MARKET ACTIVITY/TRADING NOTES FOR DAY ENDING TUESDAY, FEBRUARY 17, 1998 (1)
Wednesday, February 18, 1998
Lower borrowing costs, signaling fatter company profits, helped propel Wall Street to a fifth consecutive record close. Bay Street lost ground, weighed down by weakness among oil and gold stocks
The Dow Jones industrial average rose 28.4 points, or 0.3%, to 8398.5.
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The Standard & Poor's 500 composite index rose 2.67 points, or 0.3% to 1022.76.
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The Nasdaq composite index fell 6.99 points, or 0.4%, to 1703.43, dragged down by a slide in Microsoft Corp.
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Microsoft shares (MSFT/NASDAQ) fell US$31 1/88 to US$1543 1/88. About 594 million shares changed hands on the New York Stock Exchange, up from 536.4 million shares on Friday.
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Markets in the U.S. were closed Monday for the Presidents' Day holiday.
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Takeover news boosted some stocks. Echlin Inc. (ECH/NYSE) soared US$111 1/88, or 29%, to US$497 1/88 after rival SPX Corp. made a hostile US$3-billion bid for the auto parts maker. Beneficial Corp. (bnl/nyse) soared US$305 1/88 to US$1127 1/88 after the consumer-finance company hired Goldman Sachs & Co. and Merrill Lynch & Co. to explore strategic options, including a possible sale.
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Finance shares gained on expectations that their profits will benefit from lower bond yields.
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Chase Manhattan Corp. (CMB/NYSE) rose US$29 1/816 to US$1203 1/84, and Citicorp (cci/nyse) rose US$115 1/816 to US$1273 1/84.
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Eli Lilly & Co. (LLY/NYSE) fell US$115 1/816 to US$613 1/84 on concern that sales are slow for Evista, the drugmaker's new product. Initial sales were better for a rival drug, Fosamax, sold by Merck & Co., analysts said. Merck shares (MRK/NYSE) rose US$23 1/816 to US$1197 1/88, contributing almost 10 points to the Dow's gain.
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Canadian stocks fell, toppled from earlier highs by weakness in golds and oil producers as concerns eased that the U.S. will launch a military strike against Iraq.
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The Toronto Stock Exchange 300 composite index fell 24.7 points, or 0.4%, to 6960.46. Earlier, the benchmark index rose above 7000 for the first time since Oct. 27. About 129.3 million shares changed hands on the TSE, up from about 61 million shares traded on Monday.
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Northern Telecom Ltd. (NTL/TSE) rose 95› to $68.30 after the company announced a US$210 million pact to supply equipment to Omnipoint Corp. The gain also helped lift the stock of BCE Inc., a major shareholder of Nortel. BCE shares (BCE/TSE) rose $1.20 to a 52-week high of $49.55. By bidding up the stock, investors were also signaling their endorsement of Jean Monty as the new chairman of BCE unit Bell Canada, an analyst said.
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Talisman Energy Inc. (TLM/TSE) fell $1.75 to $40.20, Renaissance Energy Ltd. (RES/TSE) slipped $1 to $27.45 and Canadian Natural Resources Ltd. (CNR/TSE) slid $1.65 to $25.65 to lead energy issues lower after crude oil fell to a four-year low on reports from Russia that Iraq is prepared to meet United Nations demands for weapons inspections.
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Barrick Gold Corp. (ABX/TSE) fell $1.35 to $27.50 and Placer Dome Inc. (PDG/TSE) fell 70› to $17.55, as bullion for April delivery dropped US$2 to US$298.60 an ounce on the Comex division of the New York mercantile exchange.
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Other Canadian markets finished lower.
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The Montreal Exchange portfolio fell 4.64 points to 3602.32.
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The Vancouver Stock Exchange fell 4.3 points, or 0.7%, to 632.31.
For a scorecard of trading activity on all Canadian Stock Exchanges, go to:
quote.yahoo.com .
