MARKET ACTIVITY / TRADING NOTES FOR DAY ENDING THURS., JUNE 4 1998 (1)
MARKET OVERVIEW
Toronto Stocks Head Lower despite Bounding Oils
The Toronto stock market moved sideways during an uneventful day of trading Thursday, but there was heavy action in the bond market as traders responded to pressure from overseas.
Rising interest rates in Britain caused a ripple effect in North America. Investors reacted by dumping bank stocks, which helped drag the Toronto stock market into negative territory.
Canadian stocks were mixed as declines in the shares of major banks, prompted by concern that official interest rates may rise, were tempered by gains in oil producers. Blandford said investors were worried that Thursday's release of the May employment figures in Canada and the U.S. will show North America's economy is cranking out jobs at a pace that could boost inflation.
"If they point to an overheating economy or a tight labor force, that spells inflation" and the possibility of higher interest rates in Canada, Blandford said. That's why the Bank of England's sudden rate hike spooked so many market watchers. "I didn't see any good news out of Toronto today." said Blandford.
The bounding oil and gas stocks failed to offset broadly based losses in Toronto's stock market on Thursday, forcing the main index to give up a few ticks by the close of trading.
The Toronto Stock Exchange 300 Composite Index fell 8.35 points or 0.1 percent to 7484.89, paring an intraday 36.6-point loss and extending Wednesday's 41-point dip. Volume was heavy at 115 million shares valued at C$2.2 billion. On Wednesday, 177.4 million shares traded . Declining issues handily beat out advances 605 to 400 and 290 finished flat.
The rising sectors were led by oil and gas, up 2.38 percent, transportation, which gained 1.31 percent, and communications and media, which added 0.54 percent.
Nine of the 14 sub-indexes closed in negative turf, led by paper and forestry products, down 1.2 percent, gold and precious minerals, off 1.13 percent, and real estate, down 0.98 percent. The financial services group contributed almost 14 points to the benchmark's decline.
The C$ fell after an unexpected Bank of England interest rate increase boosted the possibility the U.S. Federal Reserve may raise rates at its next meeting on July 1.
The British central bank cited a tight labor market, rising wages and a weakening pound as possible inflationary triggers. The increase led to concern a U.S. jobs report due out today may show robust growth that could push prices higher.
"Concerns that rate increases may be necessary to stabilize the C$ are causing some uncertainty regarding the outlook for the profits of banks and other interest rate-sensitive issues," said Norman Duncan, a broker with C.M. Oliver & Co.
Higher rates hurt lenders by reducing demand for loans used by companies for expansion. Toronto Dominion Bank (TD/TSE) fell 70› to $66 and Bank of Nova Scotia (BNS/TSE) lost 50› to $37.70. Better-than-expected earnings from Canadian Imperial Bank of Commerce (CM/TSE) failed to halt a slide in its stock. The shares lost 20› to $49.80, despite the company reporting that its fiscal second-quarter profit before special items rose 26% to 90› a share. Analysts had been expecting earnings of 87› a share.
Northern Telecom Ltd. (NTL/TSE), which attributed 7% of its 1997 sales to the Asia Pacific region, fell 65› to $90.35 on concern that Asia's economic slowdown may hobble profits of exporters to the region. "You cannot have a third of the world in serious recession, with no recovery in evidence, without it having a larger affect than the optimists in North America are believing," said Ross Healy, president of Strategic Analysis Corp.
''We just need a little leadership in Canada, we don't have anything at this time,'' said Montreal-based strategist Bill Ram. ''There's some bargain-hunting going on -- the oils are extremely beaten down.''
Crude oil producers advanced on hopes that the proposal to curb oil production would help shore up commodity prices. The Toronto Oil & Gas Composite Index gained 2.4% or 143.73 to 6178.24.
Among the sub-components, the integrated oils gained 2.9% or 246.77 to 8794.94. Imperial Oil gained $1.10 to $27.20, Petro-Canada $0.95 to $24.90, Suncor Energy $0.55 to $51.85 and Sell Canada A $0.50 to $25.50.
