MARKET ACTIVITY/TRADING NOTES FOR DAY ENDING THURS. JUNE 25, 1998 (1)
MARKET OVERVIEW
Toronto Stocks Post Modest Gains On Strength Of Financial Services And Golds
Toronto stocks added considerable ground by the close of trading on Thursday with the help of strength in the heavyweight financial services and gold sectors.
The Toronto Stock Exchange's 300 Composite Index climbed 50.32 points or 0.69 percent to 7314.72. Gaining issues outpaced decliners 557 to 439 with 308 issues unchanged.
Toronto also posted its third highest volume and third highest value ever at 180.3 million shares worth C$3.3 billion.
By comparison the Dow Jones Industrial Average in New York rose 11.71 points or 0.13 percent to 8935.58 points.
The volume was precipitated by heavy turnover in Laidlaw Inc. (LDM/TSE) receipts and shares. The receipts will expire in July, prompting investors to flee to the shares, one trader said. Laidlaw Inc. shares topped most actives, rising 0.15 to 16.85 on turnover of 37.6 million shares. Laidlaw receipts were right behind, increasing 0.30 to 7.50 on 35.1 million shares.
All of Toronto's 14 sub-sectors ticked higher, led by banks and golds, except for consumer products, down 1.05 percent, and oils, off 0.20 percent.
Toronto's banking sector, which makes up nearly a quarter of the index, rose 1.85 percent and lent support to the market, said Pier Donnini, head trader of institutional equities at Yorkton Securities. Royal Bank of Canada (RY/TSE) rose 2 to 87.40.
A 1.41-percent gain in the gold and precious minerals sector also helped. ''The metal price was reasonably stable today and finished up a dollar,'' Donnini said. Bullion rose $0.90 to $295.10 an ounce in the August contract on Comex.
The Toronto Stck Exchange Oil & Gas Composite Index lost 0.2% or 12.33 to 6017.57. In review of the sub-components, the Integrated Oil's fell 0.2% or 17.80 to 8332.46. The Oil & Gas Producers fell 0.3% or 13.82 to 5330.46 and the Oil & Gas Services - which has trailed earlier week gains of it's counterparts, managed to gain 0.3% or 6.50 to 2420.04.
Pinnacle Resources, Compton Petroleum, Bitech Petroleum, Ranger Oil, Renaissance Energy, Petro-Canada and Canadian Occidental Petroleum were listed among the top 50 most active issues on the TSE. Service issues were not represented.
Among the top 50 best gainers on the TSE, Alberta Energy gained $1.45 to $35.05. Service issues were not represented.
Crestar Energy fell $0.95 to $17.55, Denbury Resources $0.95 to $19.05, Talisman Energy $0.65 to $41.10. Renaissance Energy $0.55 to $21.95 and Pacalta Resources $9.90. Among service issues, Canadian Crude Separators fell 0.90 to $3.00 and Enertec Resource Services $0.90 to $7.60.
Other Canadian markets were mixed. The Montreal Exchange portfolio rose 49.64 points, or 1.4%, to 3683.89. The Vancouver Stock Exchange fell 4.1 points, or 0.8%, to 528.34.
The Alberta Stock Exchange's Combined Value Index gained 1.13 to 2091.04. Decliners led advancing issues 161 to 128 with 138 issues unchanged.
Anvil Resources, HEGCO Canada, Alta Pacific Capital, Commonwealth Energy, Ionic Energy, Parkcrest Exploration, Oilexco, Raptor Capital, Red Sea Oil, Wolverine Energy, ICE Drilling and First Star Energy were among the top 25 most active issues on the ASE.
HEGCO Canada gained $0.28 to $2.53, Niko Resources $0.25 to $4.35, Encounter Energy $0.20 to $1.50, Corridor Resources $0.15 to $1.60, Northline Energy $0.15 to $1.40, Hampton Court $0.11 to $1.50 and Draig Energy $0.10 to $1.70.
