Canadian Stocks Rally on Fed, Led by Potash, EnCana, Manulife

By John Kipphoff

Dec. 16 (Bloomberg) -- Canadian stocks rose to their highest this month as commodity and finance shares climbed after the Federal Reserve cut its benchmark rate to a record low and said it will do whatever is needed to revive economic growth.

Potash Corp. of Saskatchewan Inc. gained more than 7 percent on higher prices for wheat and corn. Bullion mining companies including Goldcorp Inc. joined the rally after the Fed’s cut sent the U.S. dollar lower, boosting the appeal of metals and other commodities traded in the American currency. Suncor Energy Inc. rose pacing gains among oil producers even as crude prices reversed an earlier advance. Financial shares rallied from an earlier drop, led by Manulife Financial Corp., on the prospect of lower financing costs,

“The Fed’s move exceeded expectations,” said John Stephenson, who helps to oversee about $1.5 billion at First Asset Investment Management Inc. in Toronto. “So the markets have rallied. But the truth is, until the U.S. stops falling we’re in for a bumpy ride. We’ve got to see the U.S. stop falling, some growth come back and then we’ll see the rest of the world improve.”

The Standard & Poor’s/TSX Composite Index rose 3.1 percent to 8,724.11 in Toronto, the highest close since Nov. 28. The main Canadian equity benchmark has fallen 37 percent this year, poised for its worst annual drop since 1931, on slumping commodity prices and global credit losses of almost $1 trillion.

The Federal Reserve cut its key interest rate to “a target range” of between zero and 0.25 percent and said that “weak economic conditions are likely to warrant exceptionally low levels of the federal funds rate for some time.” The bank will also use “all available tools,” including the possible purchase of longer-term treasury bonds, to bolster growth.

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Potash gained 8.7 percent to C$93, the highest since Nov. 11. The world’s largest crop-nutrient producer was upgraded to “buy” from “underperform” by Merrill Lynch & Co. analyst Steve Byrne, who said, in a note to clients today, that “fertilizer fundamentals are nearing a bottom.” The stock has still more than halved in value this year.

Byrne, based in New York, left his “underperform” recommendation on Agrium Inc. unchanged, saying North America’s third-largest fertilizer company faces a “potential large inventory devaluation in its retail business.” Agrium climbed 10 percent to C$41.72, its highest price in a month.

Wheat futures rose 4.6 percent to $5.44 a bushel in Chicago on a report that Saudi Arabia is in the market for 500,000 metric tons of high-protein milling wheat. Corn and soybeans rose after the U.S. dollar declined for the fifth straight session.

Gold futures rose as high as $857.50 in after hours electronic trading on the Comex division of the New York Mercantile Exchange, the highest since Oct. 15.

Miners Rally

Goldcorp, the second-largest gold producer by market value, added 4.5 percent to C$38.00. Kinross Gold Corp., Canada’s third-biggest bullion miner, rose 6 percent to C$22.

Suncor Energy, the world’s second-biggest oilsands producer, added 5.6 percent to C$26.61. EnCana Corp., Canada’s biggest energy company by market value, added 5.2 percent to C$57.82. Talisman Energy Inc. gained 5.6 percent to C$12.13.

“Everyone’s looking for some positives because everything’s been crushed so badly,” said Allan Brown, who helps oversee abut $52 million as chief executive of Burlington Capital Management, a Burlington, Ontario-based hedge fund company, before the Fed decision was announced.

Measures of materials and energy shares added 5.6 percent and 3.8 percent today, paring their respective declines this year to 29 and 35 percent. An index of industrial companies advanced 4.1 percent, led higher by Canadian National Railway Co., the nation’s biggest railroad. Canadian National added 5 percent to C$44.

Manulife Financial, Canada’s biggest insurance company, climbed 4 percent to C$21.13. Royal Bank of Canada, the country’s biggest lender, added 1.9 percent to C$34.90.

Bank of Montreal dropped 6.8 percent to C$30.35. Canada’s fourth-biggest bank plans to sell as much as C$1.1 billion in discounted stock to shore up capital. About 33.3 million shares will be offered at C$30 apiece in a sale expected to close Dec. 24, the Toronto-based bank said yesterday.

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