MARKET ACTIVITY / TRADING NOTES FOR DAY ENDING WED., MAY 13 1998 (1)
MARKET OVERVIEW
Bay Street Slips, With Resource Stocks Leading The Decline
The Toronto Stock Exchange 300 Composite Index dropped 10.21 points or 0.13 percent to 7707.49. Volume was 115 million shares compared to 101.4 million shares on Tuesday. Wednesday trading volume was worth C$2.04 billion. Decliners outpaced advancers 551 to 467 with another 337 issues unchanged.
The biggest decline was in metals and mining, down 1.57 per cent, followed by financial services and oil and gas, each down 0.52 per cent. Five of the TSE 300's 14 subindexes closed on the plus side, helping to offset the losses. The consumers product group gained 1.3 percent, utilities climbed 0.6 percent and merchandising 0.11 per cent.
The TSE 100 lost 1.02 to 470.06.
Other Canadian markets closed lower. The Montreal Exchange portfolio fell 11.66 points, or 0.3%, to 3890.3. The Vancouver Stock Exchange lost 5.89 points, or 0.9%, to 617.94.
Toronto stocks closed lower on Wednesday as a broad drop in resource-based stocks pulled the market down. The Toronto market failed to keep up with New York's high flying Dow Jones Industrial Average, which raced to a record close of 9211.84, with a rise of 50.07 points or 0.55 percent. For the week, the blue chip Dow has gained 156.69 points or 1.7 percent.
However, in Toronto an across-the-board funk in resource-based stocks dragged the market down, led by a 1.6 percent drop in the metals and minerals stocks and a 0.5 percent slide in oil stocks.
The drop came as the London price for aluminum dropped US$11.50 to US$1,359 per tonne and nickel dropped US$82 to US$4,910 a tonne. In New York, Brent Crude oil dropped US$0.43 to US$14.70 a barrel. Also, Falling demand from Asian countries for the forest and mineral products that Canadian firms produce has driven down prices and damaged the earnings of resource based Canadian companies.
Alcan Aluminium Ltd. (al/tse), the world's second-largest aluminum producer, fell 65› to $46.65. Nickel producer Inco Ltd. dropped $0.65 to $23.10.
The gold and precious minerals index fell 0.08 percent and the paper and forest products group fell 0.4 percent.
Talisman Energy Inc. (tlm/tse) fell $1.15 to $40.85 and Canadian Natural Resources Ltd. (cnq/tse) lost 20› to $27.75 after a key oil industry report showed U.S. gasoline supplies rose more than expected.
''The resource sectors are under a lot of pressure today,'' said Rick Hutcheon, president of Toronto based CentrePost Mutual Funds. ''There seems to be, in those sectors of the market for whatever reason, some motivated sellers today.''
"The Canadian market is clearly underperforming and what seems to be underlying it is the developing commodity story", said Patricia Croft, portfolio manager at Sceptre Investment Counsel in Toronto. "My sense is, there's just no conviction out there, there's a lot of nervousness," said Croft.
Communications and banks stocks also added to the market's woes.
Despite assurances by the Bank of Canada that it has no plans to boost interest rates in the near future, bank stocks dropped. In his semi-annual report on monetary policy, Bank of Canada Governor Gordon Thiessen said Canadians can look forward to growth at an annual rate of 3.5 per cent until the middle of 1999, with inflation low and fewer unemployed. Still, Royal Bank slipped 10 cents to $86.25 while Bank of Montreal (bmo/tse) lost 60 cents to $78.15. Toronto Dominion Bank (td/tse) slipped 15› to $64.60, Scotiabank was down 45 cents to $38.75 and CIBC 15 cents to $50.85.
Thiessen's comments also drove down the Canadian dollar - at one point by three-quarters of an American cent. It closed down 0.53 at 69.21 cents US.
Nortel (ntl/tse) fell $1.20 to $91.90. "Northern Telecom is one of those stocks that people consider to be stretched because of past performance and the potential for future growth," said Jay Spissinger, a broker with C.M. Oliver & Co.