On the flip side, Alta Quest Energy fell $0.15 to $2.60, Total Energy Services $0.14 to $1.70 and Slade Energy $0.10 to $0.50.
Canadian bonds ended mixed in quiet trade on Thursday, with the short end of the yield curve benefiting from a firmer Canadian dollar.
Long bonds did not catch up with recovery in U.S. 30-year bonds as no new factors emerged to spur active buying.
Uncertainties over the level at which central banks would intervene to check the U.S. dollar's rise versus the yen and whether the world's key oil producers will stick to their latest accord to cut output are making players cautious.
The Canadian dollar ended firmer at C$1.4659 (US$0.6822) on Thursday in a corrective move to recent losses, managing to distant itself from yen's weakness. The U.S. dollar was rising above 142 yen despite fears of a central banks' move to check a further steep rise.
North American bond markets ignored the economic data released this morning.
The U.S. jobless claims jumped to 364,000 in the June 20 week from a revised 330,000 in the previous week. Dealers knew that prolonged strikes at General Motors plants were pushing up the number.
The U.S. gross domestic product rose a revised 5.4 percent after 3.7 percent growth in the fourth quarter of 1997, scoring the biggest gain since it grew 6.0 percent in the second quarter of 1996. This gain was largely anticipated.
The consensus forecast pointed to 4.9-percent U.S. GDP growth after a 4.8-percent rise in the fourth quarter.
Canada's April retail sales rose a stronger-than-expected 1.0 percent month on month after an upwardly revised rise of 0.3 percent in March. The number excluding automobile sales was up 0.4 percent. Economists on average had predicted a rise of 0.6 percent for the overall sales.
Canada's benchmark 30-year bond fell C$0.18 to C$135.47 to yield 5.527 percent.
Its U.S. 30-year counterpart, recovering from a earlier mild loss, rose 1/32 to yield 5.66 percent. The U.S.-Canada spread was 13 basis points after 14 points at the previous close here.
After robust U.S. economic growth in the first quarter, economists are expecting some moderation in economic activity in the current quarter as a growing trade deficit in the face of cheap Asian exports to the United States and sluggish U.S. exports to the region remains a drag on economic growth.
U.S. President Bill Clinton kicked off his nine-day tour of China on Thursday, with summit talks with President Jiang Zemin in Beijing Saturday on trade, human rights, and other issues.
Beijing, threatening a devaluation of its currency, yuan, was pressuring both Tokyo and Washington to stop the relentless rise of the U.S. dollar, particularly against the yen, as the cheap yen makes Japanese export prices more attractive than those from other Asian nations in global markets.
An ensuing, rare U.S.-Japan joint intervention in the currency market last week, which came days before Clinton's departure to China, boosted the yen's value. But the U.S. dollar resumed its upward move this week as the market was disappointed with slow progress in Japan's efforts to fix its banking system.
The world feared that a devaluation of the yuan could trigger similar action by other Asian economies and prompt a massive outflow of short-term capital and damage the confidence in the region again.
The money market was firmer on the back of the stronger Canadian dollar against the U.S. currency.
"The dollar's improving, and there's good interest to buy bills on the maturity day," one trader said. "The numbers this morning all came stronger than expected, but the market doesn't want to trade off those numbers."
Canada's three-month when issued T-bill traded with a yield of 4.85 percent, compared with 4.89 percent at the previous close here.
The Canadian dollar ended firmer at C$1.4659 (US$0.6822) on Thursday in a corrective move to recent losses, managing to distant itself from yen's weakness.
The U.S. dollar was rising above 142 yen despite fears of a central bank move to check a further steep rise.
In the short term, Canada has a chance to test its topside, said Martin Autotte, technical analyst at CIBC Wood Gundy Securities. He expects the Canadian unit to firm to C$1.4600 (US$0.6849) on Friday or early next week before slipping back towards a record intra-day low of C$1.4754 (US$0.6778).
