MARKET ACTIVITY/TRADING NOTES FOR DAY ENDING THURSDAY, FEBRUARY 12, 1998 (1)
Friday, February 13, 1998
U.S. stocks stretched their record-setting gains for a third straight day, buoyed by a strong retail sales report. Bay Street also advanced on the back of another solid gain by Canada's major banks
The Dow Jones industrial average rose 55.05 points, or 0.7%, to 8369.60 - its third straight record. The benchmark erased an earlier 76-point intraday loss.
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The Standard & Poor's 500 index rose 4.13 points, or 0.4%, to a record 1024.14.
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The Nasdaq composite index gainined 5.79 points, or 0.3%, to 1714.34.
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About 614.6 million shares changed hands on the Big Board, up from 601.8 million shares traded on Wednesday.
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Retailing stocks rose as the U.S. government reported retail sales increased 2.4% in the 12 months ended in January, and an industry group predicted sales will be strong this year. Sears (S/NYSE) rose US$11 1/84 to US$537 1/88 and Wal-Mart Stores Inc. (WMT/NYSE) gained US$13 1/84 to US$44 11/16.
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Informix Corp. (IFMX/NASDAQ), the most active stock in U.S. trading, jumped US$1 7/16 to US$8 13/16 after the database software maker reported an unexpected fourth-quarter profit.
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Warner-Lambert Co. (WLA/NYSE) fell US$3 to US$1491 1/84 following negative comments about the company's diabetes drug by a prominent diabetes doctor at a Merrill Lynch & Co. pharmaceuticals conference.
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Airline stocks took off again, pushing the Dow Jones transportation average to its fifth straight record.
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US Airways Group Inc. (U/NYSE) rose US$4 9/16 to US$69 15/16.
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The Toronto Stock Exchange 300 composite index also closed higher, led by gains in the shares of Canada's major banks.
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Losses in oil issues tempered the advance.
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The TSE 300 rose 35.9 points, or 0.5%, to 6980.68, recovering from a 40-point loss earlier in the day.
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The benchmark index has risen 1.8% in the past three trading sessions.
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Almost 117.6 million shares changed hands, up from 110.1 million shares on Wednesday.
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Royal Bank of Canada (RY/TSE) gained $2.40 to $83.20, Bank of Montreal (BMO/TSE) climbed $2.35 to $74.30 and Toronto-Dominion Bank (TD/TSE) gained $1.25 to $59.30 to pace the advance.
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Canadian National Railway Co. (CNR/TSE) jumped $3.10 to $87.10 to lead transport issues higher after its rating was raised to "strong buy" from "buy" by analyst Rossa O'Reilly at CIBC Wood Gundy Securities Inc. O'Reilly issued a 12-month price target of $100.
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Earlier in the day, Canadian National touched a record high of $88. The stock has gained more than 17% since the company said on Feb. 5 it was in talks to buy Illinois Central Railroad Co. Illinois Central shares (IC/NYSE) rose 3 1/88 to US$383 1/84.
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Canadian Pacific Ltd. (CP/TSE), which owns a majority stake in Canadian Pacific Railway Co., gained 5› to $40.90 on speculation it may make an acquisition to stay competitive with CN.
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Telecommunications equipment maker Northern Telecom Ltd. (NTL/TSE) rose $1.25 to $68.75 and Newbridge Networks Corp. (NNC/TSE) gained 15› to $32.50.
BCE Inc. (BCE/TSE) was unchanged at $48.75, despite news that the chief executive of its Bell Canada unit, Ron Osborne, was resigning after less than five months at the helm.
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Talisman Energy (TLM/TSE) fell $1.15 to $41.10, Gulf Canada Resources Ltd. (GOU/TSE) slipped 25› to $7.50 and Canadian Natural Resources Ltd. (CNQ/TSE) fell 50› to $27.90 after Royal Dutch Shell Group, the world's largest publicly traded oil company, reported lower-than-expected earnings because of the Asian currency crisis.
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Shares of Potash Corp. of Saskatchewan Inc. (POT/TSE) fell 75› to $128.90 after the firm said its fourth-quarter profit rose 57%, slightly lagging expectations.
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Other Canadian indexes finished higher.
The Montreal Exchange portfolio rose 34.39 points, or 1%, to 3615.33.
The Vancouver Stock Exchange rose 1.37 points, or 0.2%, to 627.04.
For a scorecard of trading activity on all Canadian Stock Exchanges, go to:
quote.yahoo.com .
REFERENCE: Canadian Market Summary
canoe2.canoe.ca
ÿMajor overseas markets fell.
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London: British shares fell as profit-taking hit banking, pharmaceutical and oil sectors. The FT-SE 100 index slipped 55.4 points, or 1%, to 5552.5.
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Frankfurt: The Dax index fell 51.6 points, or 1.1%, to 4536.83, after earlier surging to an intraday record of 4602.16.
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Hong Kong: The Hang Seng index fell 173.38 points, or 1.6%, to 10,620.03.
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Tokyo: The Nikkei 225 index fell 30.16 points, or 0.2%, to 17,174.93.
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Sydney: The Australian all ordinaries index finished down 3.7 points at 2674.3.
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Shareholders turn up the noise, report says -- By RICHARD BLACKWELL (F-P)
Shareholders of Canadian companies became a lot more vocal in their opposition to management proposals presented at annual meetings last year, a new study shows.
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Research by Fairvest Securities Corp., a Toronto brokerage that advises institutional shareholders, shows that 16 management proposals were withdrawn or defeated last year, compared with three in 1996.
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In addition, 76 management proposals were opposed by at least 25% of the votes cast in 1997, compared with 41 the year before.
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The management proposals that were the most likely to be opposed by shareholders were those putting in place "poison pill" takeover defence provisions, the study showed. These were opposed, on average, by 29.4% of shareholders in 1997.