REFERENCE: Canadian Market Summary
canoe2.canoe.ca
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Major international markets closed higher.
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London: British shares rose to record highs after persistent bid and merger talk among financial stocks combined with buoyant global equity markets. The FT-SE 100 Index climbed 89.6 points, or 1.6%, to 5709.5.
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Frankfurt: Germany's blue-chip Dax index vaulted over the 4600 level to hit a new record peak at 4632.35, boosted by strong bond markets and a firm Dow open. The Dax closed at 4602.40, up 81.76 points or 1.8%.
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Tokyo: Japanese stocks were little changed, as early sales in the banking sector waned, taking some downward pressure off the Nikkei average. The 225-share Nikkei average closed at 16,790.71, up 15.19 points.
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Hong Kong: Stocks staged a cautious comeback on the back of softer interbank rates and firmer markets in Asia. The Hang Seng index closed at 10,232.03, up 108 points, or 1.1%, after five consecutive days of losses.
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Sydney: Australian shares rebounded amid bargain-hunting and relief that the Reserve Bank gave no doomsday predictions on the impact of the Asian crisis on Australia in a report on the domestic economy. The all ordinaries index closed at 2657, up 35.8 points or 1.4%.
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U.S. industrial output flat
WASHINGTON (AP) - Industrial output in the United States was flat in January, the first time it has failed to increase since late 1996.
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While the Asian turmoil is expected to hit American manufacturers the hardest, the weakness in January came more from El Nino than Asian economic turbulence.
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The Federal Reserve Board reported Monday that warmer-than-normal weather for January caused a big four per cent drop in production at U.S. electric and gas utilities. That was enough to keep overall production unchanged, after having posted a 0.4 per cent gain in December and a 0.7 per cent increase in November.
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It was the first time industrial production has failed to record a monthly increase since October 1996. Some economists said that even though the biggest reason for weakness last month was weather-related, there was some evidence that Asia was beginning to have an impact.
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The slight rise in manufacturing output marked the second straight month of slowing growth in output at U.S. factories following far bigger increase of one per cent in November and 0.8 per cent in October.
Many economists believe that the U.S. manufacturing sector will feel the biggest brunt of fallout from the Asian crisis, which has forced three countries - South Korea, Indonesia and Thailand - to seek $100 billion in bailouts from the International Monetary Fund because of plunging currencies that have left their economies shaken.
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The overall U.S. economy grew at a sizzling 3.8 per cent pace in 1998, the best showing in nearly a decade. But many analysts believe growth this year will be a full percentage point slower as U.S. manufacturers lose export markets and cheaper Asian products boost the American trade deficit.
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"The industrial side of the economy is the part that will feel the brunt from the Asian crisis when it does blow through," said William Cheney, chief economist at John Hancock in Boston.
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Stan Shipley, economist at Merrill Lynch in New York, said given that more than 25 per cent of U.S. production gets exported, there was no doubt that slower growth in Asia and other countries will lower industrial production this year.
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U.S. dollar up as investors hear countdown on Iraq action
NEW YORK (Reuters) - The dollar rose broadly Tuesday after the long Presidents Day holiday weekend as investors flocked to the safety of U.S. financial markets in case Washington launches an attack on Iraq soon.
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The dollar's gains came mostly before a lunchtime speech by President Clinton, which was aimed at making the case to the American public for any U.S. military action.
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Speaking at the Pentagon, Clinton said he favored a diplomatic solution to the crisis over Iraq's chemical and biological arms but said a peaceful outcome would be possible only if Iraq gives U.N. weapons inspectors full access.
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"The bonds are up. Stocks are up," said David Gilmore, a partner at Foreign Exchange Analytics, a Connecticut consulting firm. "People are eyeing Iraq, but I don't think there's been any new developments."
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The dollar rose to 126.57 yen from 125.17 yen when trade wrapped up early Friday for Monday's holiday. It rose to 1.8256 German marks from 1.8205 and to 1.4727 Swiss francs from 1.4620 but fell to Canadian $1.4394 from C$1.4435. The pound fell to $1.6330 from $1.6408.
