MARKET BRIEF / North American Focus
Toronto stocks extend fall to end 1.3 pct
TORONTO, Nov 10 - Toronto stocks headed downward on Tuesday, closing lower for the second straight day as investors eagerly sold issues to harvest profits following the recent rally.
The Toronto Stock Exchange's keenly watched TSE 300 Composite Index fell 83.28 points or 1.31 percent to finish at 6258.11 points.
Toronto gave up more ground than did the New York market. The Dow Jones Industrial Average slipped 33.98 points to 8863.98 points.
Toronto's heavyweight banking sector, in particular, was taken down by profit-takers, said portfolio manager Irwin Michael at ABC Funds.
"Bank earnings should be out shortly, and people are a little nervous," Michael said.
Shareholders are watching for the banks' fourth-quarter results, slated to be released toward the end of November.
Many of the largest U.S. commercial banks have reported weaker numbers as recent turmoil in emerging markets created big trading losses for their brokerages and a downturn in some other areas.
The financial services sector, which makes up more than one-fifth of the 300 Composite Index, dropped 2.38 percent on Tuesday and led most of the other 13 subindexes downward.
Some switchbacks in the market were due after its October run, Irwin concluded. "It's going to be backing and filling. This market is going to remain very, very volatile."
An equities trader added that another factor was fears that the U.S. central bank would not chop short-term interest rates at a decision-makers' meeting later this month, as previously expected, since the U.S. economy seemed to be perking up on its own.
Overall in Toronto, only two of the market's subgroups -- pipelines and forestry products -- edged higher.
Consumer products, utilities, real estate and media all dropped more than 1 percent.
The exchange of shares on Tuesday was brisk at 107 million shares valued at C$1.8 billion.
Declining stocks beat out advances 554 to 417. Another 303 ended flat.
Topping most active stocks was Canadian Imperial Bank of Commerce , falling C$0.80 to C$29.90 on turnover of nearly 3.3 million shares.
Bank of Montreal slipped C$2.40 to C$57.25.
Miner Barrick Gold Corp. fell C$0.40 to C$33.
Class B shares of Noma Industries Ltd. rose C$1 or 14.3 percent to C$8. The company has asked an investment banking firm to help it find ways to enhance shareholder value.
Banks again weigh on TSE: 300 index down 83.12
The Canadian Press
TORONTO -- Financial services shares dragged down the Toronto stock market Tuesday for the second day in a row.
The TSE 300 composite index dropped 83.12 points to close at 6,258.27 under the weight of the financial services index, which fell 2.38 per cent.
The day before, the TSE banks index had lost just over two per cent amid concerns about earnings.
Canada's largest banks begin reporting their fourth-quarter and year-end results next week; owing to market turmoil and dollar worries, the results may not be as glowing as in recent years.
Concern over whether two proposed megamergers will be approved is also weighing on bank shares.
Bank of Montreal wants to wed Royal while TD plans to merge with CIBC, but federal politicians are raising objections to the deals and what they will mean for consumers.
Interest-rate worries are also weighing on both the TSE and the Dow Jones industrial average, which fell 33.98 points to 8,863.98.
Debate is raging over whether the U.S. Federal Reserve will lower interest rates again this month, following a cut in the Fed rate to five per cent made Oct. 16.
That was matched, as is customary, by the Bank of Canada, which reduced its trend-setting rate to 5.5 per cent.
Canada's central bank tends to follow Fed moves in order to maintain the spread between rates in the U.S. and Canada.
Chances are 50-50 of a rate cut next Tuesday, "but if you really pushed me, I'd say they're not going to go," said economist Steve Saldanha of Canada Trust.
The last Fed reduction was made primarily to ease threats of a credit crunch in the U.S. banking system, rather than to boost a slow economy, and that credit threat is easing, he said.
Uncertainty surrounding interest rates has particularly hammered the TSE 300's heavily-weighted financial services index, said Katherine Beattie, a technical analyst with Standard and Poor's MMS in Toronto.
Still, a small pullback after two weeks of gains on both the TSE and the Dow "is not that surprising," added Beattie.
"As long as we don't retrace all of last week's gain, I think we're still in a short-term uptrend."
But with 12 of 14 TSE index groups losing ground on the session, the outlook is not strong for the TSE 300.
Amid the turmoil, Bank of Montreal lost $2.40 to close at $57.25 while Royal fell $1.40 to $66.60 and CIBC lost 80 cents to $29.90. Scotiabank fell $1.00 to $29.85 and TD lost 70 cents to $43.75.
Following the financial industry stocks down was the consumer products group, lower by 1.68 per cent as giant entertainment conglomerate Seagram lost $1.35 to $53.30, Molson A fell 30 cents to $23.00 and BioChem Pharma dropped 85 cents to $33.00.
Interest-sensitive utilities also fell, losing 1.53 per cent as heavily weighted BCE lost $1.25 to $52.10 and Alberta's Telus slid 20 cents to $32.80.
The pipelines index, along with paper and forest products, showed the only strength on the session.
TransCanada PipeLines gained 15 cents to $22.40 as pipelines rose by 0.25 per cent.
And within the paper and forestry index, which gained 0.06 per cent, MacMillan Bloedel rose 60 cents to $16.45.
Decliners outnumbered advancers 554 to 417 with 303 unchanged in trading of 107 million shares worth $1.84 billion.
The TSE 100 lost 5.71 points to 381.88.
Newcourt Credit climbed $0.65 to $52.25, E-L Financial $2.00 to $232.00; Toronto 35 Index Participation Fund unit were down $0.55 to $34.30.
Barrick Gold lost $0.40 to $33.00, Placer Dome $0.30 to $24.50; Euro-Nevada Mining gained $0.15 to $24.25, Pure Gold Resources $0.045 to $0.310.
