TORONTO (Reuters) - Canada’s main stock index rose on Thursday as a takeover offer for Progress Energy Resources Corp (PRQ.TO) boosted its stock and other natural gas plays in the heavyweight energy group.
Energy issues rose 2 percent after Malaysia’s state oil company launched a friendly bid to buy Progress at a 77 percent premium to its Wednesday close.
The stock closed up 73.6 percent at C$20.05 and played the biggest role of any single company in leading the market higher.
“It’s obvious that this is where a lot of strength is coming from,” said Fred Ketchen, director of equity trading at ScotiaMcLeod. “People will say, if someone can come out and make a takeover bid for (Progress), well maybe Encana becomes a takeover target somewhere along the way.”
Encana Corp (ECA.TO), Canada’s largest natural gas producer and one of Progress’s rivals, jumped on news of the deal, and closed up 6.7 percent at C$21.08. Encana was the most influential gainer in Toronto after Progress.
The Toronto Stock Exchange’s S&P/TSX composite index .GSPTSE closed up 13.76 points, or 0.12 percent, at 11,424.70.
The heavyweight materials group, which includes gold miners, and financial stocks were the two major drags on the index. Financial issues fell 0.4 percent, while materials stocks fell 1.5 percent.
The price of gold fell more than 1 percent, hit by worries of an economic slowdown after a U.S. Supreme Court ruling upheld a landmark healthcare law and by fading hopes that a European Union summit will resolve that region’s debt crisis. <GOL/> <MKTS/GLOB>
“The largest influence on the negative side continues to be the mess that is taking place within Europe,” said Ketchen.
European finance officials worked on urgent measures on Thursday to bring down the borrowing costs of Spain and Italy, seen as too big to bail out, with EU leaders deeply divided over a solution to the euro zone’s ever widening debt crisis.
Shares of Tahoe Resources Inc (TAHO.N) (THO.TO) fell on news Guatemalan President Otto Perez Molina is floating a proposal to change the constitution to allow the government to take up to a 40 percent stake in new mining projects in the country. Tahoe said the proposed reforms would not affect its Escobal silver asset, but the stock closed down 22.7 percent at C$12.50.
Tahoe is 40 percent owned by Goldcorp Inc (G.TO), which itself also owns the Marlin gold mine in Guatemala. Goldcorp fell 2.8 percent to C$37.31 and was the biggest single drag on the broader market.
Also in the materials group, Centerra Gold Inc (CG.TO) fell 32 percent to C$6.72 after the Canadian miner said a Kyrgyzstan-based independent member of its board had stepped down. The news came one day after Kyrgyz lawmakers moved to review Centerra’s mining contract for its Kumtor gold mine.
The fears about Europe and other negative news overshadowed surveys suggesting a more bullish long-term outlook for Toronto stocks.
A Reuters poll showed that Canadian share prices are expected to end 2012 slightly stronger, gaining in the next 12 months to erase year-to-date losses caused by the euro zone debt crisis. <EPOLL/CA>RPOLL
Separately, a survey by Russell Investments Canada found that with worries about the European crisis pushing down valuations, Canadian investment managers are increasingly positive about Canadian equities. It found that 70 percent of managers were bullish on the sector, compared with only 56 percent in the first quarter.
Editing by Jeffrey Hodgson