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The robust U.S. economy continues to draw capital from distressed markets in Asia, while offering higher returns and more security than investments in Europe and especially Japan.
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On Wall Street, the Dow Jones industrial stock average rose 28.40 points to 8,398.50, its fifth record-high close in a row.
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Safe-haven buying pushed the price on the 30-year Treasury bond up more than 3/4 of a point, lowering the yield to 5.80 percent from 5.85 percent at Friday's close, amid fears that Japan's weak economy was not able to play a role in Asia's recovery.
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Adding to concerns about the region was Vietnam's decision to devalue its currency, the dong, and the continuing face-off between Indonesia and international lenders as Jakarta considers a plan to peg the rupiah to the dollar.
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The dollar also garnered support as the Japanese yen was pressured by growing doubts that Japan will have prepared a plan for extra fiscal stimulus in time for the London meeting of Group of Seven finance officials on Saturday.
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Ballard Power wins $2.3M US power plant order
VANCOUVER (CP) - A unit of Ballard Power Systems Inc. has won a $2.3 million contract from a big U.S. energy company to build a natural gas fuel cell power plant.
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The contract, between Ballard Generation Systems and Cinergy Technology Inc., is the first field trial of the power plant, which will produce electricity from zero-pollution technology developed by Ballard.
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The 250 kilowatt plant is slated for delivery in mid-1999, Ballard said today.
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"This order is an important event for Ballard Generation Systems as it evolves from development to manufacturing of stationary power plants for commercial use," Ballard president Firoz Rasul said in a release.
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Cinergy, a big diversified U.S. energy producer, has been working with the U.S. government to develop low-pollution power systems. The company said the Ballard deal allows it to look at new options for producing power as the U.S. industry becomes more competitive through deregulation.
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"Competition in the electric business will come not just from other companies, but also from technology that may change the way we do business," said James Rogers, Cinergy's president.
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"We have formed several strategic alliances with companies like Ballard which are helping to define the energy business of the future."
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Ballard Power Systems is a key player in the production of pollution-free power systems through its Ballard fuel cell, a zero-pollution engine that converts natural gas, methanol, gasoline, or hydrogen fuel into electricity without combustion.
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Ballard fuel cells are being used by many of the world's big carmakers, including Daimler-Benz, Volkswagen, Ford and General Motors, in developing electric vehicles.
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Engineering and energy companies such as U.S.-based GPU International and Cinergy as well as GEC Alsthom of France are using the cells to produce clean electric power plants and portable power systems.
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Alliance Forest cogeneration plant running
MONTREAL (CP) - Alliance Forest Products said Tuesday a new cogeneration plant at its Dolbeau, Que. paper mill recently began commercial operation.
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Under construction for 15 months at a cost of $65 million, the cogeneration plant produces 28 megawatts of electricity by burning a readily available resource: bark from area sawmills in the Lac-Saint-Jean area in northern Quebec.
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Alliance is selling 20 megawatts of the plant's power production to Hydro-Quebec under a 25-year contract.
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The remaining eight megawatts will be used to operate the paper mill, while excess steam heat will be used to dry paper.
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There are a handful of cogeneration plants in Quebec, which produce both heat and electricity, mainly for the large pulp and paper sector. Promoters say Hydro-Quebec is slow in responding to requests for more cogeneration plants, which make the pulp and paper sector more competitive by lowering their operating costs.
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Biomass, mainly bark, is burned to produce steam, which in turn drives the turbo-generator that produces electricity.
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The bark, which has no commercial value, was formerly buried in landfill dumps and was considered an environmental problem.
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Alliance said the cogeneration unit will help cut manufacturing costs at the Dolbeau mill, while an electrostatic precipitator installed on the boiler will reduce air emissions to below provincial standards.
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The completion of the electric plant is the final step in a $230-million investment program at the Dolbeau mill.
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