MARKET ACTIVITY/TRADING NOTES FOR DAY ENDING TUESDAY, DECEMBER 2, 1997 (1)
Wednesday, December 3, 1997
Stock Markets
Bay Street plays catch-up
Bay Street climbed for a third straight day led by a strong showing in the oilpatch and financial services stocks. Wall Street edged higher but investors were jittery after a batch of earnings warnings
By THE FINANCIAL POST
The Toronto Stock Exchange 300 composite index jumped 43.59 points, or 0.7%, to 6667.46.
Volume on the TSE was 130.1 million shares, compared with Monday's volume of 100.3 million shares.
"Canada had to catch up with New York's rise over the past couple of days," said Jim Doak, a fund manager at Enterprise Capital Management.
Earlier in the day the index gained more than 1%, but strength waned after domestic investors slackened their buying of heavily weighted banks.
All but two of Toronto's 14 sub-sectors gained, led by media, consumer products, banks and oils. Transportation and base metals were the softer groups.
Toronto's financial services subindex staged a recovery after being beaten up last week, said John Ing, president of Maison Placements Canada Inc.
The TSE's banking group gained 1.3% as Royal Bank of Canada (RY/TSE) rose $1.50 to $80.35, ahead of its fourth-quarter earnings report due to be released today.
Toronto Dominion Bank (TD/TSE) rose 65› to $53.40 while Canadian Imperial Bank of Commerce (CM/TSE) added 5› to $44.70 in brisk dealings.
The oil and gas subindex also helped the TSE 300's advance, gaining 1.5% after being the laggard in Monday's session.
The sector recovered after falling in response to an OPEC decision to increase its production ceiling by 10%. In the group, Suncor Energy Inc. (SU/TSE) climbed $1.55 to $47.25.
Individual issues also captured investor interest, including miner Noranda Inc. (NOR/TSE), which rose 50› to $25. The company is selling its energy and forestry businesses.
The other major Canadian markets closed mixed.
The Montreal Exchange market portfolio rose 12.29 points, or 0.4%, to 3386.52. The Vancouver Stock Exchange composite index fell 5.64 points, or 0.9%, to 631.35.
In New York, the Dow Jones industrial average rose 5.72 points to 8018.83 following Monday's 190-point gain.
Volume on the New York Stock Exchange was 580.8 million shares, compared with Monday's volume of 596.2 million shares.
The Nasdaq composite index, laced with tech stocks, fell 24.35 points, or 1.5%, to 1606.37. The Standard & Poor's 500 composite index dropped 3.09 points, or 0.3%, to 971.69.
"The market is generally pretty nervous as we approach our old highs, especially after [Monday's] strong gains," said Gary Anderson, a money manager at Anderson & Loe.
"People are buying into defensive and consumer issues. Technology is a very aggressive area and it can be quite volatile."
Financial markets were on pins and needles ahead of a speech on global finance by U.S. Federal Reserve chairman Alan Greenspan. Greenspan was scheduled to speak to the Economic Club of New York last night.
Almost one year ago, on Dec. 5, 1996, the Fed chief rattled global stock markets with his warnings of "irrational exuberance."
Technology stocks were led lower after disk drive maker Western Digital Corp. and networking equipment maker Cabletron Systems Inc. warned that earnings in the upcoming quarter will come in lower than expected.
Cabletron (CS/NYSE) lost US$7 1/2 to US$15 11/16 after it said its earnings would fall short of expectations for the third straight quarter.
Western Digital's (WDC/NYSE) warning of a second quarterly earnings shortfall projection in less than a month knocked the stock off 8%, down US$1 3/4 to US$19 3/8, and also dragged other data storage stocks lower.
The major overseas markets closed mixed.
London: British shares closed higher. The FT-SE 100 index rose 55.8 points, or 1.1%, to 4977.6.
Frankfurt: German shares, which had started the day well, finished slightly ahead after the previous day's rally. The Dax index climbed 4.91 points to 4072.96.
