MARKET ACTIVITY/TRADING NOTES FOR DAY ENDING THURSDAY, FEBRUARY 26, 1998 (1)
Friday, February 27, 1998
U.S. stocks pushed higher as investors, undaunted by Wall Street's record run, continued to drive cash into equities. Canadian stocks jumped, buoyed by a surge in resource-based stocks
The Dow Jones industrial average rose 32.89 points, or 0.4%, to 8490.67, after trading briefly above the 8500 level for the first time.
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The Standard & Poor's 500 composite index gained 5.77 points, or 0.6%, to end in record territory at 1048.67.
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The Nasdaq composite index rose 10.63 points, or 0.6%, to a new high of 1777.11.
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About 651 million shares were traded on the New York Stock Exchange, up from 613.7 million shares traded on Wednesday.
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"The market just seems to keep churning higher," said Guy Truicko, a money manager for Unity Management in Lake Success, N.Y.
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"It's the same thing it's always been: low interest rates, low inflation. Earnings have been pretty good. And more important, you have a ton of money flowing into the market."
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Oil producers and drilling companies led the way, after Halliburton Co. agreed to buy Dresser Industries Inc. for US$7.7 billion. Halliburton shares (HAL/NYSE) rose US$2 5/8 to US$46 1/2, and Dresser stock (DI/NYSE) soared US$6 3/8 to US$44 11/16.
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The Toronto Stock Exchange 300 composite index rose 85.57 points, or 1.2%, to 7087.67 - the fifth consecutive day of gains for the benchmark index. About 147.6 million shares changed hands, up from 125.8 million shares traded on Wednesday.
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Northern Telecom (NTL/TSE) gained $2.75 to $75.50, adding to its 30% gain since Jan. 27 when the company announced a 22% surge in fourth-quarter profit.
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"Technology stocks have much better prospects than consumer issues," said Subodh Khumar, chief portfolio strategist with CIBC Wood Gundy Securities Inc. "With growth rates in electronic commerce at 30%, technological investments cannot be postponed and require equipment that companies like Northern Telecom produce."
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BCE Inc. (BCE/TSE), which owns 51.7% of Nortel, rose 70› to $50.75.
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Bank issues gained on expectations that interest rates will remain low. Bank of Montreal (BMO/TSE) rose $1.25 to $77.30, Royal Bank of Canada (RY/TSE) rose 55› to $84 and Bank of Nova Scotia (BNS/TSE) climbed 80› to $35.85.
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Banks gained additional strength after National Bank of Canada reported its fiscal first-quarter profit rose a greater than expected 20% to 55› a share, from 46› a share in the year-earlier period. National Bank shares (NA/TSE) rose 5› to $23.95.
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However, Toronto-Dominion Bank (TD/TSE) fell 30› to $61.30 after its fiscal first-quarter profit failed to exceed analysts' estimates. TD's profit rose 12% to 95› a share from 85› a share a year earlier.
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Barrick Gold Corp. (ABX/TSE) rose $1.15 to $26.45 and Placer Dome Inc. (PDG/TSE) climbed $1 to $17.50 on higher bullion prices as jewellers took advantage of recent declines, traders said.
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Gold demand rose 9% to 2,935 tonnes in 1997, according to the producer-funded World Gold Council survey of 85% of global consumers. The price of bullion climbed US$2.30 to US$294.40 an ounce on the Comex division of the New York Mercantile Exchange.
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Oil producers Suncor Energy Inc. (Su/TSE), up $1.55 to $51.75, and Gulf Canada Resources Ltd. (GOU/TSE), up 40› to $8.10, rose after a call for the Organization of Petroleum-Exporting Countries to meet urgently on oil production levels raised hopes for higher crude prices.
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Other major Canadian markets closed mixed.
The Montreal Exchange portfolio rose 47.76 points, or 1.3%, to 3657.57.
The Vancouver Stock Exchange index fell 1.28 points, or 0.2%, to 616.63.
For a scorecard of trading activity on all Canadian Stock Exchanges, go to:
quote.yahoo.com .
REFERENCE: Canadian Market Summary
canoe2.canoe.ca
The major overseas markets all closed firmer.
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London: Britain's leading share index romped to its seventh record close since the start of February, as Wall Street held firm and cash-richinstitutions continued to buy British shares. The FT-SE 100 index closed at 5764.8, up 19.7 points or 0.3%.
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Frankfurt: Germany's blue-chip index pared earlier losses, renewing hopes for further gains in the days ahead. The Dax index closed at 4692.03, up 56.21 points or 1.2%.
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Tokyo: Japanese stocks rose moderately on expectations that a recent fragile market tone and external pressure will soon lead the government to act to boost the economy. The 225-share Nikkei average closed at 16,501.7, up 141.06 points or 0.9%.
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Hong Kong: Stocks closed sharply higher amid speculation that Hong Kong banks may cut prime rates soon. The Hang Seng index trimmed earlier gains but ended at its highest close since Dec. 9 - up 338.04 points, or 3.1%, at 11,224.78.
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Sydney: The Australian share market ended higher. The all ordinaries index closed at 2696, up 20.3 points or 0.8%.
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Commodities prices plunge to 4 1/2-year low -- By DAVID THOMAS -- Economics Reporter The Financial Post
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Commodities prices continued to take a beating in January, as slackening demand from Asia caused the sector to plummet to its lowest level in 4 1/2 years, says Bank of Nova Scotia.
