MARKET ACTIVITY / TRADING NOTES FOR DAY ENDING MONDAY, MAY 11 1998 (1)
Bay Street Advanced On Strong Economic Numbers. Merger News In U.S. Sent Telecom Shares Higher
Toronto stocks gained for the second straight day on Monday as investors continued to be encouraged by last week's strong economic numbers. Gold stocks led the Toronto Stock Exchange 300 Composite Index higher in a light day of trading.
Todd Kapala, an investment specialist at Priority Brokerage in Toronto, said strong economic numbers released last week in both the United States and Canada, were the key behind today's gains.
On Friday, the U.S. April unemployment rate fell to 4.3 percent from 4.7 percent, its lowest level since February 1970. In Canada the jobless rate slipped to 8.4 percent in April from March's 8.5 percent level.
The Canadian numbers, which indicate that the economy is improving but still shows there is a problem with unemployment, helps to reinforce many economists doubts that the Canadian government will raise interest rates.
''The strong (Canadian) economy and underlying fundamentals are good, so we should be able to avoid an interest rate increase the way things are looking right now. It's a plus on both sides,'' he said.
The same cannot be said for the U.S. economy, where many believe the United States Federal Reserve is expected raise rates some time this summer. The earliest rates could be hiked is next week, when the Fed is set to meet on Tuesday.
Despite the gains, Kapala expects the North American markets to trade in a nervous fashion for the next week as investors wait to see what move the Federal Reserve makes next week on interest rates.
The Toronto Stock Exchange 300 composite index rose 21.46 points, or 0.3%, to 7720.7. About 87 million shares changed hands on the TSE, up from 82.9 million shares traded on Friday. Trading value was worth C$1.52 billion. Advancers were outpaced by decliners 470 to 563 with 307 issues unchanged.
Overall in Toronto, nine of the TSE 300's 14 sub-indexes closed in positive territory led by a 1.2 percent climb in the gold and precious minerals index followed by communications and media, up 0.87 per cent, and consumer products, up 0.78 per cent. Tempering the gains was a 1.2 percent drop in the transportation sector and a 0.34 percent fall in the lightly weighted real estate sector.
The June price for Comex gold rose US$0.50 to US$301.20. Gold heavyweight Barrick Gold Corp. (abx/tse) gained C$0.75 to C$32.20 and Placer Dome Inc. (pdg/tse) rose C$0.50 to C$20.80.
BCE Inc. (bce/tse) edged up 25› to $63.35 and Telus Corp. (t/tse) rose 55› to $37.85 on the back of the SBC-Ameritech merger news. Fonorola Inc. (fon/tse) climbed 30› to $65.30. Telecommunication equipment maker Northern Telecom Ltd. (ntl/tse), which supplies Ameritech and SBC, rose $2.50 to $91.30.
"This will add fuel to the fire for proposals to merge telephone companies in Canada," said Rick Hutcheon, chief investment officer with the CentrePost Group of Mutual Funds.
Seagram Co. (vo/tse) also posted strong gains after a report that the Montreal-based liquor and entertainment giant is close to acquiring PolyGram, the world's biggest record company, for $9 billion to $10 billion US. Seagram gained $1.65 to $61.75, touching an intraday record high of $62.25, after Monday's report in The Wall Street Journal - which the companies would not confirm. The influential business daily said Seagram turned to PolyGram after talks with Britain's EMI Group unravelled last week. Seagram, which owns Universal Studios, is apparently trying to bolster its music business to catch up with conglomerates such as Time Warner Inc. and Sony Corp.
Thomson Corp. (toc/tse) rose 95› to $44.20 after its first-quarter loss narrowed to US$68 million, or US11› a share, from US$91 million (US15›). Six analysts polled by First Call Corp. expected the company to lose US15› a share.
Ballard Power Systems Inc. (bld/tse), the exclusive fuel cell supplier to a global alliance headed by Daimler-Benz AG, fell $4 to $163.75 after Barron's reported it could be hurt by the Daimler-Benz-Chrysler Corp. merger as both automakers estimate they could save up to $300 million on fuel cell spending in the first year after the merger.
In the transportation group Air Canada (ac/tse) fell C$0.15 to C$13.50, while Canadian National Railway Co. (cnr/tse) slipped C$1.35 to C$92.00 after it said it would sell more than 2,600 kilometres, or 11%, of its track.
Other Canadian markets were mixed.
The Montreal Exchange portfolio rose 29.76 points, or 0.8%, to 3897.97. The Vancouver Stock Exchange slipped 1.39 points, or 0.2%, to 630.39.
Wall Street took flight as telephone giants SBC Communications and Ameritech unveiled a US$71-billion merger.