Tokyo: Japanese stocks ended the session down slightly, as upward momentum petered out after four consecutive sessions of gains. The 225-share Nikkei average fell 97.3 points, or 0.6%, to 16,910.29.
Hong Kong: Stocks finished sharply higher, propelled by the strong overnight gain on Wall Street and steady local interest rates. The Hang Seng index rose 465.47 points, or 4.3%, to 11,216.35.
Sydney: Australian shares ended marginally higher, despite Monday's sharp Wall Street rally. The all ordinaries index gained 11.4 points, or 0.5%, to 2524.8.
Asian, European Markets Down A Bit Wednesday Morning
In Hong Kong the Hang Seng Index, the stock market's key indicator of blue chips, fell 8.77 points, or 0.1 per cent to 11,207.58 on Wednesday.
In Tokyo the 225-share Nikkei Stock Average at the Tokyo Stock Exchange fell 324.78 points, or 1.92 per cent, closing at 16,585.51.
In London at midday on the London Stock Exchange, the Financial Times 100-share index was down 5.1 points to 4,972.5. The U.S. dollar fell against other major currencies in early European trading Wednesday. Gold prices also were down.
In Toronto, the Canadian dollar closed at 70.46 cents US on Tuesday, up 0.20 cent. The U.S. dollar stood at $1.4193 Cdn, down 0.40 cent.
Also in London, the dollar is trading at $70.49 cents US - up 0.03 cent from Tuesday's close.
London dealers fixed a recommended gold price of $291.10 US per ounce at midmorning, down from the closing price of $294.30 bid Tuesday. In Zurich, the bid price was $291.80 US, down from $294.50 late Tuesday. Earlier in Hong Kong, gold fell $1.90 US to close at $291.15. Silver traded in London at $5.24 US a troy ounce, down from $5.33 late Tuesday.
HOT STOCKS
Shot In The Arm For Fertilizer Stocks. Potash Corp. of Saskatchewan Inc. (POT/TSE), up $3.75 to $118.25, on volume of 108,550 shares and (POT/NYSE), up US$3 1/4 to US$83 3/8, on volume of 307,600 shares. Agrium Inc. (AGU/TSE), up 40› to $15, on volume of 421,508 shares. IMC Global Inc. (IGL/NYSE), up US$2 to US$3215 1/816, on volume of 1.1 million shares. A big export order and a lower tax rate are helping the fertilizer stocks, Dow Jones reported. Canpotex, a Saskatchewan potash export agency, signed a deal to export 700,¬000 tonnes of potash to China by the end of February. According to a report by Salomon Smith Barney analyst Robert Koort, Potash supplies about 58% of Canpotex sales, IMC about 35% and Agrium about 8%. More importantly, the new orders will be shipped at higher prices. Higher orders and a better tax position will help Potash boost fourth-quarter earnings by about US$10 million, Merrill Lynch & Co. analyst Doug Groh said in a report. That lower than expected tax rate is the real excitement, said Don Carson, an analyst with J.P. Morgan Securities Inc. "The better tax rate will increase fourth-quarter earnings by about US20› a share," Carson said. "By comparison, the US5› to US10› increase [from the Canpotex contract] is not as significant."
Vector Intermediaries Inc. (VTE/ASE), down $1.20 to $1.80, on volume of 113,650 shares. Late Friday, the insurance brokerage operator reported a bigger loss, several resignations, a new president and a pause for breath. After buying 15 property and casualty brokerages this year, Vector said it has stopped its acquisition program to concentrate on integrating the businesses and cutting costs. For the three months ended Sept. 30, the company reported a loss of $2.3 million (34› a share) on revenue of $3.9 million, compared with profit of almost $30,000 (1›) on revenue of $942,000 a year earlier. Company president Philip Bookalam resigned and moved to the newly created job of non-executive vice-chairman. Judith Bookalam resigned as an officer and director. Gordon Campbell is now president. The stock closed at $4.75 Friday before the news was released. On Monday it slipped $1.75 on volume of 17,100 shares.
