Canada Stocks Extend Longest Rally Since ’10 as Commodities Gain

Feb 12, 2014 4:23 pm ET

Feb. 12 (Bloomberg) -- Canadian stocks rose a seventh day, the longest streak in three years, as commodity producers advanced with metal and oil prices and banks gained on rising home prices.

Canada Bread Co. soared 7.3 percent after Grupo Bimbo SAB agreed to acquire the business from owner Maple Leaf Foods. Canadian Natural Resources Ltd. and First Quantum Minerals Ltd. rallied at least 2.2 percent as crude and copper prices advanced. Air Canada plunged 20 percent after reporting fourth- quarter earnings short of analysts’ estimates due to a decline in the Canadian dollar.

The Standard & Poor’s/TSX Composite Index rose 19.5 points, or 0.1 percent, to 13,900.49 at 4 p.m. in Toronto. The benchmark equity gauge jumped 3.1 percent in the past seven days, the longest rally since September 2010.

“There’s some general market optimism carried over from yesterday’s Yellen testimony, and positive news from China is driving commodities,” said Anish Chopra, fund manager at TD Asset Management Inc. in Toronto. He helps manage C$218.3 billion ($198.6 billion) with the firm. “As well, the budget from yesterday you get a picture of fiscal responsibility from the government. And if the budget will be in surplus, it gives the government room to maneuver in stimulating the Canadian economy.”

U.S. Federal Reserve Chair Janet Yellen yesterday testified she will reduce stimulus in “measured steps” amid a gradual recovery in the labor market, sending U.S. and Canadian markets higher.

Canadian Federal Finance Minister Jim Flaherty released a budget after the market close yesterday that projects a surplus of C$6.4 billion in 2015.

Home Prices

Canadian Imperial Bank of Commerce rose 0.4 percent to C$88.32 and Bank of Montreal rallied 1.1 percent to C$70.51 as financial stocks added 0.7 percent as a group, the second-most in the S&P/TSX. Six of 10 industries advanced and trading volume was 7.9 percent higher compared with the 30-day average.

Canadian home prices rose 4.5 percent in January from year- ago figures, as values increased in Toronto, Vancouver and Montreal, according to data from the Teranet-National Bank house price index.

Maple Leaf slipped 0.9 percent to C$15.70. The company agreed to sell Canada Bread to Grupo Bimbo, the Mexican producer of Sara Lee products, for about C$1.83 billion. Canada Bread increased 7.3 percent to C$72.20, the most since October.

Bread Buy

Bimbo will pay C$72 a share for Canada Bread. Maple Leaf owns 90 percent of the company, and is divesting assets to focus on its packaged-meats business. The company will return available proceeds from the sale to shareholders within three years of closing.

Canadian Natural Resources advanced 2.2 percent to C$38.50 and Athabasca Oil Corp. climbed 4.1 percent to C$7.96 as the price of crude added 0.4 percent to $100.37 a barrel in New York. Prices pared an earlier gain after U.S. stockpiles rose more than expected last week. Energy stocks rallied 1 percent as a group, most in the Canadian equity gauge.

First Quantum Minerals climbed 2.6 percent to C$20.93 as copper rose in New York after Chinese trade data showed imports of the metal expanded to a record. Deliveries of unwrought copper and products to China surged 53 percent from a year earlier to 536,000 metric tons.

Earnings Miss

Air Canada tumbled 20 percent to C$6.22, the most since 2009, after saying profit in the first quarter will decline because of severe weather conditions and a weaker Canadian dollar. The company reported adjusted fourth-quarter earnings of 1 Canadian cent a share, short of analysts’ projections for 11 cents.

Air Canada was the best-performing stock in the S&P/TSX in 2013, surging 323 percent.

Rogers Communications Inc., Canada’s largest wireless operator, slumped 5.3 percent to C$43.28, the biggest decrease since June. Guy Laurence, the company’s new chief executive officer, said he was not happy with the last quarter’s results and will fully review the operator in search of ways to improve performance.

Rogers posted earnings of 69 Canadian cents a share, missing the 74 cents projected by analysts.

Thomson Reuters Corp. slumped 6.1 percent to C$37.75, the most in five years, after reporting declining fourth-quarter and full-year operating profit. The financial news and data company blamed the drop difficulties in the European and emerging markets.

--Editor: Michael P. Regan