline in energy shares, after the Organization of Petroleum Exporting Countries deferred a production cut decision two weeks, triggering a drop in crude.

Insurer Manulife Financial Corp. and Royal Bank of Canada led financials lower. Barrick Gold Corp. slid with the price of bullion. Northbridge Financial Corp. surged after Fairfax Financial Holdings Ltd. agreed to buy the rest of it.

The Standard & Poor’s/TSX Composite Index slid 9.3 percent to 8,406.21 in Toronto, the steepest drop since October 1987 and the biggest move today of any market included in global benchmarks. The country’s main stock index gets three-fourths of its value from energy, mining and finance shares.

“It’s the economy again,” said John Kinsey, who helps manage about C$1 billion for Caldwell Securities Ltd. in Toronto. “People are worried about the world economic picture and that backs up into the financials, and the commodities, and as such, stocks are down. Obviously a recession isn’t good for the banks.”

Oil fell below $50 after OPEC postponed a decision until Dec. 17 to assess the impact of a 1.5 million-barrel-a-day reduction agreed to in October, and said it will trim output at its next meeting.

Energy Producers

EnCana, the country’s biggest energy company by market value, dropped 13 percent to C$52.32, helping to lead an index of energy stocks down 11 percent, the second-biggest decline among 10 industry benchmarks in Canada. Canadian Natural Resources Ltd., the country’s third-largest energy company, fell 15 percent to C$44.44. Suncor Energy Inc., the world’s second- largest oil-sands mining company, slipped 16 percent to C$23.90.

Oil prices have fallen 66 percent since hitting a record $147.27 a barrel on July 11.

An index of financial stocks fell 8.6 percent. Canada’s financial shares have dropped 38 percent this year as the global economy slowed and credit-related losses and writedowns amounted to almost $1 trillion worldwide.

The U.S. economy entered a recession a year ago this month, a panel that dates American business expansions at the National Bureau of Economic Research said today. The S&P/TSX has declined 39 percent this year on concern the U.S.-led recession will hurt demand for Canada’s commodity exports.

U.S. Market

The Standard & Poor’s 500 Index fell 8.9 percent to 816.21, the first decline since Nov. 20, after climbing for five days, the longest streak of gains since July 2007. U.S. trading was shortened Nov. 28 after the Thanksgiving holiday Nov. 27.

Several of Canada’s banks may announce big writedowns for the fiscal year ended Oct. 31, the Financial Times reported, without saying where it got the information. Royal Bank, Toronto-Dominion Bank and Bank of Nova Scotia gave fourth- quarter results in advance because of writedowns. Canadian Imperial Bank of Commerce, which didn’t give pre-announced results, is scheduled to release fourth-quarter results Dec. 4.

Manulife, Canada’s biggest insurance company, slid 15 percent to C$20.46. Royal Bank, the nation’s largest bank, slid 8.7 percent to C$39.44. Toronto-Dominion Bank, the second- largest Canadian lender, fell 8.2 percent to C$42.25.

The S&P/TSX posted its best week in 33 years last week as banks and insurers gained on speculation the government’s actions to add liquidity to the financial markets are helping soften the worst year since 1931 for Canadian equities. During the six-day rally, the index gained 20 percent, meeting the definition of a bull market.

“It was a pretty exceptional week last week, and in Canada, a pretty exceptional Friday afternoon,” said Paul Hand, managing director of equity trading at RBC Capital Markets in Toronto. “I think we were destined to give a lot of that back today.”

Gold prices fell the most in eight months, sending Barrick down 13 percent to C$32.65. Goldcorp Inc., the second-biggest gold producer, fell 17 percent to C$29.15. A gauge of materials producers fell 14 percent.

Northbridge, a property and casualty insurer, rallied 19 percent to C$38.27, the most on the S&P/TSX Index. Fairfax, which owns 63.1 percent of Northridge, offered C$39 a share for the remaining stake. Once the deal is complete, Northbridge will become a unit of Fairfax, the best-performing Canadian financial stock this year

To contact the reporter on this story: Whitney Kisling in New York at wkisling@bloomberg.net.