Tuesday, August 22, 2006, 4:15 PM ET (Thomson Financial Corporate
Services): While markets south of the border were flat as a Fed Bank
chairman implied that interest rates might start to climb again, Bay Street
was pleased by an uptick in oil prices and solid earnings news from the
Bank of Montreal, with the promise of more beneficial news from other major
banks this week. The softwood lumber agreement seems to have gained enough
tepid industry support to squeak by, and the markets pondered Iran's
guarded response to the United Nations' displeasure with its nuclear
enrichment program.
* The S&P/TSX Stock Exchange Composite Index climbed 64.22 points, or
0.53%.
* The CPI rose 0.1% in July; most analysts had been predicting a .3%
drop. High gas and electricity prices were blamed for the increase. The
annual inflation rate was down to 2.4% from June's 2.5%, which was expected
after the cut in the General Services Tax.
* The softwood lumber deal seems to have won enough tentative support
for the Tories to ratify the agreement with the U.S. International Trade
Minister. David Emerson appears to have dropped the former 95% threshold
for industry approval, although it was not clear what the new horizon is.
Ambassador to the U.S. Michael Wilson assured a House of Commons committee
that the government had enough votes to bring the long-running dispute to
an end, but much skepticism remains.
* The role of first major financial institution to kick off bank
earnings season fell to the Bank of Montreal, which trumpeted a 30%
increase in profits to C$1.40 per share on a cash basis, from C$1.10 last
year. The most recent result handily beat analyst expectations for C$1.20
per share. The Bank mentioned credit quality and more efficient operations
for the stronger results. The provision for credit losses fell to C$42
million from C$73 million last year, due to strong corporate recoveries.
* After a brisk rise in the morning, U.S. markets were spooked in the
early afternoon by remarks from the Federal Reserve Bank of Chicago's
Chairman Michael Moskow, who said the Fed may have to raise rates again to
bring inflation back down to acceptable levels. Mr. Moskow will assume a
voting position next year, replacing the Atlanta Reserve head. On the other
hand, Chairman Guynn from Atlanta, who has a vote but is resigning next
year, reiterated the importance of the Fed in controlling inflation, but
appeared to hint that current policy would hold.
* Oil was mostly steady, as the market is already factoring in today's
Iranian response to a package of incentives on offer from western
governments. Iran's main nuclear negotiator said the country is willing to
enter into serious negotiations, but did not go into detail. September
crude added US$0.18 to close at US$72.63.
* While the prospect of a nuclear Iran worried investors in the midday,
the rise of the American dollar caused gold to drop US$1.20 to end at
US$634.
-- Carolyn.Crapo@contractor.Thomson.com; Thomson Financial Corporate
Services
This is Thomson Financial Corporate Services Canadian Commentary, which
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SOURCE Thomson Financial Corporate Group
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