Canadian Stocks Fall on Merkel Bond Comment

By Matt Walcoff - Nov 25, 2011 4:36 AM GMT+0700

Canadian stocks fell from the lowest close in seven weeks after German Chancellor Angela Merkel reiterated her opposition to joint euro bonds as a solution to Europe’s debt crisis.

Bank of Nova Scotia (BNS), the country’s third-largest lender by assets, decreased 0.9 percent as financial stocks retreated after closing yesterday at the lowest since July 2009. Enbridge Inc. (ENB), Canada’s biggest pipeline company, lost 2.8 percent. Barrick Gold Corp. (ABX), the world’s largest producer of the metal, declined 1.4 percent as the euro currency pared gains against the U.S. dollar.

The Standard & Poor’s/TSX Composite Index slipped 86.39 points, or 0.8 percent, to 11,485.32. Volume was 75 percent below its average in the past 180 days because of the U.S. Thanksgiving holiday.

“We haven’t seen any action whatsoever in terms of stemming the crisis” in Europe, Barry Schwartz, a money manager at Baskin Financial Services Inc. in Toronto, said in a telephone interview. The firm oversees about C$400 million ($382 million). “The trend is decisively negative.”

The S&P/TSX has slumped 8 percent since Nov. 8 as bond yields advanced in Europe, indicating greater concern of a potential sovereign-debt default, and U.S. lawmakers failed to agree on budget cuts.

Rising Dollar

The U.S. Dollar Index, a measure against six major currencies, traded close to a seven-week high after Merkel said at a press conference in Strasbourg, France, that she hasn’t abandoned her opposition to euro-area bonds. Merkel said that joint euro bonds would send a “completely wrong signal” partly because they would immediately lead to a convergence of interest rates in the euro region.

Portugal’s credit rating was cut to below investment grade by Fitch Ratings Ltd. because of the country’s rising debt level and weakening economy. Yields increased on the debt of Greece and Italy.

The country’s six biggest banks all fell or were unchanged. Scotiabank slipped 0.9 percent to C$48.34. Canadian Imperial Bank of Commerce, the country’s fifth-largest lender by assets, dropped 1.4 percent to C$68.62, a sixth-straight decline. Toronto-Dominion Bank (TD), the country’s second-largest lender by assets, lost 0.8 percent to C$68.70, the lowest since July 2010.

The S&P/TSX Energy Index dropped as natural-gas futures fell for the first time this week. Enbridge lost 2.8 percent to C$35.11. Imperial Oil Ltd. (IMO), the country’s second-largest energy company by revenue, decreased 2.4 percent to C$39.03 to extend its weekly decline to 9 percent.

Agreement to Expire

Nexen Inc. (NXY), an oil and gas producer with operations on five continents, retreated 3.2 percent to C$15.04, the lowest since February 2009, a day after saying its oil production-sharing agreement in Yemen will end on Dec. 17.

Gold futures erased gains in New York after Merkel’s comments. Barrick retreated 1.4 percent to C$49.55. Kinross Gold Corp. (K), Canada’s third-largest company in the industry, slipped 1.1 percent to C$13.45. Eldorado Gold Corp. (ELD), the country’s fifth-largest gold producer by market value, fell 2.7 percent to C$17.06.

Dundee Precious Metals Inc. (DPM), which operates in Bulgaria and Armenia, rallied 4.8 percent to C$8.89 after saying Bulgaria approved the environmental-impact assessment for the Krumovgrad gold project.

Potash Corp. of Saskatchewan Inc., the world’s largest fertilizer producer by market value, fell for a fourth day, losing 1.7 percent to C$43.01, the lowest since August 2010. Wheat dropped in Paris today after futures in Chicago fell to the lowest in almost 16 months yesterday.

To contact the reporter on this story: Matt Walcoff in Toronto at mwalcoff1@bloomberg.net.

To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net.