Wednesday, August 23, 2006, 4:15 PM ET (Thomson Financial Corporate
Services): Bay Street was quiet today, closing slightly down across most
sectors as data from the U.S. revealed a 2-1/2 year low in home re-sales
and rising numbers of unsold new homes. In Canada, however, the leading
economic indicator ticked up, and housing starts rose. PM Harper threw down
the gauntlet to Parliament about the softwood lumber agreement. Paper giant
Domtar announced a merger deal, and Talisman and Nortel also had hopeful
news. Finally, the massive mining mergers of the last quarter helped M&A
stats soar to an all-time record, and the saga of Inco lurched forward
towards another milestone.
* The S&P/TSX Stock Exchange Composite Index slipped 6.07 points, or
0.05%.
* In Canadian economic stats, the leading indicator of economic
performance went up in July by 0.2%, following a revised June rate of 0.3%
as well, led by consumer spending. Predictions had been for a 0.1% rise.
Housing starts also rose north of the border, in contrast with the U.S.
* The U.S. housing market lost steam last month, as re-sales hit a
2-1/2 year low and the new home inventory rose. Sales of existing homes
fell by 4.1%, the lowest level since January 2004, with 6.33 million units
moving, missing analysts' predictions of 6.55 million. The number of new
unsold homes hit a record, with 3.8 million units. The housing slowdown is
being closely watched by the Fed as well as the markets.
* Elsewhere, Prime Minister Steven Harper said a "clear majority" of
forestry companies support the softwood deal, and he is now prepared to
take it to Parliament for ratification next month. He also said that the
measure was so important to the Government that " ... because of its fiscal
measures, the vote on this will be a confidence measure."
* The basic materials sector dipped on the day. Paper mogul Domtar will
merge with an arm of U.S. Weyerhauser in a deal worth US$3.3 billion;
Domtar will keep 45% of shares. The new company will also be called Domtar
and have its administrative HQ in Montreal and its operating HQ in South
Carolina.
* While Talisman Energy's shares were not immune to the oil industry
downturn today, it did issue some encouraging news: a plan to boost its
North Sea oil and natural gas production by up to 50,000 barrels of oil per
day by 2008. Talisman plans to purchase two major fields from Royal Dutch
Shell and Exxon Mobil; no financial details were given. The move follows a
trend wherein larger oil companies are selling off older fields to smaller
ones.
* Teck Cominco is in the lead to buy six of nine old mining projects
Falconbridge is shedding as it prepares to be absorbed by Xstrata.
Meanwhile, Inco, which is still waiting to decide on choosing Phelps Dodge
or CVRD, learned that Investment Canada will extend the review of the
merger with the American copper magnate for 30 days. This means that IC
will be making its decision after the Inco shareholder's meeting on Sept. 7
and Phelps' on Sept. 25.
* The U.S. Department of Homeland Security has awarded part of a
seven-year contract to Nortel Networks for enhancing its IT services; terms
were not disclosed, but 25 companies will share billions of dollars in
fees.
* Oil closed below US$72 again, at US$71.76, down US$1.34. The fall
came as U.S. inventories unexpectedly reported a smaller-than-expected drop
and gasoline supplies climbed for the first time in five weeks, and the
U.N. continued to mull statements from Iran. However, as Tropical Storm
Debby started to move west from the African coast, traders began to worry
again about hurricane season and do not expect the fall-off to last long.
* Gold held an inverse relationship to the ups and downs of the U.S.
dollar, starting strong and then sliding, moving down US$1.20 to end at
US$632.80.
* Corporate Canada engaged in all-time record M&A activity in the
second quarter, led by numerous mining mergers, according to the Crosbie &
Co. investment bank. The bank found the deals went from 420 deals a year
ago worth US$33.6 billion to 480 worth US$86.1 billion, eclipsing the
previous record set in 2000. Metals and minerals accounted for 46% of
transaction values and fifty of the deals. The bank noted that record-high
commodity prices, active financial groups, and the "continuing
attractiveness" of the Canadian economy have created this dynamic
environment.
-- 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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