Boardwalk Equities Inc. (BEI/TSE), down 75› to $16.75, on volume of 220,580 shares. On Nov. 21 the real estate company said it had signed a $60.8-million deal to buy 1,324 residential units in buildings in four Western Canadian cities. The stock was at $18.75 when the news was released.
Talisman Energy Inc. (TLM/TSE), up 75› to $41.70, on volume of 538,328 shares. The energy company has arranged an asset exchange of North Sea locations to increase net 1998 production by 5,000 barrels a day. The deal with Arco British Ltd., effective Nov. 1, gives Talisman Arco's interests in the producing Blenheim field, increasing its stake to 68.2% from 36.1%. Talisman also acquires some similar, low-risk exploration prospects, and a 25% interest in an area adjacent to its gas discovery in the Outer Moray Firth. Arco receives Talisman's interests encompassing the Arco-operated Waveney field, and cash.
Mosaic Group Inc. (MGX/TSE), unchanged at $2.60, on volume of 1.5 million shares. Volume was heavy as stockbroker Marleau Lemire Securities Inc. crossed blocks of 1.2 million and 300,000 shares at $2.52 each. The blocks represent about 8% of the float. Ben Kaak, chief financial officer, said insiders sold to what he believes is an institution. If that is so, it will make the stock more liquid.
Alberta Oil & Gas Petroleum Corp. (AOC/ASE), $1.50, on volume of 5,500 shares. The junior consolidated its stock one for 10 and changed its name from Alberta Oil & Gas Ltd.
Vid‚otron shares (VDO/ME) closed up 35› yesterday at $11.50. Moffat (MOF/TSE) closed up 25› at $15.70. Moffat Communications Ltd. will more than double its size and expand significantly into Alberta following a $295-million deal concluded early yesterday with Groupe Vid‚otron lt‚e. The Winnipeg-based broadcaster and cable company, controlled by the Moffat family, beat out several other bidders, including Shaw Communications Inc., which owns cable systems adjoining those of Moffat in Winnipeg and Edmonton, Vid‚otron said. "This [deal] grows our company by 65% - it's quite significant," Bill Davis, Moffat's vice-president of finance, said after working out the final details with lawyers. For Vid‚otron, which hired Toronto Dominion Securities Inc. to seek bidders a few months ago, the deal with Moffat provides cash that "will be part of our Quebec war chest," said spokeswoman Sylvia Morin. She said Vid‚otron "is looking at $200 million to $210 million as an accounting gain." The Quebec-based giant will still have about 1.5 million subscribers after it sells the Alberta systems.
TLC shares (LZR/TSE) closed at $11.25, down 20›. BeaconEye (BEY/TSE) closed at 70›, down 25›. Struggling BeaconEye Inc. has rejected an offer from competitor TLC The Laser Centre Inc. to buy all its laser vision correction centres. TLC recently made an offer to buy 11 BeaconEye centres across North America, including two in Toronto.
Corel Corp shares (COS/TSE) closed down 6› at $3.20 yesterday. The stock, which recently hit a 52-week low of $3.13, is now trading at less than half the company's annual sales. Analysts forecast shares will be hammered by end-of-year selling and rumors of a dismal fourth quarter, analysts predict. The software company's final quarter, which ended Nov. 30, is expected to be at least as bad as Corel warned when it reported terrible third-quarter results in September. Corel will release fourth-quarter results on Jan. 14. "Everyone I've spoken to says they're going to be just awful," said one analyst, speaking on condition of anonymity. "No oneis hearing that there is a pleasant surprise coming." Add to that tax-loss selling normally seen during the month of December, and this promises to be a bleak time for the troubled Corel. Most analysts have downgraded their opinions of the stock since Corel reported in August its distribution channels were clogged with unsold software.
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