MARKET ACITIVITY/TRADING NOTES FOR DAY ENDING THURSDAY APRIL 23, 1998 (1)
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Good morning and welcome to Kerm's Korner - the free location on the internet Subject 10229 devoted to the Canadian Oil & Gas Industry. What one will find here is an extensive and comprehensive collection of information and data regarding current events and happenings in the Oil Patch.
We begin with an overview of stock markets in Canada with a little U.S. information thrown in to clearly establish the moods of investment in North America. We then jump into the world futures arena with the most concentrated information regarding crude oil and natural gas pricing. Following you will find the most recent articles written about the industry which are assembled from numerous sources across Canada. We will then bring you up to date with the latest announcements and reports released by companies in the industry. You will also find commentary and research notes on the industry in general, as well as individual companies.
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MARKET WATCH
Bay Street slipped as banks fell on fears that mergers may not be a sure thing. Wall Street lost ground after Microsoft warned that its sales would remain unchanged for the next six months.
Canadian stocks were mixed as BCE Inc. rose after it released stronger than expected earnings.
The Toronto Stock Exchange 300 composite index fell 5.85 points to 7816.4. The index has gained 16.7% this year and touched a record 7837.7 earlier in the session. About 120.9 million shares changed hands on the TSE, down from 128.7 million shares traded on Wednesday.
BCE (bce/tse) rose $1.25 to a record $63.75 after the company said its first quarter earnings rose 43% to 48› a share, beating analysts' estimates.
Telus Corp. (t/tse) fell $1.30 to $38 amid concerns that the Stentor alliance of provincial phone companies could fall apart.
Canadian Pacific Ltd. rose for the second day after it said first-quarter profit climbed 2.3% to 48› a share. CP (cp/tse) advanced $1.30 to $44.15.
MacMillan Bloedel Inc. (mb/tse) rose 25› to $21.50 after it posted an unexpected first quarter profit. MacBlo also said it had agreed to sell its paper business to a group of investors for $850 million.
Gold stocks rose as the price of bullion climbed US90› to US$314.50 an ounce on the Comex division of the New York Mercantile Exchange, its highest since Oct. 28. Franco-Nevada Mining Corp. (fn/tse) gained 95› to $38.20, Barrick Gold Corp. (abx/tse) rose 35› to $34 and Echo Bay Mines Ltd. (eco/tse) climbed 54› to $5.45.
Bank shares extended their losses on fears the federal government may not approve proposed super mergers. Bank of Montreal (bmo/tse) lost 75› to $80.50, Canadian Imperial Bank of Commerce (cm/tse) fell 25› to $50.55 and Toronto Dominion Bank (td/tse) fell 60› to $65.60. Royal Bank of Canada (ry/tse) slid 65› to $87.10.
Other Canadian markets were mixed.
The Montreal Exchange portfolio lost 0.71 of a point to 3915.44. The Vancouver Stock Exchange rose 0.48 of a point to 636.14. The Alberta Stock Exchange Combined Value Index closed up 4.09 to 2,279.93.
U.S. stocks fell as a warning of stagnant revenue from Microsoft Corp. signalled that the computer industry may face tough times ahead.
The Dow Jones industrial average fell 33.39 points, or 0.4%, to 9143.33.
The Standard & Poor's 500 index declined for the first time in a week, falling 10.42 points, or 1%, to 1119.58.
About 658.7 million shares changed hands on the Big Board, down from 701.6 million shares traded on Wednesday.
The tech-heavy Nasdaq composite index lost 36.22 points, or 1.9%, to 1881.39, led by Microsoft (msft/nasdaq), which fell US$4 3/8 to US$94 1/2.
After the market closed Wednesday, Microsoft said that its sales will be unchanged for at least six months until revenue from Windows '98 kicks in.
