Energy stocks send TSX lower, oil falls for fifth day

Energy stocks send TSX lower, oil falls for fifth day; N.Y. also declines
11:12 July 7, 2009, EDT.
(Canadian Press)


TORONTO - The Toronto stock market found it tough to find footing at mid-morning on Tuesday as crude prices continued to lose ground amid demand concerns.

The S&P/TSX composite index dropped 49.1 points to 9,978.3 on top of steep losses on Monday.

The main index fell 256 points or 2.5 per cent as investors continued to react to last Thursday's much worse than expected U.S. employment report for June, which cast further doubt on an economic recovery being in place by the end of the year.

On Tuesday morning, the energy sector lost early headway to move another 0.7 per cent lower as the August crude contract on the New York Mercantile Exchange fell $1.14 to US$62.91 a barrel. Crude prices are down for a fifth day and are down almost nine per cent since the beginning of the month.

The drop in the price of crude has sent stocks falling as investors anticipate that a weaker world economy will mean less demand for energy.

Suncor Inc. (TSX:SU) declined 32 cents to $30.53.

The Canadian dollar moved down 0.03 of a cent to 86.24 cents US amid positive news from the housing sector.

Statistics Canada reported construction intentions were up 14.8 per cent from April, due to gains in both residential components and two of the three non-residential components. The value of permits surpassed the $5-billion mark in May for the first time since last October.

The TSX Venture Exchange was ahead 9.15 points to 1,073.78.

New York markets were weak.

The Dow Jones industrial average lost 63.4 points to 8,261.5. The Nasdaq composite index was down 14.19 points to 1,773.21 while the S&P 500 dipped 6.85 points to 891.85.

Investors have become more tentative in recent weeks after the market's spring rally, which sent indexes as high as about 40 per cent. Some fear they might have been too optimistic in March and April about how soon the economy might recover from the recession.

"Our view is that the economy is still in a precarious state," said Ben Halliburton, chief investment officer of Tradition Capital Management in Summit, N.J.

"The weak consumer, driven by very high unemployment, destroyed wealth and unavailable credit is going to continue to be a major drag on the U.S. economy."

Investors are also looking to Wednesday's kickoff of the U.S. second-quarter earnings season. Aluminum maker Alcoa Inc. is expected to post a second-quarter loss of 37 cents per share. In the same period a year earlier, Alcoa earned 66 cents per share on revenue of US$7.6 billion.

Elsewhere on the Toronto market, the industrials sector was down one per cent as Canadian Pacific Railroad (TSX:CP) fell $1.51 to $41.57.

The base metals sector was flat as the price of copper edged two cents lower to US$2.23 a pound.

The August bullion contract on the Nymex inched 20 cents higher to US$924.50 an ounce.

The financial sector was off 0.55 per cent. Sun Life Financial Inc. (TSX:SLF) gave back 42 cents to $29.24.

Manulife Financial Corp. (TSX:MFC) shares rose 22 cents to $19.29 after the insurance giant said Monday it would issue $1 billion in notes to boost its Tier 1 capital.

Shares in drugstore chain The Jean Coutu Group (TSX:PJC.A) were ahead 30 cents to $9.68 after the company said that quarterly net earnings came in at $10.3 million, or four cents per share, reversing year-earlier losses of $20.2 million or eight cents per share.

The profits came despite a loss of $30.9 million or 13 cents per share from its stake in Rite Aid, a U.S. drugstore business in which the company owns a stake.

In other corporate news, timber giant Weyerhaeuser, which has been losing money because of the moribund U.S. housing market, is cutting its quarterly dividend to five cents US from 25 cents.

The Federal Way, Wash., company, which lost more than US$1 billion in the last quarter, cut its dividend to 25 cents from 60 cents in December 2008.

Struggling U.S. automotive parts supplier Lear Corp. (NYSE:LEA) has filed for Chapter 11 bankruptcy protection after receiving the support it needed from lenders and bondholders.

Lear, based in Southfield, Mich., said its subsidiaries outside the U.S. and Canada are not part of the filings. The company has locations in five Ontario cities - Ajax, Kitchener, St. Thomas, Whitby and Windsor.

Thomson Reuters Corp. (TSX:TRI) has bought Streamlogics, a privately held webcasting firm. Terms of the deal for Toronto-based Streamlogics were not undisclosed. Thomson Reuters shares were off 31 cents to $33.11.



