MARKET ACTIVITY/TRADING NOTES FOR DAY ENDING MONDAY JUNE 29, 1998 (1)
MARKET OVERVIEW
CANADA
Toronto Stocks End Firmer
Canadian stocks rose, led by Bank of Nova Scotia and other major banks, on expectations corporate profits of the country's largest lenders will grow in a climate of low interest rates and subdued inflation. Fund managers also scrambled to dress up their portfolios before quarter end.
Investors are betting the U.S. federal open market committee will leave interest rates unchanged at its meeting tomorrow, allowing Canada's central bank to pursue its own independent policy.
The Toronto Stock Exchange's 300 Composite Index rose 70.72 points or 0.96 percent to 7409.38 points after a lightly traded day. Turnover was quite low at 77 million shares valued at C$1.7 billion. Advancing issues barely edged declines 496 to 493. Another 283 closed flat.
The TSE 100 rose 5.01 points to 454.67 as many of the big names on the TSE moved higher.
''Generally we're at the start of a summer rally. Things are just starting to roll.'' said Matt Ljungberg, a trader at Priority Brokerage in Toronto. Ljungberg said the bad news has been disseminated, so there should be no more surprises during the second quarter earnings period set to start next month. ''A lot of people think the worst has already come out in previous earnings warnings, so they are anticipating some good earnings numbers,'' Ljungberg said.
The North American markets showed positive growth last week and the momentum is expected to continue.
''It's just the end of the half, that's all,'' one stock trader said. ''The level of activity is not very high.''
Conor Bill, director of retail trading with ScotiaMcLeod Inc., agreed. ''There's a little bit of window dressing happening here, this being the end of the month. And people have been looking at the economy, the numbers are coming out, and nobody is too worried. It looks like the Bank (of Canada) won't have to hike rates, and if the Bank doesn't have to hike rates, the (commercial) banks can go higher.''
Craig Strachan, manager of Research Services for Toronto-Dominion's Evergreen service, summed up Monday's action as "window-dressing." Strachan said that mutual fund managers were investing their spare cash before the close of the second three-month quarter. Also, they were buying the most liquid stocks in hopes of showing they had chosen the key leaders during the period, like the bank stocks, to impress clients. An equities trader agreed. "A lot of people own these things in size and probably want to see them a little higher before the end of the quarter."
"I think in our market, by and large, you are going to see it moving higher in the next couple of days,'' said David Lawson, a trader at Maison Placements Canada Inc. ''I just think the market is oversold and I just see buyers out there.''
This rally began last week as investors, who are anticipating better corporate earnings during the second quarter earnings period, charged back into the equities market. Volumes were anticipated to be light this week with many players away ahead of the Canada Day holiday on Wednesday.
"People are only going to be around for another day or two, so I think they found something better to do," said Fred Ketchen, senior vice-president at ScotiaMcLeod in Toronto. "We're coming into quarter end, there's still money waiting to be parked," he said. "Call it window-dressing."
Twelve of the index's 14 subsectors ended higher.
The financial services sector led the gainers on the TSE, adding 2.01 per cent. The TSE financial services subindex contributed almost 36 points to the advance. "A lot of the banks did extremely well," said Ketchen, noting that institutional investors were probably buying bank stocks to pump up their portfolios before the end of the month.
Scotiabank (BNS/TSE) rose $1.20 to $37.30, Canadian Imperial Bank of Commerce (CM/TSE) jumped $2.00 to $48.70, Royal Bank of Canada (RY/TSE) gained $1.55 to $89.30, Bank of Montreal (BMO/TSE) climbed $1.25 to $82.50 and Toronto Dominion Bank (TD/TSE) advanced $1.40 to $67.70. Sceptre Investments rose $2.15 to $39.90 and Power Financial closed at $68.50, up $1.75.
Shares in transportation stocks gained 1.54 per cent and the merchandising stocks rose 1.42 per cent with the help of several big-name companies.
The TSE Oil & Gas Composite Index gained 0.6% or 36.99 to 6099.16. Among the sub-components, the Integrated Oil's gained 0.2% or 15.82 to 84.79.18. The Oil & Gas Producers gained 0.9% or 48.72 to 5396.33. Reversing the trend, the Oil & Gas Services fell 0.3% or 8.00 to 2442.15.
Westfort Energy, Petro-Canada, Canadian Natural Resources, Newport Petroleum, Magin Energy and Merit Energy were among the top 50 most active issues on the TSE. Among service issues, Tetonka Drilling also made the list.
Chieftain International gained $2.25 to $35.25, Canadian Natural Resources $1.40 to $25.40 and Northstar Energy $0.85 to $10.60. Service issues were not represented among the top net gainers.
On the flipside, Lundin Oil AB fell $0.45 to $6.00. Among service and related issues, IPSCO fell $0.60 to $39.25.
Call-Net, the parent of Sprint Canada, gained 10 cents to $25.40 after after it won more than 95 per cent shareholder support for its $1.8 billion takeover of Fonorola Inc., a rival in the long distance telephone market.
Loewen Group, one of North America's largest funeral home operators, was up $1.15 at $40.40, George Weston gained $1.05 to $53.50 and Sears Canada added $1.00 to close at $27.75.
Northern Telecom Ltd. (NTL/TSE) rose $1.75 to $83.35 after a survey of Japanese business confidence spurred hopes Asian economies are on the mend and will buoy profit growth of exporters. Nortel attributed 7% of sales to the Asia Pacific region last year.