If the U.S. dollar closes below key support of C$1.4635 (US$0.6833), it could fall to C$1.4590 (US$0.6854), he said.
In the medium term, however, the U.S. dollar looks set to rise against the Canadian dollar, he added.
Currency and bond markets ignored the economic data released this morning.
The U.S. jobless claims jumped to 364,000 in the June 20 week from a revised 330,000 in the previous week. Dealers knew that prolonged strikes at General Motors plants were pushing up the number.
The U.S. gross domestic product rose a revised 5.4 percent after 3.7 percent growth in the fourth quarter of 1997, scoring the biggest gain since it grew 6.0 percent in the second quarter of 1996. This gain was largely anticipated, thus came as no surprise to the market.
The consensus forecast pointed to 4.9-percent U.S. GDP growth after a 4.8-percent rise in the fourth quarter.
Canada's April retail sales rose a stronger-than-expected 1.0 percent month on month after an upwardly revised rise of 0.3 percent in March. The number excluding automobile sales was up 0.4 percent. Economists on average had predicted a rise of 0.6 percent for the overall sales.
In cross trading, the Canadian unit edged up to 96.99 yen from 96.03 yen at the previous close here, and was flat at 1.2261 marks after 1.2262 marks.
It is likely to take some time before the market gets a boost from an increase in Canada's key lending rate by the central bank. On Wednesday, Canada said its April wholesale trade rose 1.3 percent month on month after a revised 0.8-percent fall in March. Economists on average had forecast a rise of 0.4 percent.
U.S. President Bill Clinton kicked off his nine-day tour of China on Thursday, with summit talks with President Jiang Zemin in Beijing Saturday on trade, human rights, and other issues.
Beijing, threatening a devaluation of its currency, yuan, was pressuring both Tokyo and Washington to stop the relentless rise of the U.S. dollar, particularly against the yen, as the cheap yen makes Japanese export prices more attractive than those from other Asian nations in global markets.
An ensuing, rare U.S.-Japan joint intervention in the currency market last week, which came days before Clinton's departure to China, boosted the yen's value. But the U.S. dollar resumed its upward move this week as the market was disappointed with slow progress in Japan's efforts to fix its banking system.
The Canada dollar has broken its link to the weakening yen this week and recovered a bit from new lows marked recently, partly supported by higher commodities prices as the world's oil producing cartel struck a deal to trim output.
Canada hit a record intra-day low of C$1.4754 (US$0.6778) on June 22, and the overseas trading low of C$1.4767 (US$0.6872) on June 16.
Friday Update
Toronto Stocks Edge Lower At Midday
Toronto stocks edged lower at noon on Friday on quarter-end position squaring. * Volume reached 40.3 million shares worth C$775 million. * U.S. dollar weakened to 142.7 Japanese yen.
Toronto stocks had edged lower at noon on Friday on quarter-end position squaring.
"What we've been through is the typical quarterly window-dressing and volatility run-up type of thing," said analyst Bill Ram.
The Toronto Stock Exchange's benchmark 300 composite index fell 4.84 points or 0.07 percent to 7309.88. Volume was light at 40.3 million shares worth C$775 million. Declines outpaced advances 389 to 334 with 270 issues unchanged. The Dow Jones Industrial Average rose 15.44 points or 0.17 percent to 8951.02.
Stock markets were searching for direction amid uncertainly about Asia and the longer-term trend of the U.S. dollar.
If the U.S. dollar falls, cyclical and commodity-based shares should improve. But if the Asian flu continues to dog the Japanese yen, interest-sensitives and defensive stocks should see the lion's share of investment.
The U.S. dollar fell to 142.7 yen after U.S. Treasury Secretary Robert Rubin, speaking in Beijing, indicated there may be more intervention in the foreign exchange market.
