Canadian stocks had their biggest rally since July on optimism that the U.S., Canada’s biggest trading partner, is still expanding fast enough to sustain global demand for resources.

Commodity producers such as EnCana Corp. and Goldcorp Inc. paced gains in the Standard & Poor’s/TSX Composite Index as prices for oil and metals including bullion and nickel increased.

“Commodity prices seem to be stabilizing,” said Peter Hodson, senior portfolio manager at Sprott Asset Management Inc. in Toronto, which manages $3.52 billion. “If the U.S. economy isn’t slowing as quickly as was thought, then global growth remains strong enough.”

The S&P/TSX advanced for a third time in four days, climbing 189.48, or 1.6 percent, to 11,908.57, the steepest gain since July 24. It’s also up 1.9 percent since Oct. 6, the best weekly advance since July 28.

Resources such as oil, gold and nickel comprise 54 percent of Canada’s exports and 12 percent of the nation’s C$1.09 trillion economy. Canada sent 84 percent of its merchandise exports to the U.S. in 2005. Commodity stocks make up more than two-fifths of the S&P/TSX’s value.

Energy stocks and materials companies had the two best performances in the S&P/TSX among the index’s 10 industry groups, adding 3 percent and 2.5 percent, respectively.

Crude oil for November delivery closed 1.2 percent higher at $58.57 a barrel in New York on signs of growing U.S. energy demand and as Norway ordered two offshore platforms to shut.

New York-traded crude rebounded after touching a 2006 low yesterday as the U.S. Energy Department reported fuel consumption gained last week, the first increase in seven weeks.

EnCana

EnCana rose C$1.74 to C$52.25. Canada’s largest natural-gas producer may spend as much as C$1 billion ($881 million) to build new headquarters in Calgary, the financial hub of Canada’s biggest oil-producing province.

Suncor Energy Inc., the world’s biggest oil-sands miner, advanced C$3.11 to C$82.35. Talisman Energy Inc., which is boosting North Sea output from purchases of fields from companies including Exxon Mobil Corp. and Royal Dutch Shell Plc., increased 66 cents to C$18.45.

Gold for December delivery rose 2.1 percent to $592.70 an ounce in New York as oil’s rise increased the metal’s appeal as a hedge against inflation.

Goldcorp

Goldcorp, Canada’s second-biggest bullion miner, climbed C$1.12 to C$25.85. Kinross Gold Corp., the nation’s third- largest producer of the metal, gained C$1.01 to C$14.12.

Nickel rose to its highest in at least 19 years in London, leading a rally in prices of industrial metals including aluminum, copper and zinc.

Teck Cominco Ltd., the world’s largest zinc producer, added C$2.83 to C$78.02. Alcan Inc., the second-biggest maker of aluminum, was up 75 cents at C$46.92.

Inmet Mining Corp., a producer of copper, zinc and gold rose for a sixth day, increasing C$2.85 to C$50.85.

National Bank Financial metals analysts Ian Howat and Shanthu David wrote in a note to clients that Inmet and Alcan are their “current favorites” amid a “great week” for metal prices, accompanied by even larger gains for the related stocks.

HudBay Minerals Inc., a mid-sized zinc producer, was up 71 cents at C$16.72. “I sold down HudBay and bought it back,” said Hodson. “Demand for zinc is still stronger than expected.”

The S&P/TSX may rally to about 12,500 by the end of the year as investors get more signs that earnings will hold up, said Hodson. The benchmark set its 2006 high of 12,487.32 on April 19 amid soaring commodity prices.

U.S. Economy

In the U.S., a drop in gasoline prices allowed consumers to spend more on clothing, furniture and building materials, while propelling consumer confidence to the highest level in more than a year.

The largest decline ever in gas-station receipts pushed overall U.S. retail sales down 0.4 percent in September, the Commerce Department said. Excluding service stations, purchases climbed 0.6 percent, three times the gain in August.

Consumer confidence rose more than expected this month as gasoline prices fell and stocks rose, suggesting spending may gain momentum as the holiday shopping season begins. The University of Michigan’s preliminary index of consumer sentiment surged to 92.3, the highest since July 2005, from 85.4 in September.

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

Aspreva Pharmaceuticals Corp. (ASV CN) fell $3.66, or 13 percent, to C$24.74. The drugmaker said in a statement of preliminary results that third-quarter revenue was about $48 million. That missed the estimate of $56 million by Banc of America Securities LLC analyst David Maris.

Cardiome Pharma Corp. (COM CN) slipped 46 cents, or 4.1 percent, to C$10.91, extending its losses to a fifth day. The developer of heart drugs said in a statement this week that it will sell up to $150 million of common shares over the next 25 months.

Methanex Corp. (MX CN) slid C$1.40, or 5.4 percent, to C$24.59. The world’s largest producer of methanol yesterday said an export duty on natural gas it buys from Argentina may crimp earnings from its methanol plants in southern Chile. Analysts at UBS AG and CIBC World Markets cut their ratings on the stock, which has lost 18 percent in three days.

Quebecor World Inc. (IQW CN) rose 94 cents, or 7.3 percent, to C$13.79. North America’s second-biggest printer has rallied 18 percent since Chief Financial Officer Jacques Mallette said last week that earnings in 2007 “should” exceed this year’s as the company spends less on new equipment.

Spokesman Tony Ross today confirmed today by phone that Quebecor plans to close by the summer of 2007 its plant in Hellemmes near Lille, France, which will result in the loss of “approximately 230 jobs.” An Agence France-Presse report on the closure was posted yesterday on the Web site of La Presse, the Montreal-based newspaper.

Alcan Inc. (AL CN)
EnCana Corp. (ECA CN)
Goldcorp Inc. (G CN)
Hudbay Minerals Inc. (HBM CN)
Inmet Mining Corp. (IMN CN)
Kinross Gold Corp. (K CN)
Suncor Energy Inc. (SU CN)
Teck Cominco Ltd. (TCK/B CN)
Talisman Energy Inc. (TLM CN)

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

source: bloomberg.com