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The Scotiabank commodities price index dropped 2.6% in January, leaving it nearly 14% lower than a year earlier.
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"The downturn in East Asia and a lack of trade credit in countries such as South Korea continued to take a toll on actual demand for commodities as well as expectations," said Patricia Mohr, an economist at the bank who specializes in commodities markets.
The index is languishing at a level "not seen since the autumn of 1993, when Japan and Western Europe were in recession.
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"Market sentiment was exceptionally negative in the first half of January, with short selling of base metals on the London Metal Exchange."
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January's decline was broad-based, with agriculture prices down 3.5% and industrial prices falling 2.5%.
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Within industrials, forest products took the worst hit with a 2.6% drop, while metals and minerals fell 2.2% and oil and gas were off 1.9%. Newsprint prices managed a small gain, but that was more than offset by further weakness in lumber prices and the start of a slide in pulp, Mohr said.
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The benchmark lumber - western spruce-pine-fir two by fours - fell from US$290 a thousand board feet in December to US$280 in January. Prices have since recovered slightly, hitting US$305 last week and US$295 this week.
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Pulp prices are beginning to soften, with the bellwether northern bleached softwood kraft pulp fetching US$550 a tonne in the U.S. this month after trading at US$610 at the end of last year.
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In the stock market, investors are counting on substantial firming in most forest and paper products prices in the months ahead. The paper and forest products subindex on the Toronto Stock Exchange is up 10.2% on the year, compared with a 5.8% gain for the TSE 300 composite index as a whole.
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The paper and forest subindex bottomed out at 3728.99 on Jan. 15 and closed yesterday at 4451.71 for a 19.4% advance.
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Oil prices edged down yesterday, with West Texas intermediate crude closing at US$15.35 a barrel, down US10› and well off its average of US$19.95 in the fourth quarter.
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Japan's foot-dragging seen highlighting G7 rift
WASHINGTON (Reuters) - Highlighting a growing rift in the Group of Seven major industrial nations, U.S. efforts to browbeat Japan into boosting its flagging economy in the face of Asia's financial crisis have so far run into a brick wall.
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But as concern mounts in Washington over Japan's failure to do its share to promote stability in the battered region, analysts said Thursday efforts to get any positive reaction from Tokyo had little chance of succeeding for now.
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"The major economic and financial policy-making group in Japan is kind of demoralized," said William Breer, an ex-State Department official who now chairs the Center for Strategic and International Studies' Japan department. "It hasn't got the resilience needed to react to changing circumstances."
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The standoff has heightened fears Asia's woes will have a bigger effect on the United States than previously thought, prompting even Federal Reserve chief Alan Greenspan to join the fracas and warn Tokyo it was not doing enough to prevent its economy from shrinking.
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U.S. Treasury Secretary Robert Rubin, who led the Western attack against Tokyo at last week's G7 meeting in London, upped the stakes Thursday and warned the issue of Japan's domestic demand had taken on global significance.
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"Domestic demand-led growth in Japan really has become an issue of global economic importance and it is particularly important to their neighbors in Asia," he told reporters.
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In Brussels, European Union Trade Commissioner Sir Leon Brittan said it was vital to act now "at a time when the Japanese economy is in a weak condition and when export-led growth is neither politically nor economically appropriate."
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Tokyo's response so far has been indignant. Vice Finance Minister Eisuke Sakakibara told parliament he did not agree with the G7's assessment that Japan urgently needs to act to boost its sluggish economy.
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But while much of the G7 is up in arms over the subject, analysts said there is little, if anything, they can do in practice -- putting the spotlight squarely on the group's apparent inability to deal with world economic problems.
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"The G7 has lost a lot of its effectiveness and has deteriorated considerably," said Fred Bergsten, head of the Institute for International Economics in Washington and a one-time presidential adviser. "One of the reasons is a failure to work constantly and aggressively on each other's problems."
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Foreign exchange markets seem to agree with that assessment. While they remain downbeat over Japan's economic outlook, they barely moved earlier this week after the G7 promised to avoid excessive currency fluctuations, a comment that was widely read to be directly aimed at the weak yen.
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Hampered by simmering political scandals and faced with waning consumer confidence, Japanese politicians appear in no rush to placate Washington's concerns.
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Talk that Tokyo has begun to cobble together proposals for new stimulus measures raised some eyebrows in the currency markets Thursday, but analysts insist there is little reason for hope before the Japanese government has sent its 1998/99 budget safely on its way at the end of next month.
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Any new package would come on the heels of last week's announcement of a set of measures aimed at supporting the economy and stock market, which overseas critics said lacked the tax cuts or increased spending so desperately needed.
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Rubin said that program "didn't meet the objectives," while Germany's central bank president Hans Tietmeyer warned that, in any case, simply raising spending or cutting taxes was not enough to address Japan's structural problems.
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"We have to keep the pressure up," said Breer. "But the greater question is how to restore consumer confidence and spending in Japan -- and that's not a problem that Washington or London could solve for them."
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Bergsten agreed and said the Clinton administration has to come to grips with the fact that it has little leverage on Tokyo.
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"There's always the theoretical threat that United States could close its markets or tinker with security issues, but they haven't really been wanting to do that," he said.
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