Wednesday, August 16, 2006, 4:15 PM EDT (Thomson Financial Corporate
Services): The North American markets were pleased today by data from the
U.S. indicating that retail inflation had slowed, buoying hopes that the
Fed would continue to hold rates steady. Housing data also indicated a
slowdown, and a scandal hit Statistics Canada about its data. Lorus and CAE
brandished new and lucrative contracts, and the Canadian manufacturing
sector showed strength. Finally, Teck Cominco, after a day full of drama,
has unofficially bowed out of the battle for Inco, leaving Phelps Dodge and
new suitor CVRD as viable buyers.
* The S&P/TSX Stock Exchange Composite Index jumped 53.10 points, or
0.44%.
* On the U.S. economic front, markets were delighted at figures
indicating U.S. retail inflation has moderated. The core CPI rose 0.2% in
July, breaking a run of 0.3% for several months and beating analysts'
predictions of a 0.5% rise. Overall prices were up 0.4% in July.
Separately, industrial production edged up 0.4% last month, slowing from
0.8% growth in June. Capacity use inched up 0.1% to 82.4%. The Fed is now
widely expected to hold rates in September.
* Home prices in the U.S. have stalled, rising just 3.7% in the second
quarter from last year, with a median home price of US$227,500. Housing
starts were also down, with a below-forecast July figure of 1.795 million
instead of 1.81 million. Buildings permit applications also dropped. The
slowdowns had been expected by the markets.
* Manufacturing shipments in Canada rose the most since last August in
June, up 1.9% for a five-month high of C$51.4 billion and flummoxing
analysts who had forecast a decline of 0.4%. The markets were pleased at
this sign of strength in the sector, which has shed over 83,000 jobs in the
past year but is now surging in the transportation, computer, and
electronic equipment sectors. The loonie rose about half a cent in
response.
* Meanwhile, Statistics Canada was embroiled in scandal as it revealed
it has miscalculated the official inflation rate for the last five years,
due to a computer glitch in the formula for calculating hotel and motel
rates. This mistake in the formula threw off each report since early 2001
and March of this year, understating the rate, on average, by a tenth of
one percent. The problem had not been caught since Statscan assumed that
tourism was having hard times. Like other agencies of its type worldwide,
Statscan will not revise past figures so contracts based on them will not
be disrupted.
* Lorus Therapeutics surged as its subsidiary, GeneSense Technologies,
won a U.S. patent on its anti-cancer technology using anti-sense
oligonucleotides. A C$10.4 million financing arrangement should be in place
by Aug. 28th, after conditional approval was received by the TSX and NYSE.
* Another Canadian company winning business overseas was CAE Inc.,
maker of training equipment for pilots, which was awarded contracts from
both the U.S. and U.K. navies for upgrades and new flight trainers. The
contracts are worth C$75 million.
* The Inco acquisition battle delivered two surprises within the space
of about five hours, as hostile bidder Teck Cominco announced this morning
it was going to sell C$5.7 billion worth of shares to help it make a
sweetened C$20 billion bid for the nickel miner and then rescinded the
announcement by early afternoon. Teck's current bid of C$82.50 still
stands, but Brazilian mining giant CVRD is now expected to win the company.
* Oil continued its fall as U.S. inventories dropped, the ceasefire in
the Middle East held, and the markets were calmed with encouraging U.S.
government data. Oil prices declined US$1.16 a barrel to US$71.89.
* The lower inflation figures also weakened the sawbuck, and gold
recovered US$4.25 to close at US$639.
-- 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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