Wednesday, May 24, 2006, 4:15 PM ET (Thomson Financial Corporate
Services): In a widely anticipated move, the Bank of Canada today raised
rates by a quarter percentage point, to 4.25%, to cool Canada's remarkably
strong economy. Meanwhile, with the exception of financial issues, shares
dropped across the board, particularly within the commodity-related
sectors.
* The S&P/TSX Stock Exchange Composite Index fell 116.02 points, or
1.01%.
* The Bank of Canada raised its overnight lending rate to 4.25%, close
to a five-year high, and indicated its next move would be to pause. The
Bank is now comfortable with the interest rate level and will await more
economic reports before implementing another hike.
* Turning to the U.S. economy, a sharper-than-expected drop in U.S.
durable goods orders raised hopes among investors that the Fed could pause
its rate- hiking campaign, but the market remained jittery about the
prospects for further increases.
* In commodities, oil prices dipped as traders reacted to a U.S.
government report that showed domestic gasoline inventories rose for a
fourth-straight week. Crude oil dipped below US$70 a barrel; gasoline
prices also eased.
* Meanwhile, gold shares plunged today, alongside a sharp fall in the
yellow metal, which fell by about 5%. Declines came amid a stronger U.S.
dollar that was revived by improving new-home sales in the U.S.
* In corporate news, Bank of Montreal, the first major Canadian bank to
report second-quarter net income of C$644 million, or C$1.24 a share, from
C$600 million, or C$1.16 a share, a year ago. Cash earnings rose to US$1.25
a share from C$1.21 a share last year. The mean Thomson First Call estimate
for the most recent quarter was C$1.21 a share. Return on equity edged
lower to 19.1% from 19.5%. The bank also hiked its dividend by 17% and
raised its dividend payout range to the highest level among Canada's big
banks.
* The Toronto Stock Exchange is reviewing the common shares of Cervus
Financial Group Inc. to see whether the mortgage broker can maintain its
stock listing. The operator of Canada's two national stock exchanges said
it is evaluating Cervus "with respect to meeting the requirements for
continued listing" and has given the Toronto company 60 days to meet its
obligations. Earlier this month, Cervus announced it lost C$7.5 million for
the six months ended March 31 and has an accumulated deficit of just under
C$19 million.
* In U.S. company news, General Motors shares rallied on Merrill
Lynch's upgrade of the carmaker's rating to "buy" from "neutral" on the
company's plan to buy out about 30,000 employees, a move that analysts say
could bolster GM's recovery. The stock ended the session higher on the New
York Stock Exchange.
-- Michael.O'Brien@contractor.Thomson.com; Thomson Financial Corporate
Services
This is Thomson Financial Corporate Services Canadian Commentary, which
is updated twice daily. The information herein is believed to be true and
accurate, we take no responsibility for inaccurate information and reserve
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SOURCE Thomson Financial Corporate Group
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