The TSE's pipelines and utilities sectors had fallen 0.93 and 0.75 percent respectively by midday while the financial services and the transportation sectors rose 0.65 and 0.56 percent respectively.
Nine of the TSE's 14 subgroups were on the rise.
Call-Net Enterprises and Fonorola Inc. were the two most actively traded stocks, rising C$1.75 to C$24.75 and C$0.75 to C$66.75 respectively in combined volume of 6.8 million shares after the two long distance telephone companies agreed to merge in a C$1.8 billion deal.
Fonorola had spurned all earlier advances from Call-Net.
NEW YORK
Dow Ends Firmer As Investors Take A Break
Blue-chip stocks edged higher Thursday as investors snuffed an early rally and called a halt to the past week's scorching gains in technology stocks.
The Dow Jones industrial average rose 11.71 points to 8,935.58 after rising 101 points earlier in the session.
Traders said several factors may have triggered the profit-taking, including resistance at 9,000, rumors that the Federal Reserve will act to prop up the yen again, and problems with a new chip from bellwether Intel Corp.
"It's certainly normal to tag 9,000 and take some profits," said Scott Bleier, chief investment strategist at Prime Charter Ltd. "These are just excuses to back off a little after such a ferocious one-week run up."
The rally in tech stocks stalled as the Nasdaq composite index, laden with tech issues, fell 14.51 points, or 0.8 percent, to 1,863.25. The index is still up 4.6 percent so far this week.
In the broader market, declining issues led advancers 1,565 to 1,399 on moderate volume of 657.5 million shares on the New York Stock Exchange.
Blue chips turned volatile midsession when the tech rally ran out of steam and the Nasdaq slipped into negative terrain.
"The Dow hit 9,000 and a little bit of selling came in," Dan Ascani, president of Global Market Strategists, said. "It's fairly normal for a market to meet resistance like that, but combined with the techs coming off, it produced some profit-taking. The market is reloading its cannons."
Investors took comfort that the economy was still sailing along.
Existing homes sales rose 1 percent in May, a real estate group said, to an annual rate of 4.82 million units, above private economists's forecasts for a 4.8 million unit rate.
Meanwhile, first-quarter economic growth was revised upward to a 5.4 percent annual rate, the Commerce Department said, well ahead of the 3.7 percent rate in the fourth quarter.
But economists said the first-quarter growth rate was unsustainable, mostly because of an inventory buildup that could lead to slower growth later this year as retailers and manufacturers work off the stockpile of goods.
Among Dow stocks, AT&T fell 1-5/8 to 58-3/8, extending its losses from Wednesday when it announced a $48 billion deal to buy Tele-Communications Inc., whose stock lost 1/2 to 39-1/4.
Blue chip Union Carbide posted solid gains after broker Credit Suisse First Boston raised the stock to a buy from a hold. Union ended up 4-1/4 at 52-1/4.
Elsewhere, Armstrong World Industries tumbled 4-15/16 to 70-7/16 after the maker of floor coverings and furniture warned of weak second quarter results.
3Com Corp. jumped 4-6/16 to 31-1/2 after the computer network equipment maker reported stronger-than-expected earnings late Wednesday.
The American Stock Exchange index rose 4.48 to 713.96.
The Standard & Poor's index of 500 stocks fell 3.60 to 1,129.28, a day after setting a record high for the first time in two months.
The NYSE composite index of all listed common stocks fell 1.04 to 576.14. The average share lost 8 cents.
The Wilshire Associates Equity Index -- the market value of NYSE, American and Nasdaq issues -- was 10,591.965, down 28.998, or 0.3 percent.
Friday Update
Wall Street Edges Off Highs In Morning
U.S. stocks edged off highs in calm morning trade Friday but quarter end ''window dressing'' by portfolio managers kept the market on firmer ground.
There was little else to provide direction ahead of the weekend except a possible merger of two major Japanese banks which raised hopes for progress on the country's mammoth bad bank loans problem.
