Toronto stocks fall into official bear territory

Jamie Sturgeon | Financial Post |

The bear awoke on the Canadian market yesterday as tumbling share prices lopped 2.9% off the main stock index in Toronto.

Led by heavy losses in financial stocks still reeling from the unprecedented developments on Wall Street this week, Canadian shares finished the day in official bear territory -- defined as a retrenchment of 20% or more off the last high. That was back on June 6, when soaring commodity prices propelled the S&P/TSX composite index to 15,154 points.

Since then, markets have been rocked by the loss of confidence in American banks, taking Canadian financial stocks along to finally break the bull market's back. Sun Life Financial Inc. (SLF/TSX), for example, fell to its lowest level in four years after admitting it will take a charge on its exposure to American International Group Inc. (AIG/NYSE).

Technology stocks also suffered as Nortel Networks Corp. (NT/TSX) cut its third quarter outlook due to an "expanding economic downturn." The prognosis prompted the beleaguered telecom equipment maker's shares to fall to their lowest level in a quarter century.

At the end of the carnage, the index stood at 11,877, bringing the weekly loss to more than 7% and the decline since the beginning of the month to more than 13%.

"The party probably went on a little bit too long and the TSX is going to be feeling a little bit of a hangover," Phil Flynn, senior trader at Chicago-based Alaron Trading Corp. said yesterday.

"It was one hell of a party though."

The plunge placed Canada alongside 23 other developed countries which have suffered a 20% bear market retreat this year, according to Bloomberg News.

The prospect of a sustained period of downward selling that typifies a traditional bear market holds negative implications for the broader economy, said Douglas Porter, deputy chief economist of BMO Capital Markets yesterday.

"The risk now is that with the market dropping ... it can act as a serious dampener on business confidence in this country as consumers and businesses respond to the financial turmoil."

Yet there is hope.

"It's not a normal bear market caused by normal things like earnings going down because there's a recession, or interest rates are going up so people are selling stocks so they can move money into bonds," said David Baskin, president of Toronto-based Baskin Financial.

"This is a particular situation caused by the financial abuses in the system that had to be cleaned out."

The unwinding of the financial crisis in the U. S. has shifted undue blame on Canadian banks, Mr. Baskin said.

As well, Canadian banks and insurance firms have largely avoided the financial maelstrom in the U. S., he said, and the group is on sound footing compared to its American counterparts.

Yet, with so much investor uncertainty on both sides of the border, Canadian banks alone won't be prompting a rally in stocks in the near future, Mr. Porter said.

"It would take a very brave person to say the coast is clear on that front. Sentiment will largely be driven by events south of the border."

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jasturgeon@nationalpost.com

Historic rise in stocks as U.S. rushes to banks' aid

By Jamie Sturgeon, Financial Post | 09.19.2008

The Toronto Stock Exchange roared well over 600 points on Friday as news broke that the United States federal government is orchestrating a massive plan to take on toxic assets that have wreaked havoc on the global financial system this year.

Led by a strong rebound in financial stocks, the S&P/TSX composite index had climbed 641 points or 5.5% higher to 12,708.8 by early afternoon. The Dow Jones industrial average moved more than 325 points higher to 11,347.1, while the S&P 500 was 54 points or 4.5% higher at 1,261.

"The triple-header of a proposed ... fund to buy distressed debt, a temporary ban on short sales, and a guaranty program for money market mutual funds sent all markets into a stunning U-turn," said Douglas Porter, deputy chief economist at BMO Capital Markets in an afternoon research note.

In Toronto, battered financials led the remarkable rise, as Toronto-Dominion Bank (TD/TSX) rose $4.12 or more than 7% to to $63.38 by the early afternoon. Canadian Imperial Bank of Commerce (CM/TSX) was also sharply higher, rising almost $2.82 or 4.7% to $62.50. Royal Bank shares (RY/TSX) were up $1.81 or 3.7% to $49.77, while Bank of Nova Scotia (BNS/TSX) was $2.37 or 5% higher at $49.74.

"We were overdue for a rally [but] I don't know if this is necessarily the beginning of the recovery," said John Zechner, chairman of Toronto-based money manager J. Zechner Associates Inc in an interview. "I think its going to be shaky going forward but the market was oversold on the downside.

"You needed some event to get it turned around."

Gold stocks were also lifted by the broad rise even as futures slide to their lowest level in 28 years in New York as investors poured back into equities.

Goldcorp (G/TSX) saw its shares rise by $2.21 or 7.2% to $32.65, while Barrick Gold Corp. (ABX/TSX) was up by $2.90 or 8.9% to $35.40.

No sub-indices were left behind, as other commodity stocks also soared. Potash Corp. (POT/TSX) rose by $18.50 or 11% to $185.40, while metals miner Teck Cominco Ltd. (TCK.B/TSX) rose $1.90 or 5.3% to $37.83.

Technology stock were sharply higher as well. BCE Inc. (BCE/TSX) soared over 8% to $37.45 as Scotia Capital upgraded the telecommunication giant's stock as it nears going private. Research in Motion Ltd. rose $12.50 or 13% to $109.03 as well.