Shares in cable companies were mixed after the CRTC opened the door for a system of payments from those operators to broadcasters, known as carriage fees. The CRTC wants broadcasters and cable companies to negotiate what the payment should be. If that doesn't work, the two sides would go to arbitration. Shaw Communications (TSX:SJR.B) declined 34 cents to $18.51 while Rogers Communications (TSX:RCI.B) added four cents to $29.46.

Overseas, Japan's Nikkei 225 stock average was down 18.11 points, or 0.2 per cent, at 9,662.76.

Hong Kong's Hang Seng gained 117.67, or 0.7 per cent, to 18,097.09 as a Chinese central bank researcher said China's economy is improving and growth might top 7.5 per cent for the quarter that ended in June.

London's FTSE 100 index was up 0.38 per cent, Frankfurt's DAX was off 0.7 per cent while the Paris CAC 40 slid 0.6 per cent.

Markets Weak July Seasonal Low Volumes = Down Day

Weak open for stocks TheStar.com - Business - Weak open for stocks

July 07, 2009

THE CANADIAN PRESS

The Toronto stock market could be in for a slightly higher open following a commodity-stock led tumble as oil prices headed slightly higher.

The main TSX index fell 256 points or 2.5 per cent Monday as investors continued to react to last Thursday's much worse than expected U.S. employment report for June, which cast further doubt on an economic recovery being in place by the end of the year.

The slide was led by a retreat of almost four per cent in the energy sector as crude prices retreated for a fourth session. On Tuesday morning, the August crude contract on the New York Mercantile Exchange rose 28 cents to US$64.33 a barrel, still down sharply from last week's highs

The drop in the price of crude has sent stocks falling as investors anticipate that a weaker world economy will mean less demand for energy.

The Canadian dollar moved up 0.12 of a cent to 86.39 cents US.

New York futures pointed to a weak open, Asian stocks moved lower while European bourses made headway.

Dow Jones industrial average futures rose eight points to 8,285. Standard & Poor's 500 index futures slipped 1.6 points to 893.9, while Nasdaq 100 index futures gained 2.5 points to 1,443.5.

In Japan, the Nikkei 225 stock average was down 18.11 points, or 0.2 per cent, at 9,662.76.

Hong Kong's Hang Seng gained 117.67, or 0.7 per cent, to 18,097.09 as a Chinese central bank researcher said that China's economy is improving and growth might top 7.5 per cent for the quarter that ended in June.

Growth is benefiting from Beijing's stimulus spending and rising investment and consumption, said Zhang Jianhua, chief of the bank's research bureau, in an article in the July issue of the bank's magazine, China Finance.

London's FTSE 100 index was up 0.8 per cent, Frankfurt's DAX rose 0.77 per cent while the Paris CAC 40 added 0.18 per cent.

Other commodity prices moved higher as copper gained three cents to US$2.28 a pound while the August bullion contract on the Nymex advanced $5.20 to US$929.50 an ounce.

Toronto investors will be looking to pharmacy chain operator The Jean Coutu Group (TSX: PJC.A) at the open. The company said Tuesday that quarterly net earnings came in at $10.3 million, or four cents per share, reversing year-earlier losses of $20.2 million or eight cents per share.

The profits came despite a loss of $30.9 million or 13 cents per share from its stake in Rite Aid, a U.S. drugstore business in which the company owns a stake.

In other corporate news, struggling U.S. automotive parts supplier Lear Corp. (NYSE: LEA) has filed for Chapter 11 bankruptcy protection after receiving the support it needed from lenders and bondholders.

Lear, based in Southfield, Mich., said its subsidiaries outside the U.S. and Canada are not part of the filings. The company has locations in five Ontario cities – Ajax, Kitchener, St. Thomas, Whitby and Windsor.

Manulife Financial Corp. (TSX: MFC) said Monday it would issue $1 billion in notes to boost its Tier 1 capital. The insurance company said the interest rate on the notes, which will be due Dec. 31, 2108, will be fixed at 7.405 per cent per year and starting on Dec. 31, 2019, and on every fifth anniversary after that, will be reset.

Thomson Reuters Corp. (TSX: TRI) has bought Streamlogics, a privately held webcasting firm. Terms of the deal for Toronto-based Streamlogics were not undisclosed.

Investors are also looking to Wednesday's kickoff of the U.S. second quarter earnings season. Aluminum maker Alcoa Inc. is expected to post a second-quarter loss of 37 cents per share. In the same period a year earlier, Alcoa earned 66 cents per share on revenue of US$7.6 billion.

