MARKET ACTIVITY / TRADING NOTES FOR DAY ENDING WED., MAY 20 1998 (1)
Canada
A rally in New York equities and a C$1 billion telecommunications sale helped lift Toronto's key stock index to a higher close on Wednesday. A waning fear of inflation helped keep Canada's benchmark index in the black.
The Toronto Stock Exchange 300 composite index rose 33.02 points, or 0.4%, to 7695.4. Nortel, the third most heavily weighted stock on the benchmark, added 15.5 points to the index's advance. About 100.2 million shares changed hands on the TSE, up from 77.4 million shares traded on Tuesday. Decliners outnumbered advancers 581 to 444, with 308 unchanged in trading worth $1.8 billion. Eight of Toronto's 14 sub-indexes chugged upward.
The TSE 100 rose 2.58 points to 469.71.
'Not a very broad-based rally in New York,'' said Yorkton Securities Inc. trader Pier Donnini. ''Canada is very quiet.'' ''You could take Inmet and Rogers out of the fray, there is only 80 million (shares) traded. Not much,'' Donnini said. ''Dog days in August look like they're here in May.''
Gains on the TSE would have been stronger if not for plunging oil and metals prices, said Pat Blandford, senior vice-president at Midland Walwyn Capital Corp. in Toronto.
"If it's in the ground, it's going down," Blandford said.
But falling commodity prices tend to dispel inflationary fears, which have gripped investors as they watch for a corrective interest rate hike by the Federal Reserve Board in the U.S. Such a rate hike would be unnecessary and ill-advised if a risk of inflation is not apparent, Blandford said. "If oil is that low and gold is that low, then we've got no inflation, and the Fed in the States isn't going to raise interest rates," he said. "It'll more than offset any wage pressure we might be feeling, and I'm not even seeing that."
Still, the plunging price of crude exacted a toll on the TSE's oil and gas sub-group Wednesday. A key report showed U.S. inventories of crude oil unexpectedly surged to a five-year high last week. West Texas crude fell US83› to US$14.18 on the Comex division of the New York Mercantile Exchange.
The TSE Oil & Gas Composite Index fell 1.2% or 79.55 to 6310.3.
Among sub-components, the integrated oil's fell 0.3% or 29.01 to 8650.23. Imperial Oil lost $0.20 to $26.20. Suncor Energy also lost 20 cents to $52.30, while Shell Canada lost $0.15 to $25.65. The oil & gas producers sub-index fell 1.3% or 75.17 to 5506.10. Penn West Petroleum (pwt/tse) fell $0.75 to $16.75, Rio Alto Exploration (rax/tse) $0.75 to $16.00, Alberta Energy Co. (aec/tse) $0.65 to $33.15 Northrock Resources (nrktse) $0.60 to $19.30 and Renaissance Energy Ltd. (res/tse) $0.60 to $25.35. The oil & gas services sub-index fell 3.2% or 97.42 to 2935.40. Decliners included Dreco Energy Services Ltd. (dey/tse) falling $6.00 to $51.50, Computalog $1.75 to $22.00, Enerflex Systems (efx/tse) $1.00 to $41.50, Shaw Industries (so.a/tse)$1.00 to $56.5 and Precision Drilling (pd/tse) $0.85 to $32.05.
Gold and silver stocks also slipped 0.90 per cent. Despite a modest increase Wednesday in the price of gold, the yellow metal is still below the $300 US mark and gold stocks are feeling the pinch. Barrick Gold Corp. lost 45 cents to $30.30, Franco-Nevada Mining fell 40 cents to $34.40 and Placer Dome Inc. dropped $0.25 to $19.60.
Inmet Mining Corp. was the most active issue in Toronto, with 12.1 million shares changing hands. The shares (imn/tse) gained 70› to $5.10 after U.S.-based Zemex Corp. announced a $517.2 million bid for the metals miner. Meanwhile, after the market closed, the TSE said that, effective tomorrow, common shares of YBM Magnex International Inc. (YBM/TSE) will be removed from the TSE 300 and TSE 200 indexes. YBM is under investigation because of concerns over certain aspects of its business and operations in Eastern Europe.
Transportation stocks were Toronto's third-weakest sub-group, off 0.63 per cent. Air Canada slid a nickel to $13.70.
Conglomerates helped hoist the TSE into positive territory with a 2.07 per cent gain as Canadian Pacific Ltd. gained $1.60 to $45.10.
The utilities sub-group came next, up 1.74 per cent thanks to BCE Inc. (bce/tse), which owns 51.7% of Nortel, up $1.90 to $66.20, a record close. Telus Corp. lost 20 cents to end the day at $38.65.
Communications and media stocks were third, led by Northern Telecom Ltd., which won a US$1.5 billion contract to supply telecommunications equipment to U.S.-based SBC Communications Inc. Nortel (ntl/tse) soared $4.85 to $98.85, building on its 56% gain so far this year. The stock was reiterated a "buy" by analyst Timothy Luke at Lehman Brothers. It hit an intraday record of $99.15. Nortel will supply SBC with digital wireless equipment, hardware, software and upgrades for the next five years.
Rogers Communications Inc. class B shares (rcib/tse) rose $1.35 to $10.85 after MetroNet Communications Corp. said it will buy Rogers Telecom, a wholly owned subsidiary of Rogers, for cash and stock valued at $1 billion. MetroNet (mnc/tse), up $3.75 to $39, provides local telecommunications and data networking services. Rogers was the second most active issue in Toronto with 5.3 million shares changing hands, almost eight times its three-month daily average. The cable company's shares have climbed 58% so far this year.