CanWest Global Communications Corp. (cgss/tse) fell 5› to $27 after the broadcaster acquired 46% of WIC Western International Communications Ltd.'s class B non-voting stock, "giving CanWest a veto against Shaw's declared intention of merging WIC with Shaw," Canwest said in a statement. CanWest said it would not increase its holding to more than 50% of WIC's non-voting shares. WIC shares (WICb/TSE) gained $2.75› to $44.25 and Shaw Communications Inc. (SCLb/tse), which has agreed to buy WIC, fell 20› to $22.90.
Heavily-weighted Seagram led the consumer products index of the TSE to gains of more than one per cent as it jumped $1.15 to $62.15 on hopes it will take over PolyGram, the world's largest recorded-music company.
Prices were mixed in moderate trading on the Canadian bond market Wednesday. The two-year bonds were $0.04 lower at $99.77. Ten-year bonds were $0.10 higher at $112.90. Long-term bonds were $0.25 higher at $130.80. The Government of Canada bond carrying an eight per cent coupon and maturing in 2023 a barometer of long-term borrowing costs, was yielding 5.68 per cent. Day-to-day money was available at 4.80 per cent.
Wall Street took flight on new numbers that show continuing low interest rates and expected profit growth.
U.S. stocks gained as reports on inflation and retail sales boosted optimism that borrowing costs will stay low, helping corporate profit growth.
"I can't see much better news coming out economically," said Nelson Gold, a trader at Interstate-Johnson Lane Inc. in Atlanta.
The Dow Jones industrial average rose 50.07 points, or 0.6%, to 9211.84.
The Standard & Poor's 500 composite index gained 3.07 points, or 0.3%, to 1118.86.
About 604.7 million shares changed hands on the Big Board, down from 605.6 million shares traded on Tuesday.
The Nasdaq composite index gained 6.02 points, or 0.3%, to 1866.18.
Microsoft Corp. (msft/nasdaq) led the Nasdaq higher, gaining US$1 1/2 to US$86 15/16 on investor optimism that its Windows '98 software would ship on time. Other high-tech companies also rose. Dell Computer Corp. (dell/nasdaq) jumped US$3 7/8 to US$98 1/4 and Intuit Inc. (intu/nasdaq) gained 19/32 to US$49 7/8.
Auto stocks gained amid speculation that Daimler-Benz AG's US$41.5 billion takeover of Chrysler Corp. will accelerate an industry shakeout that is already under way. General Motors Corp. (gm/nyse) climbed US$2 1/8 to US$75 1/16 while Ford Motor Co. (f/nyse) rose US$2 3/8 to US$48 1/8.
Motorola Inc. (mot/nyse) gained US$3 7/16 to US$59 3/8 on a rumor that Germany's Siemens AG may make an offer to buy all or part of the world's largest maker of wireless phones. Siemens said it is not interested in buying Motorola.
Bay Networks Inc. (bay/nyse) rose US$3 13/16 to US$27 3/4. Bay told analysts that it rejected an acquisition offer from Northern Telecom Ltd. as too low, but would consider higher bids from Nortel or other suitors.
Citicorp (CCI/NYSE) fell 1 5/8 to US$150 1/2, Chase Manhattan Corp. (cmb/nyse) dropped US$1 1/4 to US$139 1/2, BankAmerica Corp. (bac/nyse) fell US$1 5/16 to US$83 13/16 and Bankers Trust Corp. (bt/nyse) fell US$1 9/16 to US$128 9/16.
"Asia-related risk caused a lot of heartache in autumn for these stocks, and we're seeing ugly headlines from Indonesia again," said David Berry, director of research at Keefe, Bruyette & Woods Inc. in New York.
Major international markets were mixed.
London: Europe's largest bourse, London's FTSE 100 index, ended near the middle of its day's trading range. The FT-SE 100 index rose 16.2 points, or 0.3%, to close at 5972.9 Earlier, investors had decided to stay on the sidelines in case of any upset from a heavy batch of economic data and the Bank of England's quarterly inflation report. An unexpected sharp bounce in average earnings dragged the index back from a best of 6,000. February average earnings growth jumped to 4.9 percent vs. expectations of a 4.5 percent rise. But the market took some comfort from Bank of England comments that inflation was expected to remain close to its 2.5 percent target over the next two years.