Merger and acquisition speculation also ignited interest in the oil group. Anderson Exploration Ltd. (AXL/TSE) rose 12% or $1.80 to $17.25 on speculation the natural gas producer is about to receive a takeover offer from a U.S. company.
The oil & gas producers gained 2.5% or 129.25 to 5381.83. Leading gainers included Anderson Exploration, Paramount Resources $1.00 to $13.25, Talisman Energy $0.95 to $39.80, Alberta Energy $0.90 to $32.15, PanCanadian Petroleum $0.85 to $23.50, Crestar Energy $0.80 to $19.00, Rio Alto Exploration $0.60 to $16.50, Bonvista Petroleum $0.55 to $5.90, Canadian Occidental Petroleum $0.55 to $29.75, Gulf Canada Resources $0.55 to $7.20, Amber Energy $0.45 to $14.20, Abacan Resources $0.42 to $1.25, Pinnale Resources $0.40 to $12.00 and Penn West Petroleum $0.40 to $16.40.
On the reverse side of the ledger, Baytex Energy took a hit, falling $1.10 to $8.90.
In other stock action, the when issued shares of venerable retailing institution T. Eaton Co. were hotly traded at their debut, closing up 0.45 at 15.45 after being issued at C$15. The C$175-million initial public offering is expected to hit the bourse next week.
Other Canadian markets closed mixed. The Montreal Exchange portfolio rose 0.94 points to 3837.92. The Vancouver Stock Exchange lost 2.68 points, or 0.5%, to 579.45. Canadian markets closed mixed. The Montreal Exchange portfolio rose 0.94 points to 3837.92. The Vancouver Stock Exchange lost 2.68 points, or 0.5%, to 579.45.
Wall Street resumes climb as tech stocks do bungee bounce
Technology stocks staged an impressive rebound on Wall Street yesterday, lifting broad-market measures that have dragged during the group's decline in the past few sessions.
Energy stocks chipped in with some solid gains on the back of a rise in the price of crude oil.
The Dow Jones industrial average climbed 66.76 points, or 0.8%, to 8870.56. The Standard & Poor's 500 composite index rose 12.1 points, or 1.1%, to 1094.83. The Nasdaq composite index rose 27.64 points, or 1.6%, to 1769.95.
More than 573.7 million shares changed hands on the New York Stock Exchange, down from 576.5 million shares traded on Wednesday.
The big winners came from the beleaguered high-technology sector. Intel Corp. shares (INTC/Nasdaq) jumped US$2 1/4 to US68 3/16, as investors heaved a collective sigh of relief that the company did not do anything to legitimize earnings worries that surfaced Wednesday.
Computer makers closed higher, too, with International Business Machines Corp. (IBM/NYSE) adding US$2 1/8 to US$116, Gateway 2000 Inc. (GTW/NYSE), up US$1 9/16 to US$47 1/8 and Dell Computer Corp. (DELL/Nasdaq) surging US$4 1/4 to US$84 1/2.
Energy stocks rallied after the price of oil jumped more than 5% on speculation oil ministers from Saudi Arabia, Venezuela and Mexico, which produce 20% of the world's oil, will try to boost prices by cutting output. The price of West Texas oil rose US31› to US$15.12 a barrel on the Comex division of the New York Mercantile Exchange.
Oil stocks led the Dow higher, Exxon Corp. (XON/NYSE) advancing US$1 5/16 to US$70 5/16, Chevron Corp. (CHV/NYSE) jumped US$1 1/2 to US$80 3/16 and Mobil Corp. (MOB/NYSE) gained US$1 1/16 to US$76 5/8.
The spike in crude prices helped the AMEX Oil Index (XOI) gain 7.72 to 471.70 and the Philadelphia Oil Service Index (OSX) to rise by 3.50 to 102.13.
Nearly all big oil producers rose smartly on the session, including British Petroleum (BP), up 2 3/8 to 89; Mobil (MOB), higher by 1 1/16 to 76 5/8; and Amoco (AN), up 1 1/16 to 41 3/8.