Computer-related shares slumped on the news. Intel Corp. (intc/nasdaq) dropped 13/16 to US$83 1/4, PeopleSoft Inc. (psft/nasdaq) lost US$4 11/16 to US$47 3/8, Yahoo Inc. (yhoo/nasdaq) slipped US$6 3/16 to US$112 3/16, Ascend Communications Inc. (asnd/nasdaq) fell US$1 15/16 to US$41 3/4, Lucent Technologies Inc. (lu/nyse) tumbled US$2 3/4 to US$73 3/4 and Intuit Inc. (intu/nasdaq) lost US$2 15/16 to US$48.
Despite the continuation of merger mania, financial shares lost ground.
Bank of New York Co. (bk/nyse) fell US$1 1/2 to US$60 9/16 a day after announcing a US$22.9-billion unsolicited takeover bid for Mellon Bank Corp. Mellon (mel/nyse) fell US$1 15/16 to US$75 5/8, Citicorp (cci/nyse) slid US$3 11/16 to US$156 1/4, Chase Manhattan Corp. (cmb/nyse) lost US$3 7/8 to US$136 1/2, J.P. Morgan & Co. (jpm/nyse) tumbled US$5 1/4 to US$137 3/8 and Bankers Trust New York Corp. (bt/nyse) slumped US$4 1/2 to US$131 13/16.
Major overseas markets ended mixed.
London: British shares were dragged down by a rout in index futures. The FT-SE 100 index lost 33 points, or 0.6%, to 5898.1.
Frankfurt: German shares retreated as bank issues lost ground after riding high on merger speculation. The Dax index dropped 109.19 points, or 2%, to 5251.46.
Tokyo: In Japan, Tokyo stocks closed marginally higher in lackluster trading, the day before the government planned to release details of its latest attempt to revive Japan's faltering economy. The benchmark Nikkei Stock Average of 225 selected issues gained 0.15 points, closing at 15,761.69. "It's hard to take active positions now, as the direction of the market is unclear," said Futoshi Yoshimura, joint head of dealing at Schroders Japan's equity trading department.
Seoul; Seoul's benchmark index fell 3.5 percent, closing at 416.54. Han Suk-chul, a senior analyst at KFB Securities Co., said local investors sold massive amounts of shares, while foreigners continued to stay on the sidelines. Labor unrest could further hurt the country's battered economy by delaying restructuring at local companies, which is necessary to draw back foreign investment, he said. Another blow to the market came from a report released by the Korea Development Institute. The state-owned think tank said Wednesday that a delay in restructuring could increase bad loans owed by financial institutions. This would lead many South Korean companies to collapse and the country into another foreign exchange crisis, it said.
Hong Kong: In Hong Kong, share prices closed lower in quiet trading, dragged down by bearish sentiment in the futures market and an absence of positive local news. The blue-chip Hang Seng Index closed down 0.5 percent at 10,918.94. Analysts said the domestic economy's weakness, as evidenced by the high jobless rate reported Tuesday, has caused local investors to put less in the stock market.
Kuala Lumpur: In Malaysia, share prices rose on relief that a major bank acquisition deal had gone through. The benchmark Kuala Lumpur Stock Exchange Composite Index finished 1.4 percent higher at 628.24. In a news conference Thursday, Rashid Hussain Bhd. announced financing details of its purchase of troubled Sime Bank Bhd. The financial group said it will merge Sime Bank with its own commercial banking unit, RHB Bank Bhd, to create Malaysia's second-largest bank. But dealers noted remaining concerns in the market about the depth and length of Malaysia's economic downturn. A number of economists now expect the country will fall into outright recession.
Jakarta: In Indonesia, Jakarta share prices closed lower, driven by a fall in telecommunication shares as the bearish trend continued despite Indonesia's apparent commitment to economic reforms. The JSX composite index closed down 1.8 percent at 491.856 points. Dealers said foreigners saw the reforms announced Wednesday as irrelevant, and felt Indonesia's greater needs were bank restructuring, a functional bankruptcy law and debt restructuring.