U.S. stocks rose on the back of five multibillion-dollar takeover bids, topped by SBC Communications Inc.'s record-setting offer for Ameritech Corp.
The Dow Jones industrial average ended 36.37 points, or 0.4%, higher at 9091.52, after soaring to almost 9200 intraday.
The Standard & Poor's 500 index fell 1.5 points to 1106.64.
About 562 million shares changed hands on the Big Board, up from 561.3 million shares traded on Friday.
The Nasdaq composite index slumped 16.3 points, or 0.9%, to 1848.07.
SBC Communications' acquisition of Ameritech is the largest in corporate history, topping last month's US$70.3-billion merger between Travelers Group Inc. and Citicorp. It would create the largest local telephone company in the U.S., with customers from Ohio to California. SBC shares (sbc/nyse) fell US$311 1/816 to US$3811 1/816. Ameritech (ait/nyse) rose US$115 1/816 to US$4513 1/816.
Dekalb Genetics Co. (dkb/nyse) rallied US$171 1/84 to US$941 1/84 after Monsanto Co. offered US$2.5 billion for the seed company. Western Atlas Inc. (wai/nyse) surged US$111 1/82 to US$927 1/88 after Baker Hughes Inc. agreed to buy the company for US$6.2 billion in stock and assumed debt. The offer values Western at US$98.70 a share.
Stone Container Corp. (sto/nyse) rose US$211 1/816 to US$2011 1/816 after Jefferson Smurfit Corp. agreed to buy the paper company for US$6.37 billion.
Seagram Co. (vo/nyse) gained US$11 1/84 to US$431 1/88 on speculation that the entertainment and beverage company is close to an agreement to buy PolyGram NV, the world's largest recorded-music company, for between US$9 billion and US$10 billion.
General Motors Corp. (gm/nyse) gained US$21 1/82 to US$713 1/816. The Wall Street Journal said some investors expect the world's biggest industrial company to "unleash a tremendous amount of shareholder value" soon, perhaps by spinning off its Hughes Electronics division.
DuPont Co. (dd/nyse) climbed US$51 1/82 to US$799 1/816 after the largest U.S. chemicals company said it will sell a 20% stake in its Conoco oil unit in an initial public offering.
Major international markets rose.
London: Britain's FT-SE 100 index climbed 58.5 points, or 1%, to 6028.3.
Frankfurt:The German Dax index jumped 84.11 points, or 1.6%, to 5341.69.
Hong Kong: The Hang Seng Index rose 35.99 points, or 0.4%, to 10,096.37 after a volatile session which saw the index touch a high of 10,135.33 and a low of 9,953.27.
Seoul: The Seoul Stock Exchange's Korea Composite Stock Price Index fell 13.18 points, or 3.5 percent, to 361.58. Investors were disappointed that President Kim Dae-jung did not announce any measures against rising unemployment. In Sunday's televised "conversation with the people," Kim appealed to South Koreans to endure "the pain of reforms" to overcome the country's deepening economic crisis. Kim predicted that South Korea's economy would begin to recover in the latter part of 1999 if reforms are carried through smoothly. The South Korean market was also pushed down following an announcement by Moody's investors Service that it has lowered the long-term debt ratings of South Korean banks.
Tokyo: Japanese stocks rose sharply following reports that Daimler-Benz is in talks to acquire an affiliate of Nissan Motor Co. Tokyo's benchmark 225-issue Nikkei Stock Average rose 232.90 points, or 1.54 percent, to finish the day at 15,381.90 points. On Friday, the average gained 5.97 points, or 0.04 percent. Daimler-Benz has reportedly approached Nissan about taking over its struggling truck unit, Nissan Diesel Co. That news encouraged overseas investors to be net buyers of Japanese stocks for the first time in weeks, traders said.
Taiwan Share prices also closed sharply higher in Taiwan, with brokers saying that bargain-hunters stepped into the market in the belief that stock prices had bottomed out following recent sharp falls.
Taipei: The Taipei market's key Weighted Stock Price Index rose 168.04 points, or 2 percent, to 8,378.88.
Manila: The market was closed in the Philippines for national elections.
Markets were also closed in Singapore, Malaysia, Thailand, and Indonesia for religious holidays.
Wellington: New Zealand share prices closed higher, with the market boosted by gains in forestry and telecommunication stocks. The NZSE-40 Capital Index rose 16.05 points, or 0.7 percent, to 2,245.74.
Sydney: Australian share prices closed broadly higher on the eve of the announcement of the federal budget. The All Ordinaries Index rose 17.1 points, or 0.6 percent, to 2,797.6.
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