Monday, July 17, 2006, 4:15 PM EST (Thomson Financial Corporate
Services): Traders started to feel slightly better about the Middle East
situation as diplomatic efforts began, even while the fighting raged on,
lowering the price of gold and oil from last week's highs. The TSX dropped
in 7 out of 10 sectors, but Canadians invested overseas in near-record
numbers, while U.S. productivity figures doubled expectations. The Phelps
Dodge mergers hit another milestone, and Aquiline won a silver mine, while
Petro-Canada made a lucrative deal with the Russian Government.
* The S&P/TSX Stock Exchange Composite Index tumbled 149.39 points, or
1.28%.
* The Phelps Dodge / Inco / Falconbridge narrative moved forward again
as Phelps and Inco both sweetened their bids over the weekend. Phelps
raised their bid from C$78.01 to C$80.76 for Inco, and Inco in turn raised
their bid a loonie to C$60.20, a bid which will close July 27th and now
trumps Xstrata's bid of C$59 per share. Falconbridge CEO Derek Pannell
applauded the increased bid.
* The mining sector was lifted not only by the Falconbridge news but by
a doubling of the value of Aquiline Resources, as the precious metals miner
won a landmark court decision in British Columbia to obtain full ownership
of the Navidad silver mine in Argentina over IMA Exploration.
* The energy sector, for a change, is looking to a fellow northern
country for a supply. The Energy Minister of Russia, Viktor Khristenko,
attending the G8 summit in Moscow, announced a deal between Petro-Canada
and OAO Gazpom, the government-controlled energy company. The US$1.5
billion deal will convey tankers of Russian natural gas from Ust-Luga to
Cacouna, Quebec; the Minister indicated he hoped that this deal would be
the first of many with Canadian companies.
* In the U.S., the Dow received support from McDonald's, which had a
5.9% increase in same-store sales for June and said its earnings are
expected to top expectations. The market was tempered, though, when
Citigroup did not meet its forecasts, missing by one cent and reporting
US$1.05 per share in the second quarter, up from US$0.97 last year.
* Oil again reflected, almost by the hour, the turmoil in the Middle
East, as prices dipped in the morning when peace talks were mentioned and
then rose again as violence continued to escalate, only to close down for
the first time in five days at US$75.25. Investors are cautiously
optimistic about the strength of diplomatic efforts.
* A fall of 0.8% in the materials sector dragged gold down with it
today, as the yellow metal lost 1.62% to close at US$652.50. All other
precious metals also dropped as investors switched their safe haven to U.S.
dollars.
* In economic news, Statistics Canada released May figures on
International Securities transactions. Canadians acquired C$10 billion in
foreign securities that month, the third highest amount on record. C$5.9
billion of this was invested in foreign equities, and most of the rest in
bonds. Non-Canadians, in turn, bought C$5.7 billion in Canadian securities,
an 18-month high.
* U.S. production handily beat expectations, with a 0.8% increase in
output at factories, mines, and utilities. Analysts had been predicting a
0.4% gain and a capacity use rate of 81.9%; the rate topped out at 82.4%,
up 0.6% from May and the best since June 2000. They are now keeping an eye
on how the good news will affect the Federal Reserve as they weigh their
decision about rates.
-- 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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