08:51ET 07-07-09

TSX plunges as commodity prices fall

TSX plunges as commodity prices fall


FINANCIAL POSTJULY 6, 2009


Stocks around the world fell Monday largely on skepticism over prospects for an economic recovery any time soon, and the Toronto Stock Exchange fell exceptionally hard as commodity stocks were down in line with resource prices.

The S&P/TSX composite index at midday was down about 305 points, or 2.9 per cent, at 9,980, with energy, materials and financials leading the decline.

On the New York Mercantile Exchange, crude oil was down $2.53 to $64.20 U.S. a barrel. Gold was off $8 to $923 U.S. an ounce. A number of other commodity prices, including natural gas and copper, were also in decline.

The Canadian dollar was up four basis points to 86.12 cents U.S..

Companies will soon be reporting earnings from the second quarter, and there expectations for big profitability declines.

Also, comments over the weekend by U.S. Vice-President Joe Biden indicated the Obama administration "misread the economy" when it predicted unemployment in that country would peak at eight per cent. Last week, it was learned that the jobless rate hit 9.5 per cent in June.

U.S. markets were down as well Monday by midday, but not to the degree as in Canada. The Dow Jones industrial average fell about 30 points, or 0.4 per cent, to 8,230. The Nasdaq composite index was down around 25 points, or 1.3 per cent, to 1,775.

Overseas markets also fell Monday.

On Friday, the S&P/TSX ended the day up 37.19 points or 0.36 per cent, to close at 10,283.1. Markets were closed in the U.S. in lieu of Independence Day.

© Copyright (c) The Calgary Herald

PDP Technicals Alert To Buy Now, During The Cone Of Silence Period

How do you spend $2-trillion (U.S.)? Very slowly.

Karim Bardeesy

Globe and Mail Update Last updated on Saturday, Jul. 04, 2009 04:13AM EDT

How do you spend $2-trillion (U.S.)? Very slowly.

China's massive foreign currency reserves place it in an enviable position compared with other debt-ridden, import-dependent economies. But China's economy has slowed, it is worried about a depreciating U.S. dollar, and its trading partners are irritated that the country is keeping its own currency, the yuan, undervalued. So China is starting to move its $2-trillion in currency reserve savings – of which around two-thirds are denominated in U.S. dollars – into the real economy.

That's easier said than done. And it's not always in China's interests to do so.

China Investment Corp.'s (CIC) purchase of a 17.2-per-cent stake in Teck Resources Ltd. for $1.74-billion (Canadian) is just one in a series of recent investments by Chinese-run companies in foreign commodity producers. The deal comes just a week after Sinopec, China's largest oil refiner, agreed to buy Toronto-listed Addax Petroleum Corp. for $7.24-billion.

CIC manages only about one-10th of China's foreign assets. The biggest player is the People's Bank of China, the country's central bank.

China's holdings are so large – the next largest holder of foreign currency reserves, Japan, has around $1-trillion (U.S.) – that any moves it makes will have an impact on global markets. That's why, as much as it may want to diversify, it can't afford to do it quickly.

“It's a sort of financial Catch-22. They want to sell their U.S. dollars, but doing so reduces its value,” said Randall Morck of the University of Alberta.

Zhou Xiaochuan, head of China's central bank, wrote last week that the country is looking for a new global “reserve” currency that is more stable in the long term than the U.S. dollar. That would increase the bank's confidence that it can start safely shedding some of its foreign reserve holdings like U.S. Treasury bills with minuscule yields.

“There is an increasing suggestion from the government and Chinese think tanks to diversify [reserves] into equity investments. They want safety, but they also want a reasonable rate of return,” said Kenny Zhang of the Asia-Pacific Foundation, a think tank based in Vancouver.It's hard for the central bank to invest directly in companies. It can increase Chinese investment abroad and decrease reserves by facilitating lending to its major commercial banks and cutting interest rates.

There's also a way to unlock money by spending it at home. The Chinese savings rate has been very high of late – standing at 54.4 per cent of gross domestic product in 2006. The government has introduced a $586-billion stimulus package to spur the domestic economy. This inward focus can increase the appetite for foreign acquisitions.

“The Chinese are concerned about the future availability of various minerals and oil for their economy. They are attempting to lock in secure supplies by buying stakes in resource companies everywhere,” Prof. Morck said.