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The second least popular proposals were to amend or adopt stock option plans for executives. "Shareholders are starting to show intolerance towards excessive use of stock options," the Fairvest report said.
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Routine proposals, such as appointment of auditors or the approval of stock splits received negative votes from less than 1% of voting shareholders.
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Fairvest president Bill Riedl said the numbers reflect increasing shareholder militancy. Publicity about corporate governance issues has made individuals and institutions realize they can influence companies.
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"When shareholders as a group start to think that their votes count, they start to vote."
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He said public and corporate pension funds have made the strongest moves to study and vote on proposals. However, only a few big mutual fund firms take corporate governance seriously.
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Fairvest's data were compiled from questions sent to 283 companies listed on the Toronto Stock Exchange 300 and 108 firms outside that group. Sixty-six percent of the TSE 300 firms replied, but "substantially" fewer of the other group.
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Fairvest's report noted that in the U.S. voting results must be filed with securities regulators, but in Canada there is no such disclosure requirement.
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Proposals presented by shareholders - rather than management - were rare but are now becoming much more common.
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Up until 1997, the only shareholder proposal that got majority support was one at Placer Dome Inc. in 1994, where a motion to make voting confidential won 51% of the votes cast.
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Last year, a motion to rescind a poison pill at B.C. Sugar Refinery Ltd. attracted 73% support.
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In 1998, there will likely be at least two shareholder proposals that win majority support. That's because Laurentian Bank of Canada has recommended a "yes" vote on two of four motions from Montreal activist Yves Michaud and his associates, to be presented at the annual meeting on March 3.
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Ottawa struggling to keep ahead of banking changes: Martin
OTTAWA (CP) It's not Ottawa's job to shape how Canadians bank and save their money. But Finance Minister Paul Martin says it is government's job to keep pace with change and make sure everybody is treated fairly.
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Martin said in an interview that past governments have had the luxury of developing policy while the financial services sector waited until it was decided who would do what.
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But today, governments must react to change in financial services and try to keep policy in tune with business because of developing technology and the struggle for survival by various types of financial institutions.
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Ottawa is currently in the midst of its largest policy overhaul of banking and other financial services since the Porter Commission of 1964 when banks were given the right to determine interest rates on loans but were barred from merging.
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It may well be that Porter had to break new ground," Martin said.
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"The fact is new ground is being broken every day. What governments have got to do is essentially stay ahead of the process."
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Next September, a task force chaired by Regina lawyer Harold MacKay is to report to the government on a wide range of issues, including whether banks mergers should be allowed.
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Although the Royal Bank and the Bank of Montreal have already announced their intention to merge, Martin said the task force was set up in anticipation of rapid change.
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Commodity prices to make modest gains in 1998: bank economist
TORONTO (CP) - Commodity prices are slowly nosing upward from trenches carved by the Asian crisis, says an economist, but it won't be enough to comfort battered Canadian resource companies like Inco and MacMillan Bloedel.
Prices for a group of export commodities, from oil to base metals to forestry products, have recovered a bit this month after falling 12 per cent over the last year, Teresa Courchene, senior economist at Toronto Dominion Bank, said Thursday.
"We're starting to see some little bit of recovery on some prices," said Courchene, who tracks 17 of Canada's major resource export commodities for a monthly price report. Some, like pulp and base metals, will remain weak for some time, recovering later in the year. Others, such as oil and gold, could move a little faster. But while there are "positive signs on the horizon," Courchene warns that gains will be modest and won't make up for last year's losses. Those followed five years of steady gains. "I expect a modest recovery, I think the worst of the financial uncertainty in Asia is over ... and it appears people are becoming morecomfortable," she said. "But we're not looking at reversing that 12 per cent this year."
Canada's economy relies heavily on such commodities as metals, lumber and other forestry products which account for more than 40 per cent of exports. Falling demand and lower prices have forced layoffs and spending cuts at resource giants such as Inco, which has badly shaken Canadian towns that have been built around these employers.
And we may not have heard the last of such stories, warned Courchene. "There has been a dramatic decline in base metal prices and so we would expect some reaction to that because companies have to basetheir current year plans on where prices are today. "It's certainly something to think about, that might continue to happen."
The outlook differs between commodities, especially oil and gold which are subject to political factors in the Persian Gulf beyond the Asian crisis.
But fears and shockwaves from the turmoil in that region have unsettled markets and slowing growth - including in Canada. Inco, the world's largest nickel producer, has announced more than 1,200 job cuts and outlined dramatic spending cuts this week to save cash in the wake of weak markets. A dramatic overhaul at MacMillan Bloedel Ltd. will lead to layoffs of about one-fifth of its 13,500 employees and has also decimated its1997 earnings. Canada's largest forestry company revealed a $368-million loss
Wednesday, largely the result of costly restructuring plan. Canada's second-largest producer, Canadian Forest Products Ltd., has hired new chief executive David Emerson to preside over planned cuts.
But TD economists hope prospects will brighten as Asian financial markets settle and growth continues at about three per cent in major economies. "We still have good expansions going on in all the major industrialzed countries - except Japan."
Lumber is among the sectors hit by factors other than Asia. Prices, which dropped 29 per cent last year, were falling before the Asian crisis because of slowing home construction in the United States, points out Courchene. After sharp gains in 1996, oil prices have been sliding to under $17 US a barrel because of increased OPEC production. But they may now be boosted by political turmoil in the Middle East.
That's especially good news for oil-producing provinces such as Alberta,
Saskatchewan and Newfoundland. Gold has been dropping in value, hitting an 18-year-old low of about $289 US per ounce last December, partly because uncertainty around central banks' holdings and because low inflation means the precious metal is no longer seen as a safe haven against uncertainty.
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