Canadian Stocks Decline, Led By Scotiabank, RIM; Nexen Jumps

By Eric Martin and John Kipphoff

Dec. 2 (Bloomberg) -- Canadian stocks dropped a second day, adding to the worst sell-off in 21 years, on speculation that the economic slowdown trigger additional losses at financial companies and reduce consumer spending on technology.

Bank of Nova Scotia paced the decline after posting larger- than-expected investment writedowns, while Manulife Financial Corp. slid after saying it will issue stock to shore up its balance sheet. Research In Motion Ltd., maker of the BlackBerry mobile phone, dropped as much as 11 percent after competitor Palm Inc. blamed smaller-than-estimated sales on consumers curbing their spending on handsets. Nexen Inc. surged on a report that France’s Total SA will offer to buy the oil company.

“People thought most of the worst had happened,” said David Cockfield, who helps oversee about $2 billion as a portfolio manager at Leon Frazer & Associates in Toronto. “There’s still a black cloud hanging over the financials.”

The Standard & Poor’s/TSX Composite Index lost 0.9 percent to 8,327.81 in Toronto, extending its loss this week to 10 percent. The main Canadian stock index dropped the most since October 1987 yesterday, ending a six-day, 20 percent rally. The S&P/TSX is down 40 percent in 2008, on course for its worst annual drop on record.

Scotiabank, Canada’s third-largest bank by assets, dropped 7.1 percent to C$32.38 after reporting fourth-quarter net income dropped 67 percent to C$315 million ($251 million), on C$642 million in investment writedowns. The Toronto-based bank said Nov. 18 that writedowns would be C$595 million.

Deterioration?

“Provisions from credit losses were higher than we anticipated,” John Aiken, an analyst at Dundee Securities in Toronto said in a note to clients. The implications for other banks could be that global credit quality is deteriorating more quickly than anticipated, he said.

Royal Bank of Canada, which is scheduled to report earnings on Dec. 5, fell 3.9 percent to C$37.90. Royal, the country’s biggest lender, said Nov. 24 that its fourth-quarter profit would fall about 15 percent from a year earlier because of C$670 million in trading losses and writedowns.

Manulife slipped 2.8 percent to C$19.89. Canada’s biggest insurance company said that it will sell as much as C$2.13 billion in new stock to increase reserves threatened by the eroding value of investments. Manulife also said that expects to report its first quarterly loss since going public in 1999.

Sun Life Financial Inc., Canada’s third-largest insurer by market value, dropped 9.7 percent to C$23.25.

Rival’s Report

Research In Motion fell 7.5 percent to C$46.46, the lowest since November 2006. Palm, the maker of the Treo and Centro mobile phones, reported sales that missed analysts’ estimates. Fewer consumers are buying older phones, especially as they tighten budgets to cope with the global credit freeze, according to Palm. Palm plunged as much as 39 percent in Nasdaq trading.

Stocks also fell after opposition parties agreed to wrest power from Prime Minister Stephen Harper, and said they’re prepared to form as early as next week Canada’s first coalition government since World War I. Leaders of the Liberal Party, New Democratic Party and Bloc Quebecois signed an accord yesterday to form an administration to replace Harper’s Conservatives.

Nexen Inc. surged 11 percent to C$24.26 and earlier jumped as much as 33 percent for its steepest intraday gain in 21 years. Total, based in Paris, is preparing a C$19.7 billion ($15.8 billion) bid for the Canadian co-owner of the Long Lake oil-sands project in Alberta, the Financial Times reported on its Alphaville Web site, without citing anyone.

‘Pretty Big Signal’

“If Nexen were to go and it was Total that bought them out, that would be a pretty big signal saying we have an underpinning to energy, an important sector of our market,” said Andrew Martyn, who helps manage about C$450 million at Toronto-based Davis-Rea Ltd. “That is playing heavily into today’s trading.”

Other oil and gas stocks advanced. Talisman Energy Inc. climbed 9.2 percent to C$11.21. Canadian Natural Resources Ltd. added 6.3 percent to C$47.25.

An index of energy shares rose as crude-oil prices fell to the lowest in more than three years.

Barrick Gold Corp. and Goldcorp Inc., the country’s biggest gold producers, led raw-materials producers to a 3.4 percent advance, the biggest among the three among the S&P/TSX’s 10 industries that rose. Gold gained, rebounding from the biggest decline in eight months, as the U.S. dollar dropped, boosting the appeal of the precious metal as an alternative investment. Barrick increased 5.7 percent to C$34.31 and Goldcorp rose 6.7 percent to C$31.10.

To contact the reporter on this story: John Kipphoff in Toronto at jkipphoff@bloomberg.net; Eric Martin in New York at emartin21@bloomberg.net.