Frankfurt: Frankfurt shares, after a brief afternoon foray above the 5,400-point level, eased back while holding on to a more than one percent gain. The DAX picked up 64.17 points or 1.21 percent at 5,371.99. The continuing strength of the DAX -- the index is up 27 percent since January 1 and 87 percent since the end of 1996 -- has apparently not raised as much concern in Germany as the Dow's bull run has in the United States. Bundesbank council member Olaf Sievert said the DAX's gains were little cause for concern.
Paris: The French market was bolstered by gains in the oil sector on the back of higher crude prices, traders said. The CAC-40 index rose 32.43 points to 4,019.76. Its previous all-time best was 4,017.24 and it set a fresh intra-session peak of 4,045.77.
Worsening tensions in Indonesia and a spate of bad local news drove Asian share prices and currencies sharply lower on Wednesday. Along with Jakarta, Singapore and Hong Kong were hit particularly hard. Unrest in Indonesia, India's testing of nuclear bombs and a further drop in some commodity prices are all upsetting investors, said Patricia Croft, portfolio manager at Sceptre Investment Counsel in Toronto.
Traders in many Asian markets cited fears that the deaths of six students in anti-government protests Tuesday would increase instability in Indonesia. The Indonesian stock market and rupiah currency nosedived, and dragged other markets down. Jakarta's Composite Index plummeted 6.6 percent to close at 402.057 percent, after falling below the key 400-point level at 393.364 at one point. The rupiah fell to as low as 11,150 to the dollar, before retracing marginally. In late trading, the rupiah was trading at 10,800 to the dollar, down sharply from 9,250 late Tuesday. Matthew Pecot, president-director of PT G.K. Goh Ometraco, said early Wednesday that market sentiment was "obviously very negative." "The major impact of the shooting will be that most of the population of the country will support the students' movement," he said. Rioting and looting continued throughout Indonesia Wednesday. Shops, a gas station and a police station were all set on fire by marauding mobs just outside Trisakti University in central Jakarta. Currency dealers say the rupiah's fate is now squarely tied to Indonesia's political situation.
In Singapore, the key Straits Times Industrials Index plunged 4.9 percent to close at 1,331.98 points. It was down 6.8 percent an hour before close, but last-minute buy orders helped the market rally. The Singapore dollar also fell heavily, breaching the psychologically important level of 1.65 to the U.S. dollar to reach 1.66 toward the end of Asian trading, a 1.7 percent drop from Tuesday's rates. Traders said everyone in the Singapore market wanted to buy U.S. dollars, and domestic property slump and heavy investmedollar was quoted at 134.12 yen, up 0.99 yen from late Tuesday in Tokyo and above its late New York level of 134.07 yen.
The weaker yen also pushed the South Korean won sharply lower. The dollar ended at 1,405 won, compared with 1,388.5 at Tuesday's close. Seoul's shares also opened lower on concerns that lagging reforms would hurt foreign investor confidence, analysts said. But share prices later inched higher on unconfirmed market talks that the government will raise the ceiling on foreign stock investment in two state owned corporations. The key index closed 1.3 percent higher at 356.58 points.
In Manila, share prices and the peso also plunged as investors watched for results from Monday's presidential elections. The key index closed down 2.3 percent to 2,163.67 points. The dollar averaged 39.446 pesos, 1.9 percent more than Tuesday's 38.673 pesos.
Sydney: Australian share prices closed weaker after a rally ignited by the government's new budget failed to outweigh profit taking in selected blue-chip stocks. The key index fell 13.2 points to 2,773.7.
Taipei: Taiwan shares ended lower as investors opted for the sidelines on declines in the New Taiwan dollar. The key stock index fell 0.91 percent to 8,202.90 points. The New Taiwan dollar was quoted at 33.3386 to the U.S. dollar, up from its close of 33.324 Tuesday.
Wellinton: The key New Zealand stock index finished lower, with market volume boosted by the trading of a block of 23 million shares The key index lost 3.26 points, closing at 2,228.69.
|