The country is diversifying, but slowly. The U.S. government reported in April that despite a record trade surplus for China of $114.3-billion in the fourth quarter of last year, China's foreign reserves grew by only $40.4-billion – suggesting that it was deploying some of its excess reserves abroad.

But it would take a lot of $1.7-billion deals, even if that's large to recipients like Teck, to make a major dent in China's stash of greenbacks.

TECK:$1.74-billion deal provides cash-strapped Tech

China's hunger for resources bolsters Teck

Donald Lindsay, president and chief executive officer of Teck Resources in his office on Burrard Street in Vancouver.

$1.74-billion deal provides cash-strapped Canadian firm with strategic partnership

China's unyielding appetite for commodities pushed Teck Resources Ltd. (TCK.B-T19.991.498.05%) and its CEO Don Lindsay into a near-death debt fiasco. Now, the Asian economic superpower is digging them out.

In May of 2008, Mr. Lindsay led a group of Teck directors to Shanghai where they witnessed China's economic explosion in full swing. The board members were so awed by the building boom they became converts to the notion that Chinese metals demand would remain strong for years to come.

Weeks later, they gave Mr. Lindsay the green light to go ahead with the $14-billion (Canadian) acquisition of Fording Coal – the top-of-the-market takeover that would leave Teck drowning in $9.8-billion (U.S.) in debt as the global economy collapsed.

Yesterday, China came to Teck's rescue, the final step in the copper, coal and zinc miner's self-titled “12-step plan” to kick its leverage problem and repair its balance sheet.

Teck unveiled a $1.74-billion (Canadian) private stock sale that will give China a 17.2-per-cent stake in Canada's largest base metals company.

The deal, struck with the hulking $200-billion (U.S.) sovereign wealth fund China Investment Corp. (CIC), will provide Teck with sorely needed cash to largely eliminate its crushing short-term debt load and a strategic partnership with the world's dominant commodity buyer.

“If you think about the market for our core products, China is obviously the single most important country by far in terms of demand. So getting a Chinese strategic investor was top of the list,” Mr. Lindsay said.

The Teck CEO expects CIC will help his company increase its coal sales to China, a key pillar in the company's strategic plan. Mr. Lindsay also said that China may help Teck fund development projects including a pair of its copper mines in Chile. Teck is also a partner in the Fort Hills oil sands project in Alberta that has suffered from staggering cost inflation and China could help Teck fund its share of the project.

As the world economy has slipped deeper into recession and crimped metals demand, China has moved aggressively to buy resource assets and secure access to copper, oil, iron ore and coal.

Despite the recent collapse of state-controlled Aluminum Corp. of China's (Chinalco) proposed $19.5-billion (U.S.) investment in Rio Tinto PLC (another miner riddled with debt as a result of a top-of-the-market takeover), China's Commerce Ministry said earlier this month that it will continue with its so-called “go abroad” investment policy.

Through various state entities, China has plowed billions into resources in the past eight months, including oil in West Africa and Iraq, zinc in Australia and iron ore in Canada. With the vast majority of its holdings in U.S. dollar-backed investments, China is looking for diversification with the resource deals.

“They are a deep-pocketed partner. I don't know if they are the deepest pocket in the world but it is pretty close … they are clearly shifting out of U.S. Treasuries into hard assets. This is just one step in that,” Mr. Lindsay said.

Several international mining firms were interested in taking a similar size stake in Teck but were rejected in favour of CIC and China. Mr. Lindsay believes the rival miners were interested in the stock as a precursor to a takeover. “That was something that was never going to be on the table,” he said.

CIC intends to be a “long-term passive financial investor” and will not take a seat on the board. The deal underscores China's expectation of continued demand for metals and Teck expects to tap its new partner for insight into the state of the Chinese economy.

CIC chairman and CEO Lou Jiwei, who signed the deal for CIC this week, is a member of China's government cabinet.

“We addressed him as ‘your Excellency.' He's one of the key people in the country,” Mr. Lindsay said.

Despite shareholder dilution, analysts and investors generally applauded the proposed transaction that will give CIC a 6.7-per-cent voting interest in Teck. The company's class B shares jumped 8 per cent yesterday on the TSX. Once the transaction is completed, the company's A class shareholders, which are dominated by the family of Teck chairman Norman Keevil and Japan's Sumitomo Metal Mining Co. Ltd., will hold a 61.8-per-cent voting interest down from 66 per cent.

In a report to clients, BMO Nesbitt Burns analyst Tony Robson said he was “surprised” by the CIC deal as Teck had previously stated it wasn't planning an equity issue.