Among oil-drilling and services firms, gainers were led by Camco International (CAM), up 2 15/16 to 67 3/4, Halliburton (HAL), higher by 1 11/16 to 45 13/16, and Schlumberger (SLB), which rose 3 1/8 to 77 3/16.
World markets were mixed
In London, the Financial Times Index of 100 industrials closed Thursday at 5,860.8, down 37.6. Most Asian markets continued to lose ground Thursday, dragged down by more bad economic news at home and continued concern about Hong Kong's troubled economy.
The key indices in Hong Kong, Singapore, Taiwan and Malaysia plunged. Indonesia's shares rallied as foreign investors made a cautious return.
In Hong Kong, the blue-chip Hang Seng Index sank 3 percent to close at 8,558, one day after breaking a seven-session losing streak. The index had plunged more than 10 percent before Wednesday.
Traders said the government's job-creation plan announced Wednesday, and a previous economic stimulus plan announced last Friday, failed to impress investors.
On Wednesday, the government unveiled a program to create 100,000 jobs over the next 18 months. Hong Kong is suffering from its highest unemployment in 14 years, and the government announced on Friday that the economy contracted 2 percent in the first quarter of the year.
In Singapore, fears of a looming recession, official predictions of growing unemployment, and a falling Singapore dollar also sent shares down, with the key Strait Times Industrials Index plunging to its lowest level since mid-January.
After a week of falling steadily, the index tumbled 32.06 points, or 2.62 percent, crashing through the 1,200-point floor to reach 1,187.74.
In Taipei, the technology-heavy Weighted Price Index also plunged 2.84 percent to a four-and-a-half-month low, closing at 7,425.96, as investors worried that the global technology industry's current doldrums could affect May sales results.
Rumors that analysts in the United States may lower estimates of second-quarter profits for Intel triggered panic-selling on the Taipei bourse, traders said.
Weaknesses in the bourses in Hong Kong, Taiwan and Singapore and a weak ringgit also soured sentiment in Malaysia, as the key Composite Index plunged 1.5 percent to 518.61.
The Malaysian economy shrank by 1.8 percent year-on-year in the first quarter of the year, compared with 6.9 percent growth the previous quarter.
In Indonesia, share prices closed sharply higher, boosted by news that Indonesian debtors and international creditors had struck an agreement over Indonesia's massive corporate debt overhang.
The JSX Composite index closed up 13.723 points, or 3.5 percent, at 406.331.
In Bangkok, share prices also rose, with the benchmark index gaining 1.8 percent, after the central bank announced details of a debt restructuring plan for the private sector that will allow commercial banks to set aside smaller amounts of reserves, dealers said.
The Stock Exchange of Thailand index rose 5.60 points to 318.81.
In Tokyo, stock prices bounced back modestly, with afternoon selling sparked by a fall on Hong Kong stock prices eating up some of its early gains.
The benchmark 225-issue Nikkei Stock Average rose 79.47 points, or 0.52 percent, closing at 15,426.47 points. On Wednesday, the index had lost 1.33 percent.
The dollar edged up slightly against the dollar.
In late afternoon, the dollar bought 138.16 yen, up 0.40 yen from late Thursday in Tokyo but below its late New York level of 138.75 yen overnight.
The markets in South Korea were closed for a holiday.
Elsewhere:
Manila : Philippine shares ended mixed as bargain-hunters rallied behind oversold blue-chip issues after nine sessions of declines, while at the same time liquidating their portfolio of second-line stocks, traders said. The key index closed 1.3 percent higher at 1953.88.
Sydney: Australian shares closed slightly lower in thin and mostly directionless trading, as institutions left the stock market to retailinvestors.
However, the market held up well given a drop on Wall Street and mixed markets in Asia, along with a dearth of local corporate news, brokers said. The key index dropped 3.6 points to 2,658.4.
Wellington: New Zealand shares closed lower for the sixth consecutive day, but buying in market giant Telecom Corp. of New Zealand to capture its upcoming quarterly dividend payment helped claw back the market's early losses. The key index fell 3.14 points to 2,152.04.
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