Friday, July 28, 2006, 4:15 PM ET (Thomson Financial Corporate
Services): Stocks climbed as news of an economic slowdown in the U.S. was
welcomed, and Bay Street hoped the Fed would not need to raise rates next
month. The loonie rose nearly half a cent and nearly all sectors gained.
Inco did not persuade enough Falconbridge shareholders to vote for its
takeover bid, and the largest merger in Canadian history was called off.
Housing sales were up in Canada, but plunged in the States, contributing to
a fall in its GDP. Finally, oil dropped and gold edged up as President Bush
and Prime Minister Blair announced that the UN would meet about the
conflict in the Middle East on Monday.
* The S&P/TSX Stock Exchange Composite Index moved up 64.77 points, or 0.55%.
* The epic three-way merger is no more. After nearly two months of
labyrinthine machinations, ever-rising bids, competing press releases, and
regulatory rulings, the avidly courted shareholders of Falconbridge last
night decided not to be acquired by Inco, leaving the horizon clear for the
European Xstrata to acquire the shares it lacks to take over the nickel
miner. Inco has formally withdrawn its offer and will continue its merger
with Phelps Dodge to create a nickel-and-copper giant; but the value, while
not yet calculated, will not be the record-setting US$40 billion dollars
that Phelps Dodge would have paid for a combined Inco/Falconbridge.
However, some amounts are clear: Falconbridge now must pay Inco US$150
million for enhanced expenses, and Xstrata will pay Inco US$300 million if
it succeeds with its offer, now valued at US$63.25 per share and set to
expire August 14th. Finally, since Falconbridge's deal to sell its
Nikkelverk Mine in Norway to LionOre Mining was contingent on its
acquisition by Inco, that too has been called off. Inco CEO Scott Hand
summed up the tale: "The Falconbridge stockholders have spoken, and we're
moving on."
* Other mining news was also released: Cameco Corporation, the world's
largest uranium producer, reported a C$149 million second-quarter profit,
soaring from C$32 million a year ago and netted C$0.40 per diluted share. A
45% increase in overall revenue and a major tax break were credited.
* In the U.S. energy sector, after hearing from #1 Exxon Mobil
yesterday, #2 Chevron posted its profits: an 18% jump in the second
quarter, from a net income US$3.68 billion and US$1.76 per share last year
to US$4.35 billion and US$1.97 per share. Earnings were at US$2.10 per
share, whereas analysts had expected US$2.17. The rise was also driven by
the surge in oil prices.
* The financial sector edged up as Sun Life Insurance recorded its
profits, with a record second quarter of C$512 million and C$0.88 per share
in earnings, compared to C$477 million and C$0.81 last year. The figure
beat expectations of C$0.87 and will boost Sun's quarterly dividend by 9%
to thirty cents per share. Due partly to expansion in China and India,
revenue rose from C$6 billion to C$6.2 billion.
* Celestica's stock shot up as the electronics manufacturer posted a
second- quarter US$30.3 million loss but nevertheless beat expectations,
showing revenues of US$2.22 billion where US$2.13 billion had been
predicted. Its guidance issues for the third quarter were also within
estimates.
* National icon Tim Hortons did so well in the second quarter that it
will be serving up its first dividends, as a 25% increase in profits to
C$76.3 million was announced. Total revenues were C$406.8 million, rising
from C$368.5 million last year, and a seven cent per share dividend should
be going out to shareholders by the end of August. Its spinoff by Wendy's
in October is still on track.
* Japanese auto maker Mazda saw a 16-fold surge in profit to US$57
million this quarter, as sales of its minivans and sports convertibles
surged in the U.S. and Europe.
* Oil fell US$1.30 to US$73.15, its lowest point of the week, as calls
for a ceasefire in the Middle East grew, the conflict failed to spread to
oil- producing nations, and world leaders promised a major peace meeting at
the United Nations on Monday.
* The yellow metal market rose slightly as the U.S. GDP stats softened
the dollar, rising US$2.30 to close at US$634.80. Gold overall rose 2.4%
this week.
* Major studies and statistics released on both sides of the border
painted rather different pictures of the two economies. From Thomson
Financial came a 15-year study of Canadian consumers, finding a direct
relationship between the GDP and retail sales data on a quarterly basis in
that, according to researcher Avita Sukrahm, "the stronger retail sales
are, the more likely GDP will follow." She concluded that Canadian
consumers are showing no sign of stopping their spending and are a main
driver of growth. Statistics Canada issued monthly raw materials costs
data, showing a sharp drop in June of 2.5% after a May rise of 23.6%; while
the stat is still 14.7% higher than last year's figure, it did show a price
drop in crude oil and non-ferrous metals.
* American GDP figures, however, showed a sharp drop and missed Wall
Street's expectations by .5%, coming in at 2.5% for the second quarter. The
overall pace was half that of the 5.6% first quarter as consumers tightened
their belts in the face of high energy costs and rising interest rates;
inflation indicators also moved up.
* The most dramatic split between the neighbors was seen in home sale
stats: in Canada, sales in the first six months of 2006 shattered records
with a 3.6% increase, representing a total of 186,177 houses changing
owners. New listings are also at record levels, topping 300,000 so far in
the year. An employment boom in certain areas, especially in mining, a
prime rate of 6%, and lower interest rates were credited for the rise. In
contrast, a prime rate of 8.25% and rising rates were blamed for a 3% June
drop in home sales in the U.S., according to the Census Bureau.
-- 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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