Tuesday, August 29, 2006, 4:15 PM ET (Thomson Financial Corporate
Services): As Tropical Storm Ernesto turned north, avoiding the Gulf,
energy prices tumbled, sending the TSX into a dive in the morning. Despite
another stellar performance in the financial sector -- this time from
Scotiabank, a sharp fall in confidence rates from U.S. consumers sent North
American markets into a decline that was only partly ameliorated at the end
of the day by the release of minutes from August's FOMC meeting, which
raised hopes that the interest rate would be paused for another month.
* The S&P/TSX Stock Exchange Composite Index tumbled 106.87 points, or 0.88%.
* The U.S. Conference Board's index of consumer confidence plunged to
the lowest level since November, to a 99.6 in August after a revised 107 in
July. The Euro and sawbuck rallied briefly as alarm bells rang among FOMC
hawks. Consumers cited worries about the job markets and terrorism,
especially the airline plots in London, for lowering their sense of
economic security.
* Markets worldwide spent most of the day waiting for the release of
the Fed's Open Market Committee meeting notes from August 8. The Committee
believes that inflation pressures should ease, and that the effect of
previous hikes has not yet been fully felt. Energy price gains, they
thought, could level off, and therefore there was a limited risk in
deferring rate hikes. The markets perked up at the thought that rates would
not be hiked again in September, but it is now waiting for further clues
from a crucial U.S. job report on Friday.
* The Bank of Nova Scotia reported a 20% profit jump since last year to
C$0.93 per share, from C$0.77 a share a year ago. The most recent result
handily beat estimates of C$0.86 a share, and the upbeat results were
credited mostly to overseas operations, especially in Mexico, and a healthy
credit environment. Revenue increased from C$2.69 billion to C$2.99
billion.
* Inco's Board of Directors reiterated today that it still backs the
Phelps Dodge merger deal of cash-and-stock currently priced at C$85.86 per
share, and not CVRD's C$86 all-cash offer. Inco's Board had been hoping
that CVRD would improve its offer, but the Brazilian base metal mogul does
not seem ready to do so. A boost to Inco's stock has recently made Phelps'
offer worth about the same C$19 billion as CVRD's, and Inco has called a
special stockholder's meeting on Sept. 7.
* One of QLT's major shareholders, a private equity group, might buy
the troubled drug company for about US$669 million. However, QLT's board is
resisting the idea, wishing instead to have a massive stock buyback of
US$104 million to soak up excess cash.
* Husky Energy is to spend C$100 million upgrading its oil pipeline
between Lloydminster and Hardisty in Alberta. The project will accommodate
increased production at the Tucker Sands Oil Project and should be finished
by the fourth quarter of 2007.
* Oil finally dipped below US$70, ending at US$69.71, losing US$0.90.
Relief at the news that Tropical Storm Ernesto would not attack the
oilfields of the Gulf was mixed with concerns about the deadline tomorrow
for Iran to stop enriching uranium or face the threat of sanctions. Iran
has indicated it might try to block the Straits of Hormuz, through which
20% of the world's crude must pass.
* Gold also dropped as reports came that demand from the Middle East
recently dropped by 25%. The upcoming Indian wedding season might help make
up for the shortfall, but the US$600 threshold might be breeched soon. The
yellow metal continued to slide today, closing down US$4.80 to US$619.10.
-- 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
the right to update our reports. For more financial information at your
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SOURCE Thomson Financial Corporate Group
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