''The market was oversold heading into this week and was helped by the very strong rebound in the over the counter market,'' said Charlie Crane, chief market strategist at Key Asset Management.
''The big-cap stocks had a little catching up to do,'' he added.
Crane said quarter end buying by money managers was helping to lift the market.
At 1102 EDT/1502 GMT, the Dow industrials were off earlier highs, up 40 points at 8975. The tech-studded Nasdaq rose five to 1869. The S&P500 added five to 1134.
Advancers topped decliners 7-5 on the Big Board. The Russell 2000 index of smaller stocks rose 0.50 to 450.67.
New York Stock Exchange trading curbs were on since 1029 EDT/1429 GMT after the Dow rose more than 50 points.
INTERNATIONAL
Morning Update
Asian stocks reversed early losses on Friday as the yen came back from its lowest level since last week's $6 billion intervention to shore up the Japanese currency.
Tokyo's key Nikkei average closed at 15,210.04, up 0.51 percent or 77.82 points, erasing losses suffered earlier in the day as the yen sank below the 143 level.
In late trade the yen was hovering around 141.6, helped by news that a major bank merger might be on the cards.
''When the yen falls, it underscores the troubles in Japan's financial system,'' said Masayuki Nishina, a trader a New Japan Securities. ''It undercuts confidence.''
Trading in Long-Term Credit Bank of Japan and Sumitomo Trust & Banking was suspended after quasi-governmental broadcaster NHK reported the they would merge. On Thursday LTCB fell to 50, the face value of its shares.
''This is an example of things to come,'' said a trader at a foreign brokerage. ''Things are progressing and that is good news.''
In Hong Kong, the Hang Seng recovered most of its morning losses to close slightly down. Brokers said next week's trend would again be dictated by the yen.
The index closed down 0.67 percent at 8,607.86, after tumbling more than 250 points in mid-morning to a low of 8,410.60. It lost 57.97 points on the day.
''The market's trend really depends on the yen,'' said Steve Cheng, associate director at Lippo Securities. ''That's because the stability of the currencies of Hong Kong and China is linked to the yen.''
Over the week, the Nikkei lost 57.94 points while the Hang Seng gained 15.96 points.
Singapore shares made strong gains in the afternoon as the yen's recovery boosted the local dollar. Singapore property stocks also perked up in anticipation that government measures due to be announced on Monday to cushion the impact of the Asian crisis could include moves friendly to the sector.
The Straits Times Industrials index closed up 1.47 percent to 1,085.59, up 15.76 points, but dealers said they were not hopeful the gains would be sustained through next week.
''It takes a lot to get the market moving. It's painfully obvious the economy is going into a recession,'' said Jeffrey Teo, institutional dealer at Santander Investment Securities.
Taiwan stocks closed down at 7,681.96 amid a selloff in technology shares, following an overnight fall on New York's tech heavy Nasdaq index, which Taipei closely tracks. Taiwan's index lost 0.53 percent or 40.68 points.
Brokers said anxiety was mounting as U.S. President Bill Clinton started his nine day visit to China, with eyes particularly on Saturday's summit with Chinese President Jiang Zemin.
Sydney's All Ordinaries index ended at up 0.69 percent to 2,609.9, an increase of 17.9 points on strength in blue chip companies.
The Broken Hill Pty Ltd was the star attraction, as the steel and resources giant took asset writedowns of A$3.08 billion on a pretax basis, reporting only its second loss in a century.
''BHP with A$3 billion of abnormals was greater than the market was thinking,'' said Robin Forbes, broker at Hartley Poynton. ''But they may have been thinking a new CEO would slash anyway, so this lets them walk in with a clean sheet.''
BHP's shares were 19 cents higher by the close, up 1.4 percent.
The Kuala Lumpur Stock Exchange Composite Index ended down 0.61 percent at 445.67, shedding 2.75 points.
