MARKET ACTIVITY/TRADING NOTES FOR DAY ENDING WED., DECEMBER 10, 1997 (1)
Thursday, December 11, 1997
Asian fears stalk the Street
Stocks on Bay and Wall streets fell for a second day as concern resurfaced that slowing Asian economies will hobble profit growth among exporters that rely on sales to the region
By THE FINANCIAL POST
Losses by Newbridge Networks Corp. and Northern Telecom Ltd. toppled the benchmark Toronto Stock Exchange 300 composite index from early highs. The TSE 300 dropped 12.46 points to 6754.53 after rising as high as 6789.49 earlier.
Volume was 111.7 million shares, against Tuesday's 110.5 million.
The losses were compounded by a slide in U.S. equities. The Dow Jones industrial average fell 70.87 points, or 0.9%, to 7978.79.
"The more people read about overseas markets and the less they know how bad it could be, the more uncertainty - and that is enough to drag the market lower," said Tom Green, a trader with Commission Direct Inc.
Telecommunications equipment maker Newbridge (NNC/TSE) led the Toronto decline, tumbling $3.90 to $52.30. Nortel (NTL/TSE) slipped $2.50 to $134.70. Newbridge generated 13% of 1997 sales in the Asia Pacific region and Nortel recorded more than 6% of its sales from regions outside North America and Europe.
Software maker Cognos Inc. (CSN/TSE), which made 6% of its profit in the Asia Pacific region in 1997, fell $2.60 to $29.25.
The losses were sparked by U.S.-based software maker Oracle Corp. (ORCL/Nasdaq), which said Tuesday its sales in Asia and the U.S. were below expectations, while rising costs trimmed profit margins.
"When the market sees big disappointments and stocks are pumped up at historical high earnings multiples, there is the probability of large downside moves," said Joe Playfair, president of Playfair Trading Inc.
Newbridge trades at a price-earnings multiple of 58, while Nortel trades at 34 times earnings. The TSE 300 has a P/E multiple of 24.
Energy issues and oil service companies fell on lower crude prices. A 2.8% dive in heating fuel prices, associated with warmer temperatures, helped push crude futures to their lowest this year. Crude for January delivery fell US53› to US$18.14 a barrel. Gulf Canada Resources Ltd. (GOU/TSE) fell 45› to $10.85 and Canadian Natural Resources Ltd. (CNQ/TSE) dropped 75› to $31.75.
Gold producers rebounded on the back of higher bullion prices. Barrick Gold Corp. (ABX/TSE) rose $1.20 to $22.90 and Placer Dome Inc. (PDG/TSE) gained 90› to $15.90. Bullion rose US$3.80 to US$286.60 an ounce on the New York Mercantile Exchange's Comex division.
Other major Canadian markets rose. The Montreal Exchange market portfolio edged up 1.94 points to 3437.76. The Vancouver Stock Exchange composite index rose 4.24 points, or 0.7%, to 611.64.
U.S. stocks lost ground, led by J.P. Morgan & Co., amid concern that the Asian turmoil will take a bite out of U.S. corporate profits.
The Standard & Poor's 500 composite index dipped 5.99 points, or 0.6%, to 969.79.
J.P Morgan shares (JPM/NYSE) fell US$5 to US$117 7/8 after the company said its fourth-quarter earnings would be hurt by the turmoil in global financial markets.
"It's pretty obvious more and more companies will cite Asian influences in their fourth-quarter earnings and into 1998," said Charles Crane, chief investment strategist at Key Asset Management Inc.
Other banks with large overseas businesses also declined. Citicorp (CCI/NYSE) fell US$5 7/8 to US$132 and Chase Manhattan Corp. (CMB/ NYSE) lost US$33 1/816 to US$11211 1/816.
Declining issues swamped advancers on the New York Stock Exchange with 608 million shares changing hands, up from 543.4 million shares traded Tuesday.
The Nasdaq composite index slipped 23.94 points, or 1.5%, to 1596.61. Companies hurt in a tech selloff included Compaq Computer Corp. (CPG/NYSE), which dropped US$3 3/8 to US$60, Intel Corp. (INTC/Nasdaq), down 15/16 to US$74 11/16, Microsoft Corp.(MSFT/Nasdaq), down US$2 1/16 to US$142 1/4, and Dell Computer Corp. (DELL/Nasdaq), down US$2 13 1/816 to US$91 1/8.