Nortel gained back 18 cents a share or 6.2% to $3.08 after losing over 50% of its value just days earlier in what has been one of the most volatile weeks for stocks in memory.

The price of crude rose above US$100 a barrel on Friday as well, lifting energy giant Encana Corp. more than $2.33 or 3.3% to $74.11 in early afternoon trading. Suncor Energy Inc. (SU/TSX) was up more than $4.22 or 9.2% to $49.74.

The surge on North American exchanges follows huge gains in Asia and Europe as Markets gave a resounding endorsement to the U.S. government's actions.

U.S. Treasury Secretary Henry Paulson announced plans on Friday morning to hammer out a bipartisan legislative package by the end of the weekend that will allow the U.S. federal government to purchase asset-back securities from beleaguered banks that are at risk of failing.

Congress will likely vote on a bill sometime next week, Mr. Paulson said in speech in Washington, D.C.

Both the London FTSE 100 and French CAC 40 surged more than 8%. In Asia, the Nikkei 225 rose sharply, as did the Hang Seng index in Hong Kong.

"We may retest the lows again but this reminds me a lot of where we were in January," Mr. Zechner said. "There may be more bad news ahead, but I think the market was just overly pessimistic."

Still, there are "no iron-clad guarantees that this puts an end to the financial crisis," BMO's Mr. Porter said. "After all, there have been many false dawns before in the past year."


Financial Post

jasturgeon@nationalpost.com

News: Job gains beat expectations

Ontario, Saskatchewan help Canada create 15,000 jobs

By Jamie Sturgeon, Financial Post | 09. 05. 2008 (see article)

Two provinces helped the Canadian labour market add 15,000 new jobs in August and gain back some ground from July's steep decline, Statistics Canada said on Friday.

Saskatchewan and Ontario both added jobs in the month and partially offset losses in Nova Scotia and Manitoba, while "employment was virtually unchanged in the other provinces," the federal agency said.

The unemployment rate remained unchanged as well, at 6.1%.

The uptick was higher than many economists had forecast. Most called for a net addition of about 10,000 jobs in August after a decline of 55,000 jobs in July -- the sharpest one-month fall since February 1991.

"While not exactly a picture of robust health, the decent August job gain helps to relieve some of the sting from July's big drop," said BMO economist Doug Porter in a morning commentary.

It didn't lessen the sting of another plunge in employment in the United States, however.

The news comes as nonfarm payroll figures in the U.S. revealed that the world's largest economy shed 84,000 jobs last month.

"These results do not take away from the fact that Canada's labour market is cooling, but it certainly is not deteriorating at nearly the pace the U.S. job market is softening," Mr. Porter said.

Job gains at home in August, which could play into fall federal election campaigns, were led by a broad range of sectors.

"In August, employment increased in educational services, construction, utilities, and accommodation and food services," StatsCan said. "These gains were partially offset by decreases in health care and social assistance, agriculture and public administration."

Manufacturing managed a modest recovery in August, picking up 13,800 additional jobs across the country. The education and construction sectors had the biggest pop in new jobs, however. About 30,000 jobs were added in education.

The construction labour market grew by 7.4% or 19,000 jobs, "continuing the strength seen over the past few years," StatsCan said. Most increases took place in Ontario, British Columbia and Alberta.

The higher-than-expected job growth provided some evidence that July's plunge was an "overstatement" of weakness in the economy, according to Paul Ferley, assistant chief economist with RBC Economics.

"It also reinforces the Bank of Canada's contention ... that though the domestic economy has slowed it still remains strong," he said in a note to clients.

The central bank held its benchmark interest rate at 3% this week after stating Canada's economy was in better shape than most for the time being.

With the looming possibility of a federal election this fall that could hinge on the state of the economy, August's employment figures "took on a bit more importance," Mr. Porter said. "But the main theme is that it is a bit better than expected."

Following two months of heavy losses Ontario, a critical electoral battle ground, saw net-job additions jump by 14,000.

Still, increases in construction and several service industries were dampened by the year-long decline in manufacturing in the province, StatsCan said.

Saskatchewan added 6,000 jobs in the month, mainly in mining, oil-and-gas production and construction.

While Quebec's employment was little changed in the month, Canada's second-most populous province saw unemployment increase to 7.7% as more people entered the labour force looking for work, StatsCan said.

On the downside, the agricultural labour market retracted by almost 18,000 jobs, while health care and social assistance saw more than 21,000 jobs disappear.

Both Nova Scotia and Manitoba shed about 4,000 jobs in August.

In total, employment has increased by just 0.5% or 87,000 new jobs this year compared with the 1.3% or 221,000 jobs added through the first eight months of 2007.

"We take one-month numbers with a grain of salt given the huge standard error associated with a survey of this size," said Avery Shenfeld, economist with CIBC World Markets.

The scale of the rebound could be due to a statistical overestimate of the decline in July the CIBC economist said, given that each monthly result is only accurate to within 55,000, 19 times in 20.

"The broader picture is that Canadian employment gains since the start of the year have been soft," Mr. Shenfield said.