Friday, July 14, 2006, 4:15 PM EST (Thomson Financial Corporate
Services): Despite good news from Find Energy, and modest gains in most
sectors, the TSX rose only slightly today on continuing worries about oil
prices and world stability. Although none of the countries involved in the
recent Middle Eastern turmoil are major oil producers, oil supplies have
not been affected, and Saudi Arabia is attempting to negotiate with
Hezbollah to end the violence, any escalation in the area will affect
prices. Add to that the Nigerian pipeline sabotage, and unrelated problems
with major producer Iran, and it becomes understandable why almost every
sector is starting to feel pressure from oil prices.
* The S&P/TSX Stock Exchange Composite Index edged up 28.07 points, or
0.24%.
* The US Census Bureau released new retail sales figures and, after a
0.1% increase in May, retail sales fell 0.1% in June. Analysts had been
expecting a 0.4% increase, and pinned the blame on rising energy costs
cutting into consumer spending; nevertheless, retail gasoline costs rose
1.1%. All eyes are on the Federal Reserve, which is mulling stopping its
trend of raising interest rates to ease inflation, since growth appears to
be slowing on its own.
* South of the border, two industry giants had bad news to offer: the
Ford Motor Company cut its dividends in half from US$0.10 per share to US
$0.05 as part of a major restructuring program that also involves halving
the pay of its directors and closing North American plants that employ
30,000 people. High gas prices have made consumers flee from Ford's SUVs
and large trucks to smaller vehicles. Also, General Electric dropped since,
while it beat expectations on quarterly earnings, its forecasts did not
meet analyst's predictions.
* Phelps Dodge and Inco gave themselves more time to attempt to acquire
Falconbridge. The deadline of Thursday midnight for Inco's C $22 billion
stock-and-cash bid for the smaller nickel miner was extended until July
24th, with no change in price. Two-thirds of Falconbridge's shareholders
must approve the deal, and if they do not before Falconbridge's poison pill
expires on July 28th, Phelps Dodge and Inco will have to compete for shares
on the open market with rival suitor Xstrata. Meanwhile, the Ontario
Securities commission will hold a hearing on July 21st on Inco's own poison
pill; hostile suitor Teck Cominco is claiming that since Inco is in an
auction already, the clause is not needed.
* Find Energy soared on the news that the Shiningbank Energy Income
Fund will be purchasing it in a equity swap valued at C $443 million. David
Fitzpatrick, Shiningbank's CEO remarked that there would be "a beautiful
operating synergy" between Find's land-based oil production and his
company's natural gas acreage in Alberta.
* UBS Securities analysts added to the data about oil prices by raising
their crude oil targets for the next three years, saying that they expected
oil to remain above US $60 per barrel (and to modulate in the long term to
US $43.) They noted that high prices and slowing growth in supply did not
seem to moderate demand, and they believe this may lead to the re-rating of
such companies as EnCana, Nexen, Canadian Natural Resources, and
Petro-Canada.
* Another all-time record was set for oil, as after a brief surge to a
record-breaking US $78.40 per barrel, crude closed at US $77.03. The
escalating battles in Israel, the Palestinian territories and Lebanon are
leading to pessimism by the markets and a universal prediction that the US
$80 mark will be passed soon, perhaps next week.
* Shares of ConjuChem Biotechnologies dropped nearly 30% as the company
was forced to halt a Phase II trial in Argentina after a patient testing a
HIV lipodystrophy drug died. ConjuChem and the Argentine government are
investigating any possible connection.
* Unnerving events ranging from railway cars bombed in India to the
Middle East situation to problems with North Korea kept investors flocking
en masse to the safe haven of gold since Tuesday. After briefly hitting US
$669, the yellow metal closed at US $668, moving US $13.60. Analysts
believe it may return to the US $700 mark unless a correction is made. Said
one trader, "No one wanted to go home short this weekend."
-- Carolyn.Crapo@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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