Remington Energy rose $0.60 to $11.00, Pan Canadian Petroleum $0.60 to $21.60; Ulster Petroleums fell $0.45 to $13.80, Petromet Resources $0.25 to $3.95.
Canada bonds end firmer
TORONTO, Nov 10- Canadian government bonds ended a quiet pre-holiday session firmer on Tuesday, retaining most of the day's gains prompted by steady U.S. treasuries.
Bonds generally attracted investors as the outlook on many of the world's major stock markets remained bearish, although the U.S. stock markets posted slight gains.
A rally in the U.S. dollar helped U.S. treasuries, and in turn supported Canadian bonds, while the weaker Canadian dollar weighed on Canada's T-bill market.
Fixed-income markets will be closed in North America on Wednesday for the Remembrance Day holiday in Canada and the Veterans' Day holiday in the United States.
Canada's benchmark 30-year bond due June 1, 2027 maintained a bullish tone, rising C$0.78 to C$135.27, yielding 5.529 percent. The U.S. 30-year bond shed early gains, rising only 4/32 to 99-17/32 to yield 5.281 percent. The spread between the bonds was 25 basis points after 28 points at the previous close here.
Comments by U.S. Treasury Secretary Robert Rubin on the global market outlook on Tuesday had little impact on bond prices, but were supportive. "I still think we're going to have a substantial period ahead during which there is going to be a lot of difficulty and a lot of work to do," he told a President's Export Council forum.
"The market seems to have gotten very euphoric just on the G7 action plan, but at least now he's saying it's going to take time," said Harvinder Kalirai, economist at I.D.E.A. in New York. "It's going to be awhile before the global economy and financial system recovers. If that's going to continue, it's a positive scenario for the debt market."
The G7 pledge at the end of last month to work together for sustained growth and a stronger facility to help countries with tight credit had depressed bonds and boosted stocks.
The market remained focused on U.S. monetary policy, which the Bank of Canada follows closely. Players are awaiting the decision by the Federal Open Market Committee (FOMC) meeting a week from now.
"I think bonds are also getting a boost from Fed Vice Chair Rivlin's comments overnight suggesting that the recovery we've seen in credit spreads are still very tentative, and as a result that will likely translate into a Fed easing at the November 17 meeting," said Rob Palombi, senior fixed-income analyst at Standard & Poor's MMS. Federal Reserve Vice Chairwoman Alice Rivlin warned on Monday that global turmoil will slow the U.S. economy sharply.
At the short end, Canada's three-month when-issued T-bill weakened to yield 4.87 percent after 4.82 percent at the previous close. The weaker Canadian dollar weighed on bills, while the short-end of the U.S. yield curve firmed on expectations of a Fed rate cut next week.
"A lot of customers are sidelined until they see what's going to happen next week," one money trader said.
Canada's fortnightly T-bill auction produced the average yield of 4.862 percent for the three-month, 4.957 percent for the six-month, and 4.933 percent for the 12-month.
"I've seen very little client activity both before the auction and at the auction. It's a very quiet close going into tomorrow," the trader said. "Most of the account activity that we've seen is still related to the very short end of the curve. The only business I've seen after the auction is basically the Street dealing with the Street in some switch trades."
The release on Tuesday of higher U.S. productivity and lower labor costs in the third quarter confirmed implications in the gross domestic product (GDP) data that supply-side growth is not inflationary, Kalirai said. Bond holders hate steep inflation because it erodes gains in bond prices.
Bonds were also propped up by the benign inflation outlook indicated by a rise in the U.S. wholesale inventory for September.
"The data are bonds-positive. It could have a higher inventory accumulation in Q3, but it could be offset by the trade deterioration and might not have any net effect on Q3 growth. Higher inventory growth is bad for Q4 growth (in the GDP), but it's very good for the inflation outlook," Kalirai said.
Canada seems to have kicked off the fourth quarter with good marks on the economic fundamentals. Following a sharp rise in October job creation, housing starts in October, released on Monday, showed a 3.6-percent rise at an annual rate.
But the Canadian dollar did not benefit much. The market focus has shifted from expectations of substantial Fed easing to uncertainty over how much Fed will ease further, which has set the tone for the currency.
The market is also awaiting the release at 1030 EST/1530 GMT on Monday of the half-yearly monetary policy report by the Bank of Canada, in which the bank discusses the nation's economic growth and market conditions. Bank of Canada Governor Gordon Thiessen holds a briefing at 1145 EST/1645 GMT.
"I don't think the monetary policy report will highlight anything substantially new. It will, however, underline that because of the volatility during the summer there are some concerns over the growth outlook, but that on balance the economy is still in okay shape," Palombi said.
"The bank will be careful, at least, about giving the impression that it wants to ease before the Fed. I think the report will be very balanced and will leave us with the idea that the bank will match whatever the Fed does," he said.
The Bank of Canada is widely expected to follow any Fed cut quickly in its own process of fully unwinding the credit tightening it conducted in August in defense of the local dollar. The Canadian dollar is sensitive to the timing of a rate cut by the bank as capital tends to move to securities denominated in currencies with higher yields.
Last week bonds came under selling pressure by comments on Thursday by Federal Reserve Chairman Alan Greenspan, which were taken as a signal that the Fed might not now be in such a hurry to ease credit further. In a speech, Greenspan had said safe-haven capital flows into U.S. Treasury securities seen at the height of fears of global financial system breakdown may dissipate and "yield spreads and liquidity premiums will soon fall into more normal ranges."
11/11 08:53 Toronto stocks expected to open stronger
Toronto stocks were expected to open higher on Wednesday after strong overnight performances in Europe and Asia.
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