Canadian Stocks Advance; Gold Gains on Interest Rate Outlook

Canadian stocks rallied to their fifth record in six days, led by materials producers such as Barrick Gold Corp., as bullion prices rose.

Raw materials producers led gains among 10 industry groups in the Standard & Poor's/TSX Composite Index, rising 1 percent, while financial stocks fell on concern that reports signaling economic growth reduced the likelihood of lower interest rates. The main index added 10.63, or 0.08 percent, to 13,330.28 in Toronto.

Barrick, the world's largest gold miner, added 92 cents, or 2.5 percent, to C$37.25. Goldcorp Inc., Canada's second-largest gold producer, increased 92 cents, or 2.9 percent, to C$32.95.

Gold futures for April delivery rose $23.10, or 3.5 percent, to $680.20 an ounce in New York after the Labor Department reported U.S. consumer prices rose more than forecast in January. The report gives credence to Federal Reserve Chairman Ben S. Bernanke's message that inflation remains the central bank's primary concern and makes gold, which has climbed 16 percent in the past year, more attractive as an inflation hedge.

``When you get gold up, investors are going to chase those stocks,'' said Brendan Kyne, chief investment officer at Leeward Hedge Funds Inc., which manages C$230 million in Toronto. ``It's clearly a commodity-driven day. There's a rotation of capital.''

A group of financial companies fell 0.2 percent, the biggest drag in the S&P/TSX.

Royal Bank of Canada, the country's largest bank, fell 60 cents to C$55. Manulife Financial Corp., the largest insurer, declined 38 cents to C$40.40.

Interest Rates

Retail sales advanced 2.3 percent to C$33.5 billion in December, adding to evidence that the economy ended the year in a broad-based expansion, after reports that exports and wholesaling also gained. Canada's dollar rose to a more than seven-week high on the report from Statistics Canada, which prompted traders to pare bets the Bank of Canada will cut borrowing costs this year.

``Financial services stocks are interest-rate sensitive,'' said Jackee Pratt, who helps manage $708 million at Mavrix Fund Management Inc. in Toronto. ``A number of these companies have large revenues coming from mutual fund operations and brokerage firms. High rates imply high inflation and are negative for the overall stock market.''

The Bank of Canada kept the benchmark rate for overnight loans at 4.25 percent on Jan. 16 for a fifth straight meeting.

Banks report earnings this week and next, beginning tomorrow with Toronto-Dominion Bank, Canada's second-largest by assets. Canada's second-largest bank probably will say that profit at the Portland, Maine-based TD Banknorth Inc. unit fell 1.5 percent during the past three months, based on a company forecast. TD Banknorth's earnings have dropped in five of the past seven quarters. The shares added 26 cents to $70.21.

Canadian stocks yesterday notched the fourth record in five days, surpassing the previous high set Feb. 16. The benchmark is up 2.9 percent this year. Gains were limited as energy stocks fell along with oil prices.

Energy Shares

Shares of energy companies also declined today. EnCana Corp., Canada's largest natural-gas producer, dropped 52 cents to C$55.88. Petro-Canada, the third-largest oil company in Canada, declined 8 cents to $43.69.

Crude oil for April delivery rose $1.22, or 2.1 percent, to $60.07 a barrel on the New York Mercantile Exchange, the highest close since Dec. 29. Futures touched $60.63, the highest intraday price since Feb. 9. Prices are down 1.7 percent from a year ago.

The following shares had unusual price changes. Stock symbols are in parentheses.

Agricore United (AU CN) added $1.58, or 13 percent, to $13.58 in Toronto. Canada's largest grain handler agreed to be acquired by James Richardson International Ltd. to thwart a hostile takeover by Saskatchewan Wheat Pool Inc.

Agricore shareholders will receive C$6.50 in cash and 0.509 share of the combined company in a transaction funded in part by the Ontario Teachers' Pension Plan. Winnipeg, Manitoba-based James Richardson, a privately held agricultural company and food processor, said it will own 50.5 percent of the merged company.

Alcan Inc. (AL CN) fell 30 cents to C$63.79. The world's second-biggest aluminum producer said it may invest $3 billion in new projects in the Middle East to increase production in countries that offer cheaper energy supplies. The company is interested in taking equity stakes in facilities such as the 20 percent interest it's got in the Sohar smelter in Oman, said spokeswoman Anik Michaud, from Montreal.

Loblaw Cos. (L CN) slid 29 cents to C$48.13. Canada's biggest supermarket chain, will lower food prices and improve customer service to deliver 10 percent earnings growth a year, Executive Chairman Galen G. Weston said. The shares have dropped 13 percent over the past year.

Rona Inc. (RON CN) fell 2 cents to C$24.08. Canada's biggest home-improvement retailer by number of stores said fourth-quarter profit increased 1.3 percent, the slowest growth since the company sold shares to the public more than four years ago.

Saputo Inc. (SAP CN) added $1.70, or 4.1 percent, to C$43. Canada's biggest dairy-products maker agreed to buy Land O'Lakes Inc.'s West Coast industrial cheese business for $216 million, expanding operations in the U.S. The shares rose the most in a year.

The business generates about $415 million in annual sales, Montreal-based Saputo said today in a statement. Land O'Lakes will continue its Californian operations at a dairy facility in Tulare and a cheese facility in Orland, Saputo said. The transaction is expected to close around April 2.

source:www.bloomberg.com