However, the analyst viewed the transaction as positive because of the $1.5-billion in proceeds from the stock sale that Teck intends to put toward debt reduction.

“With recent asset sales, today's move has done much to correct the former severely weakened balance sheet,” Mr. Robson said in the report.

The CIC deal marks the final hurdle in an aggressive debt reduction plan hatched by Mr. Lindsay and other Teck executives at the depths of the market meltdown last November.

Teck has cut its dividend, laid off workers, sold $1.5-billion (U.S.) in assets, restructured its loans, cut capital spending and issued $4.2-billion (U.S.) in junk bonds to raise cash to reduce the loans from the Fording deal.

A former investment banker, Mr. Lindsay said he scribbled down the 12 steps comprising the plan on a note pad that is still sitting on the desk in his Vancouver home office.

“All along this was the last step. We hoped to get this strategic partnership with China and we did. So a lot of us are going on vacation now.”

B.C. pipeline bombed for sixth time EnCana spokeswoman confirms bomb went off early Saturday morning, less than a kilometre from site of Thursday's e

For the sixth time in nine months, and the second time in three days, a bomb has exploded near EnCana's natural gas pipeline in northeastern British Columbia.

The blast early Saturday morning took place less than a kilometre from where EnCana workers were trying to cap a gas well damaged in an explosion Thursday.

“Our crews were at the wellhead site, where they were working to stop the gas leak,” EnCana spokeswoman Rhona DelFrari said from Calgary.

“Around 2:30 in the morning they heard a loud bang, so they immediately went to the spot where they thought it was and that's where they discovered the explosion at the pipeline.”

The Mounties are labelling the bombings as domestic terrorism and have flown in a unit of its Integrated National Security Enforcement Team to investigate.

RCMP spokesman Corporal Dan Moskaluk said the EnCana crew, as well as a nearby resident, reported the explosion.

The blast caused a brief leak of potentially toxic sour gas but the pipeline's control system sensed the drop in pressure and triggered emergency shutdown valves to isolate that portion of the line.

It's not clear whether the EnCana repair crew was downwind of the leak but Cpl. Moskaluk said no one was hurt.

Some nearby residents evacuated their homes when they heard the blast, said Ms. DelFrari, but it was unnecessary.

The small amount of leaked sour gas dissipated instantly, she said, and tests of the air showed no signs of hydrogen sulphide, which can kill in small quantities.

“So there was no risk to the public,” said Ms. DelFrari.

It's the sixth bombing against EnCana gas-transmission facilities since October.

The bombings have all taken place along a 15-to-20-kilometre stretch of the pipeline near Pouce Coupe, just south of Dawson Creek on the B.C.-Alberta border about 1,050 kilometres northeast of Vancouver.

The string of unsolved bombings has left Pouce Coupe, which has less than 800 residents, edgy and suspicious.

“This is an attack on the entire community now,” said Ms. DelFrari. “This isn't just an attack on EnCana as a corporation. This person is putting everyone's lives in risk right now.”

Police suspect the bomber is someone who has a grudge against EnCana and who perhaps lives in the area.

The attacks began with three bombings shortly after a letter was sent to a Dawson Creek newspaper and to EnCana. It labelled oil and gas companies terrorists and demanded EnCana stop natural gas development in the area.

There was another explosion in January, then none until this week.

Most have targeted wells or pipelines carrying sour gas.

Cpl. Moskaluk said though no one has been hurt yet, the bombings have created stress in Pouce Coupe, as well as nearby Dawson Creek, which depends economically on energy development.

“Many have been questioned, many have been brought in for interviews,” he said.

“They're all looking at one another. You can imagine how that's eating away at people.”

Cpl. Moskaluk said police won't be releasing information on the type of explosives used or the bombs' construction. He could not say if the latest bomb had been planted before or after Thursday's blast.

He said police hope this sixth attack will trigger some tips to help them catch the bomber.

I think if somebody comes forward then I think there's a little bit of strength in numbers,” said Cpl. Moskaluk.

EnCana has offered a $500,000 reward for information and set up a special phone line for the bomber to call them but so far it hasn't rung.

Meanwhile, EnCana is maintaining bolstered, 24-hour security along the pipeline. But Ms. DelFrari admitted there's no way to ensure the bomber doesn't strike again.

“Let's face it, it's hard to patrol hundreds of kilometres of pipeline and we have about 150 wells in the Dawson area,” she said.