Banks and other lenders rose. Bank of Nova Scotia (bns/tse) jumped 20› to $38.70, Toronto Dominion Bank (td/tse) gained 35› to $64.10 and Newcourt Credit Group Inc. (nct/tse) rose $3.85 to $69.95. Newcourt also was buoyed by news that Janus Capital Corp. will buy a 5.8% stake in the leasing company for US$400 million.
Yogen Fruz World-Wide Inc. shares (YFa/TSE) lost 25› yesterday to $12.90 but shares are expected to bounce back today on the news that the issue will replace YBM in the TSE 200 & 300, analysts said.
Among industrials, Rothmans gained $5.00 to $210.00; Fairfax Financial lost $5.00 to $565.00.
Other Canadian markets were mixed.
The Montreal Exchange portfolio rose 36.76 points, or 1%, to 3897.62. The Vancouver Stock Exchange fell 2.72 points, or 0.4%, to 611.85. The Alberta Stock Excange's combined value index gained 0.21 points to 2,303.40.
Prices were higher in light trading on the Canadian bond market Wednesday. The two-year bonds were $0.07 higher at $99.90. Ten-year bonds were $0.28 higher at $113.35. Long-term bonds were $0.35 higher at $131.40.
The Government of Canada bond carrying an eight per cent coupon and maturing in 2023 a barometer of long-term borrowing costs, was yielding 5.64 per cent.
Day-to-day money was available at 4.75 per cent.
United States
U.S. stocks rose for a second day as investors snapped up shares of McDonald's Corp. and PepsiCo Inc.
The Dow Jones industrial average surged 116.83 points, or 1.3%, to 9171.48, bringing its gain so far this year to 16%.
The Standard & Poor's 500 composite index gained 9.54 points, or 0.9%, to 1119.06.
About 591.7 million shares changed hands on the Big Board, up from 569.9 million shares traded on Tuesday.
The Nasdaq composite index fell 14.12 points, or 0.8%, to 1831.75.
McDonald's (mcd/nyse) was the Dow's biggest gainer, rallying US$3 1/16 to US$65 15/16, after chief executive Jack Greenberg said he expects the world's largest restaurant company to have a "very strong"
second quarter.
PepsiCo (PEP/NYSE) rallied US$2 9/16 to US$40 1/2 on optimism that its soda business will return to double-digit profit growth next year.
Intel Corp., Gateway 2000, Inc. and International Business Machines Corp. fell after Dell Computer Corp.'s first-quarter earnings failed to beat analysts' estimates by as much as some hoped.
Dell shares (dell/nasdaq) fell US$22 7/32 to US$91 3/4. Gateway (gtw/nyse) lost US$3 5/16 to US$46 7/8 and IBM (IBM/NYSE) dropped US$1 5/16 to US$123 9/16.
International Stocks
Optimistic Rate Outlook Buoys European Markets
LONDON -- European stocks rose yesterday, led by banks, after the U.S. Federal Reserve decision to leave benchmark interest rates unchanged cut the likelihood of European rates rising in coming weeks.
The last moments of trade on some European markets also found inspiration in a strong start on Wall Street as investors turned their attention back to earnings news and takeover rumors.
The situation in Indonesia, which has contributed to uneasiness in world markets in recent days, was relatively calm.
Frankfurt: The German Xetra Dax index -- which rose 73.51 points, or 1.4%, to 5514.51 -- led European benchmark indexes higher. "Now that the Fed has decided not to raise rates, investors regard stocks as a more profitable investment," said Gero Holbertz, of Zuerich Investmentgesellschaft in Frankfurt.
But traders noted volume remained thin ahead of today's holiday. The Dax index rose 46.05 points, or 0.9%, to 5388.9.
London: British shares closed firmer, though off the day's highs, with the FT-SE 100 index climbing 29.6 points, or 0.5%, to 5907.4.
Shares in British bus and rail operators finished on a strong note on expectations that a government white paper on transport policy will boost passenger growth. FirstGroup rose 18.5p to 427p, while Stagecoach climbed 31p to 1,266p.
Misys closed the day up 220p at 3,570p as it looks forward to opening trade today on the blue-chip board. It replaces the Energy Group as the first information technology stock among the FT-SE 100.
Tokyo:Japanese shares ended higher on firmer sentiment as no major developments were seen in Indonesia during trading hours. The 225-share Nikkei average closed at 15,652.95, up 101.3 points, or 0.7%. Kawasaki Steel rose nine yen, or 4.7%, to 200 yen and NKK increased five yen, or 4.4%, to 119 yen.
Hong Kong: Shares ended higher as a late rally in the futures market helped lift the underlying index. The Hang Seng index closed at 9549.18, up 100.07 points or 1.1%. HSBC Holdings PLC finished flat at HK$199.50, Shanghai Industrial Holdings Ltd. added HK$2.05 to HK$24.90, while China Telecom (Hong Kong) Ltd. gained HK65› to HK$14.95.
Sydney: Australian share prices closed in negative territory as cautious investors took profits across the board. The all ordinaries index fell 18.8 points or 0.7%, to 2723.2. Shares in M.I.M. shed a A1› to A87›. Australian Gas Light, a gas pipeline owner and operator, fell A3› to A$11.68.
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