Jakarta stocks ended higher, largely ignoring Thursday's agreement between the country and the International Monetary Fund. The composite index ended up 0.48 percent at 430.87, mainly on a rise in index heavyweights like Telkom, Jakarta's biggest capitalised stock.
European shares were mixed in directionless trade after recouping early losses on Friday, while the yen steadied after softening overnight.
''Eveyone's worried about Asia and the yen and any progress from these levels will be stifled,'' a London share dealer said.
Wall Street's flat close after a sally above the 9,000 level on Thursday also undermined confidence, traders said.
The yen sagged to almost 143 to the dollar overnight -- its lowest level since last week's $6 billion intervention to shore it up -- as bearish sentiment toward Japan's economy resurfaced.
Fears of fresh intervention constrained the selling and the yen rallied later on news two Japanese banks would merge.
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MARKET PRICES AT 1054 GMT
MARK 1.7982/80
YEN 141.84/89
STERLING 1.6680/90
GOLD $292.95/293.35 -0.00 (pvs PM fix)
BRENT $13.27 +0.16
FTSE 5836.6 -22.30
CAC 4,201.78 -2.03
X-DAX 5861.22 -25.50
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London's FTSE 100 was down around 0.3 percent after a wobbly start following Wall Street's uninspired close and with worries over Asia continuing to jangle market nerves.
Prices bounced off their worst levels partly on expectations that Wall Street would open slightly higher. But trading throughout the session was thin and directionless.
''It's so quiet it's ridiculous,'' one dealer said. ''I'd normally have about 40 orders on the order book by now and I've got two.''
Dealers said the market's main source of action would be end of quarter window-dressing as investors and brokers adjusted portfolios to tie in with the end of the accounting period.
Underlying concerns over Asia continued to weigh on sentiment along with fears domestic interest rates may rise again and corporate profits fall, they said.
''We've also got UK interest rates to worry about and fretting over which companies will come out next with a profit warning or which broker will come out with a profit forecast downgrade,'' one dealer said.
Germany's Xetra DAX failed to break above 5,900 points and was showing a 0.2 percent loss after moving up and down around the overnight close.
Market commentators said new peaks were possible as the end of the first half neared.
''For the next few days (ahead of June 30) window-dressing will prop up the market again,'' Dresdner Bank said.
Dealers said the index was entering precarious territory and that caution was advisable.
French shares were also cautiously higher having overcome early losses, though investors were holding back ahead of Wall Street's open. Sentiment remained bullish however.
In currencies, the dollar was steady against the yen and mark by the European midsession, but trading was likely to become more volatile, analysts and dealers said.
''Fears of intervention on a Friday afternoon are going to keep it choppy,'' said Michael Metcalfe, currency strategist at NatWest Markets.
''I would be very surprised if the authorities' resolve to keep dollar/yen where it is were not tested,'' he added.
Dollar/yen rose overnight to its highest level since the U.S. Federal Reserve and Bank of Japan intervened to support the yen on June 17.
But the dollar fell after news of merger plans between Sumitomo Trust & Banking and Long-Term Credit Bank of Japan (LTCB), seen as a step towards financial reform in Japan.
Sumitomo said it would hold a news conference at 1200 GMT, and LTCB at 1300 GMT.
''The merger was perceived as good for the yen, and a few speculators in Tokyo pushed it near 141,'' said a trader from a U.S. bank. ''Since then, the dollar has been drifting higher.''
The yen failed to rally further in the absence of concrete plans for more widespread financial reforms, analysts and dealers said.
Dollar/mark was pinioned by the 1.80 level, with Russian reforms continuing to provide a focus, analysts said.
Russian Deputy Finance Minister Oleg Vyugin said on Friday Russia expected to receive cash from a new $670 million International Monetary Fund loan tranche on Tuesday.
Analysts said the IMF would look for more progress on reform before disbursing more funds.
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