Bangkok: In Thailand, stock prices closed lower on first-quarter losses reported by financial institutions. The Stock Exchange of Thailand index lost 2.1 percent, closing at 427.41. Although prospects for improvement in the economy are bright with the government and central bank planning long-term bond issues to boost liquidity, investors still questioned which companies will survive the recession, dealers said.
Sydney: The key Australian stock index finished higher on the back of higher gold and mining share prices. The index gained 21.0 points to 2,877.8.
Wellington: The key New Zealand stock index finished at its lows, with brokers saying the market lacked direction. The index ended down 5.51 points at 2,314.45.
Manila: Philippine shares ended higher as investors picked up blue chip issues at bargain levels, traders said. The key index closed up 0.5 percent at 2,164.33.
Taipei: Taiwan shares ended lower as investors headed back for the sidelines to wait for first-quarter earnings reports due later this month, traders said. The key index closed down 0.26 percent at 8,613.96.
TODAY'S EXPECTATIONS
" Canadian dollar - Weaker, 1.4340 - 1.4390
" Canadian money market - Slightly weaker, no curve bias
" Canadian bond market - Slightly weaker, flattening bias
" US bond market - Slightly weaker
" Canada - US spreads - Canada underperforms
"Bond Market: The US Treasury market is likely to retain its cautious sentiment today. While we remain unconvinced that the most recent Japanese stimulus package will be sufficient to jump start the economy, most observers appear pleasantly surprised. However, the market should see some support as mark et participants begin to find value around the 6 percent level for the US long bond. With the weaker trend in the Canadian dollar, the Canadian bond market is likely to lag the US today.
"Money Market: The Canadian money mark et is expected to hold a slightly weak er bias in quiet trading today. An uneventful overnight session has again left the market with little momentum at the North American open. Market participants are awaiting a backup in rates before significant buying interest can appear. Of course, if the currency continues to trend weaker, we may just get the backup over the next few sessions.
"Foreign Exchange: The Canadian dollar is expected to retain its negative momentum today. The US dollar is softening vs. the other major currencies, and following BoC Governor Thiessen's testimony yesterday, there is little expectation of a near term rate hike in Canada. The next technical target of significance is at the 1.4440 level, but we are unlik ely to see this level today.
Bulls Cast A Wary Eye On Friday's Outlook
MSNBC
Those tremors you're feeling from Wall Street are real. Stocks have repeatedly climbed to heretofore-unforeseen heights and now appear ready to descend to some degree. There may be some buying in anticipation of Monday mergers, but other than that, there seems to be little impetus for stocks to move higher Friday.
A wild card for the activity is the market's reaction to the expected fiscal stimulus package announcement from the Japanese government. The big concern is whether this latest package from Prime Minister Ryutaro Hashimoto's government will include some permanent tax cuts. Fear of such cuts, and a coming rebound in Japan's moribund economy, is one reason for the dollar's recent slide versus the yen. That trend has the long bond creeping back toward 6%, a potentially negative development for the stock market.
Additionally, the earnings locomotive slows heading into the weekend, while a light week of economic data concludes with no major reports. That will leave traders with plenty of time to think about the fact that first quarter earnings thus far, though ahead of official projections, haven't exactly been gangbusters compared with year-ago results -- or even the expectations of just a few months ago.
So was Thursday's performance in the Internet sector a harbinger of things to come for broader markets? Is the sky falling?
There's been of a lot of Chicken Littles talking in the press lately, pecking about while major indices continued to set new highs. So we decided that Thursday's reversal was a perfect time to speak with one of Wall Street's unabashed bulls, Joseph Battipaglia, chief investment strategist at Gruntal & Co.
Battipaglia remains "very much" the bull.
"The economy is showing greater strength than anticipated, corporate profits aren't as bad as people thought, interest rates are tame, and confidence is strong, meaning there will be a flow of funds into equities," he said. "Put it all together and you get a rising market."
However, even Gruntal's super-bull believes "the complexion of the market will change."
Instead of the Dow and S&P 500 stocks in favor, there will be a "broadening out" of the leadership to include companies with market capitalization from under $3 billion to $100 million, Battipaglia said.