Newbridge Networks Corp. (NNC/TSE), which attributed 18% of its sales to the region, rose 5› to $35.30.
Seagram Co. (VO/TSE) gained 55› to $59.40 after chief executive Edgar Bronfman was reported to have said he is willing to accept US$750 million for Polygram NV's Polygram Filmed Entertainment, below the $1-billion price tag that an internal company analysis put on the division. The lower price improves the chance of selling the unit.
Nova Corp. (NVA/TSE) gained 10› to $16.95 on heavy volume of 3.8 million shares, making it the most active issue in Toronto. At its annual general meeting yesterday, Nova shareholders approved a plan to merge the company and TransCanada Pipelines Ltd. and spin off Nova's chemicals business as a separate public company.
Abitibi-Consolidated Inc. (A/TSE) rose 60› to $18.85 after the newsprint maker said it may close two of its higher-cost mills in Quebec permanently because of a two-week-old strike by 5,000 union workers.
Boliden Ltd. (BOL/TSE) fell 15› to $8.25 after the company said it would spend US$245 million to expand its Swedish copper smelter.
The two holdouts were pipelines and golds.
Gold miner Placer Dome rose 15 cents to $16.45; Barrick Gold fell 15 cents to $27.20, Inmet Mining fell five cents to $4.75.
Peerless Carpet Corp. shares fell 0.55 to 2.65 after a fire and explosion ripped through one of its factories in Acton Vale, Quebec on Monday. Two firefighters were killed in an explosion at the site and nine other people were injured. The factory accounts for 15 percent of the company's sales and employs 150 of the company's 1000-member staff. None of the Peerless workers was injured.
Other Canadian markets closed higher. The Montreal Exchange portfolio rose 54.57 points, or 1.5%, to 3766.31. The Vancouver Stock Exchange gained 0.35 of a point to 532.24.
The Alberta Stock Exchange combined value index fell 3.09 to 2090.45. Declining issues outnumbered advancing issues 154 to 142, with 118 issues unchanged.
Oil & gas issues among the top 25 most active traded issues on the ASE included Anvil Resources, Parkcrest Exploration, Green River Petroleum, Cubacan Exploration, HEGCO Canada and Maxwell Oil & Gas.
Top gainers included Encounter Energy $0.16 to $1.49, Redeco Energy $0.12 to $0.35, BXL Energy $0.11 to $0.55, Ionic Energy $0.10 to $1.50 and Proprietory Energy $0.10 to $4.00.
On the downside, Anvil Energy fell $0.22 to $1.22, Solid Resources $0.15 to $7.00, Avid Oil & Gas A $0.10 to $1.20, Global Link International $0.10 to $0.75, Cirque Energy $0.09 to $2.51 and Corlac Oilfield Services $0.08 to $0.80.
Canadian bonds closed little changed in very quiet trading on Monday, with analysts predicting an uneventful week for the country's fixed-income markets.
"It's a very, very, quiet day. This week is shaping up to be something that's going to be unbelievably quiet with Canada closing at one o'clock tomorrow and on Wednesday," said Dawn Desjardins, a fixed-income analyst J.P. Morgan Canada.
Canada's benchmark 30-year bond closed unchanged from Friday's close to yield 5.520 percent. Its U.S. 30-year counterpart fell 6/32 to yield 5.65 percent. The spread between the two widened to 13 basis points from 11 basis points at the close of trading on Friday.
"There was very, very little today, as can be expected," said Larry Berman, senior fixed-income analyst with CIBC Wood Gundy Securities Inc.
A spokesman for the Toronto Bond Traders Association confirmed on Monday it is recommending the market close early on Tuesday at 1300 EDT/1700 GMT. The Canadian market will also be closed on Wednesday for the Canada Day public and market holiday.
Analysts said a meeting of the U.S. Federal Reserve's rate-setting Open Market Committee on June 30 and July 1 is also expected to keep many Canadian bonds investors sidelined.
At the short end of the curve, Canada's three-month when issued T-bill traded with a yield of 4.85 percent, unchanged from the close of trading on Friday.
The Canadian dollar closed slightly weaker at C$1.4702 (US$0.6799) in light trading on Monday as investors showed little inclination to push the currency out of its narrow range, traders said.
The currency remained within a range of C$1.4694 (US$0.6805) and C$1.4721 (US$0.6793) throughout the session following the release early Monday morning of the Bank of Japan's Tankan report.
The Japanese yen jumped after the quarterly Tankan report, a survey of business confidence, came in better than expected.
"Any good news out of Japan will be good for the market. Barring some news out of Asia, look for these markets to remain fairly calm and stable," said Reid Farrill, executive director of foreign exchange for CIBC Wood Gundy.
Analysts said markets would watch the U.S. Federal Reserve's FOMC meeting on Tuesday and Wednesday for signs of a change in U.S. monetary policy. A U.S. interest rate hike, however, is considered unlikely.
"It is pretty much deemed to be a non-event. There is an extremely low probability that they would come out with a rate move," said Mark Chandler, senior economist with Goldman Sachs Canada.
Analysts said the Canada unit may take some minor direction from monthly Canadian gross domestic product data due to be released at 0830 EDT/1230 GMT on Tuesday.
A Reuters survey of economists forecast monthly GDP would rise 0.3 percent after a 0.4 percent increase in March.
But Farrill said the release of U.S. employement data on Thursday would be the key economic data for the Canadian dollar this week.
On the crosses, the Canada unit dipped to 1.2309 marks from 1.2318 marks on Friday and fell to 96.29 yen from 96.52 yen at the previous close.
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