Overseas markets closed lower.
London: Britain's leading share index lost ground as Asian weakness and a wobbly Wall Street prompted profit-taking. The FT-SE 100 index closed at 5130.7, down 46.4 points or 0.9%.
Frankfurt: The failure of the US$ to keep a grip on gains sparked further losses for the blue-chip Dax index, traders said. It closed at 4117.27, down 67.64 points or 1.6%.
Tokyo: Tokyo stocks closed modestly lower, as the market grew wary about the effectiveness of a proposed financial remedy. The 225-share Nikkei average closed at 16,478.12, down 208.39 points or 1.3%.
Hong Kong: Stocks tumbled on a lack of institutional interest. The Hang Seng index closed at 11,022.41, down 468.25 points or 4.1%.
Sydney: A weaker resources sector led the Australian market lower. The all ordinaries index closed at 2554.7, down 28.1 points or 1.1%.
HOT STOCKS
Gold shares take heart on Euro bank rumors
Barrick Gold Corp. (ABX/TSE), up $1.20 to $22.90, on volume of 2.4 million shares.
Placer Dome Inc. (PDG/TSE), up 90› to $15.90, on volume of 1.5 million shares.
TVX Gold Inc. (TVX/TSE), up 60› to $4, on volume of 1.4 million shares.
Toronto gold stocks surged yesterday, with the Toronto Stock Exchange's gold and precious minerals subindex bouncing up 289 points points, or 5.6%, to 5488.31.
The German daily Boersen-Zeitung yesterday cited sources claiming the proposed European central bank will keep 5% of its reserves in gold.
On Tuesday, the price of gold fell to an 18-year low of US$282.80 an ounce. Yesterday gold rose US$3.80 at US$286.60 an ounce.
Pan American Silver Corp. (PAA/TSE), up $1.85 to $15, on volume of 61,000 shares. Silver jumped US46› to US$5.93 an ounce yesterday - a one-day rise of 8%. The spike comes amid rumors that speculators are trying to lock up supplies. Merrill Lynch & Co. warned in October that a syndicate of traders and investors controlled a large stock and was seeking more. Demand for silver has been climbing steadily, while supplies monitored by the Comex division of the New York Mercantile Exchange have dropped to 12-year lows.
Donner Minerals Ltd. (DML/VSE), down 4› at $1.68, on volume of 2.1 million shares.
Northern Abitibi Mining Corp. (NAI/ASE), up 25› to $1.40, on volume of 1.7 million
shares.
Cypress Minerals Corp. (CYP/VSE), up 3› to 32›, on volume of 779,171 shares.
Trading volume in all three mining companies spiked Friday amid rumors of a major find. Donner, Cypress and Abitibi are part of a group of 15 juniors exploring a property south of Voisey's Bay. On Monday, Donner and Abitibi said they had found massive mineralization.
EdperBrascan Corp. (EBCa/TSE), unchanged at $26.20, on volume of 105,382 shares.
Noranda Forest Inc. (NF/TSE), down 5› to $7.75, on volume of 1.6 million shares.
EdperBrascan said it had purchased 3.4 million common shares of Noranda Forest, or 2.1% of the shares outstanding. EdperBrascan has operations in natural resources, power generation, real estate and financial services.
Laidlaw Environmental Inc. (LDM/TSE), down 5› to $19.10, on volume of 347,168 shares. Safety-Kleen Corp. (SK/NYSE), unchanged at US$27 11/16, on volume of 279,400 shares.
Philip Services Corp. (PhV/TSE), down 65› to $22.25, on volume of 113,505 shares.
Shareholders of U.S. waste management company Safety-Kleen will vote on Jan. 9 on whether to restore voting power to Safety-Kleen shares owned by a Laidlaw subsidiary. A "yes" vote would clear the way for Laidlaw's hostile takeover bid for Safety-Kleen. Safety-Kleen has already approved a $27-a-share bid led by Hamilton, Ont.-based Philip.
NOTE: Page 2 consisting of the oil & gas section of this column will be delayed. It will be published within two hours.
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