Noting that both the Dow and S&P 500 are up more than 15.6% for the year to date, the strategist said the upward bent of those indices is "probably finished, by and large, for the moment."
However, the Nasdaq and Russell 2000 "could well do another 15% to 20%," he said.
When asked why now is the time for the small caps when others have been predicting their rise since (seemingly) time immemorial, Battipaglia noted that they did lead the market in 1997 from April until September.
"Then October came and people turned skeptical on the market," he recalls. "The first phase after October is, 'Let's got back into the big names.' Now everyone is looking for value, and they're not going to find it in the same [blue-chip] names. So they'll start to look elsewhere."
WORLD MARKETS FRIDAY
Asia Mixed, London Down At Noon
Asian stock markets ended the week mixed Friday, with share prices rising in Tokyo but falling in Hong Kong.
Japanese shares were boosted by Finance Minister Hikaru Matsunaga's comment earlier Friday that the government's latest economic package would include a pledge to look at making expected one-time tax breaks permanent.
The benchmark Nikkei Stock Average of 225 selected issues rose 249.55 points, or 1.58 percent, closing the week at 16,011.24 points. On Thursday, the average rose 0.15 points, negligible in percentage terms.
Buying by public funds pushed the Nikkei by more than 400 points early in the afternoon, but some selling of blue chip stocks trimmed some of its early gains toward the closing bell, traders said.
Meanwhile, the U.S. dollar was quoted at 129.78 yen, down 0.76 yen from late Thursday in Tokyo and also below its late New York rate of 130.18 yen overnight.
Share prices in Hong Kong closed generally lower for the second straight day in thin trading.
The Hang Seng Index, the Hong Kong market's key indicator of blue chips, fell 39.01 points, or 0.3 percent, closing at 10,879.93. On Thursday, the index had lost 58.53 points.
Brokers said share prices opened lower in reaction to an overnight slump on Wall Street, but that futures related buying in the afternoon erased some of the earlier losses.
They said trading remained light as many investors continued to stay on the sidelines because of the uncertain economic outlook for the region.
Kuala Lumpur: Malaysian shares closed mostly higher as market sentiment remained upbeat following the well received merger details between RHB Bank Bhd. and Sime Bank Bhd. The key Composite Index, which track 100 bluechip stocks, closed at 635.11 points, up 6.87 points or 1.09 percent.
Taipei: Share prices closed slightly higher as most investors continued to stay on the sidelines ahead of the release of first quarter earnings at the end of the month. The market's key Weighted Price Index rose 22.15 points, or 0.2 percent, to 8,636.11.
Wellington: New Zealand share prices closed higher. The NZSE-40 Capital Index rose 8.38 points, or 0.3 percent, to 2,322.83.
Manila: Philippine shares closed lower lower Friday, buffeted by political uncertainties ahead of next month's general election and a weak local currency. Te Philippine Stock Exchange Index of 30 selected issues fell 10.42 points or 0.5 percent, to 2,153.91.
Sydney: Australian share prices closed lower after a spate of sell orders in the finance and media sectors, dealers said. The All Ordinaries Index fell 22.9 points, or 0.7 percent, to 2,854.9.
Seoul: Share prices closed lower on profit-taking. The Korea Composite Stock Index fell 1.98 points, or 0.4 percent, to 414.56.
Singapore: Share prices closed mixed in cautious trading. The Straits Times Industrials Index slipped 4.58 points, or 0.3 percent, to 1,491.28.
Jakarta: Share prices closed lower, driven by the fall of some blue chip stocks following poor results from several major listed companies. The Composite Index fell 1.375 points, or 0.3 percent, to 490.481.
Bangkok: Thai shares close lower. The Stock Exchange of Thailand index fell 2.62 points, or 0.6 percent, to 424.79. (ks)
London: Share prices on the London Stock Exchange were lower at midday Friday. At noon, the Financial Times Stock Exchange 100-share index was down 87.7 points at 5,810.4.
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