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| Market News: News Archive : Morning News Call Week ending |
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Jan 22, 2010
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FRIDAY, JANUARY 22, 2010, CANADIAN EDITION
TOP NEWS
• GE Q4 profit tops analysts' estimates
• VietinBank to sell shares to IFC, Nova Scotia - report
• Johnson Controls posts Q1 profit, raises outlook
• Air Products Q1 profit more than triples
• Schlumberger Q4 profit tops Wall St view
BEFORE THE BELL
Toronto's main stock index could open lower on Friday as weakness in global stocks and commodity prices weigh on the resource-laden market. Wall Street is set for a lower open as President Barack Obama's proposed sweeping restrictions on banks and the delayed confirmation of Fed Chairman Ben Bernanke put investors on the defensive after a 10-month rally. European shares fell, extending losses to the third-straight session, as banking shares weighed. Asian stock markets fell, with Japan's Nikkei average sliding 2.6 percent to a three-week closing low. Oil fell below US$76 a barrel and gold steadied around US$1092.55 an ounce.
STOCKS TO WATCH THIS MORNING
• Bank of Nova Scotia (BNS). The bank and the International Finance Corporation, the World Bank's private sector lending arm, have won Vietnamese government approval to buy shares in VietinBank, the official Vietnam News Agency reported on Friday.
• Canaco Resources Inc. (CAN). The company said on Thursday it entered into a letter of intent with Beijing Donia Resources Co Ltd to acquire copper-gold exploration assets in Ethiopia for $6 million.
• Premium Brands Holdings Corp. (PBH). The company said on Friday it acquired South Seas Meats Ltd, a Vancouver-based meat distributor, for about $2.1 million and expects the deal to add to its 2010 earnings.
• TVI Pacific Inc. (TVI). The company on Friday said it reduced its overall debt facility by 46 percent. The company added it reduced five year debt facility form US$30.1 million to US$16.2 million in less than an year.
• WestJet Airlines Ltd. (WJA). The Canada's No. 2 carrier is encouraged by early signs of economic recovery, but said on Thursday that caution remains a key component of its strategy. A $962 million cash reserve, plumped up with a $166 million equity raise, helps reduce risk, but the no-frills airline will work at conserving funds, cutting costs and managing capacity.
ECONOMIC CALENDAR
08:30 Retail sales for Nov: Prior 0.8% Expected -0.2%
08:30 Retail sales ex-autos for Nov: Prior 0.2% Expected 0.5%
ANALYST RECOMMENDATION
• ADF Group Inc. (DRX) rating started with outperform; price target of $4 at Raymond James
• Calfrac Well (CFW) rating raised to outperform from market perform at Raymond James
• Canyon Services (FRC) rating raised to strong buy from outperform at Raymond James
• Domtar Corp. (UFS) rating raised to outperform from market perform at Raymond James
• Inmet Mining (IMN) price target cut to $95 from $100; rating outperform at Raymond James
• Nal Oil & Gas Trust (NAE_u) rating cut to market perform from outperform at Raymond James
• Russel Metals (RUS) rating started with market perform; price target of $18 at Raymond James
EXDIVIDEND
• Cogeco Cable Inc. (CCA). Amount $0.14
• Cogeco Inc. (CGO). Amount $0.10
• Royal Bank of Canada (RY). Amount $0.50
• Utility Corp. (UTCc). Amount $0.065
Note: All values in Canadian currency, unless otherwise stated
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INSIGHT
Wall St's rout seen as onset of correction
The sharp slide in U.S. stocks this week portends more trouble for Wall Street in the days ahead as investors worry if the recent rally is sustainable.
With major indexes breaching key technical support levels on Wednesday, market technicians said Wall Street was likely to see the onset of a long-anticipated correction following a 70 percent run-up in the benchmark S&P 500 from March 2009.
"This is the beginning of a correction. It's been brewing for months," said John Kosar, market technician and president of Asbury Research in Chicago. "There's more risk on the downside than opportunity on the upside here until we get a correction."
Besides grappling with a deteriorating technical picture, Wall Street is also starting the new year with an even less reassuring fundamental picture as the Obama administration pushes to limit banks' risk-taking.
Additionally, there are concerns that China, the world's third-largest economy, risks derailing the nascent global economic recovery by tightening lending too soon to prevent its economy from overheating.
Disappointing 2010 corporate outlooks have added to the negative tone, eclipsing far rosier fourth-quarter earnings thus far.
According to Kosar, the latest downdraft could potentially drive the S&P 500 to 1,100-1,084, a level which should potentially spur new buying. But if the buying failed to materialize, the index could then head down 10 percent or more from the recent high.
"The market is overextended by almost every metric that we look at, which makes it vulnerable to some kind of a pullback, and more than one that will last two days," added Kosar.
Sector leadership has also become an issue as both financials and technology shares falter after underpinning the recent rally. As is traditionally the case, investors tend to get off the fastest horses first when the going gets tough.
Bellwether International Business Machines Corp is a case in point. Despite beating analysts' profit forecasts, IBM shares were pummeled.
Intel Corp's upbeat 2010 gross margin forecast of last week provided little comfort, and investors sent the chipmaker's stock down.
So without leadership, analysts see the stock market more vulnerable, particularly with the pace of earnings announcements set to go into high gear in the coming weeks and the risk of disappointments set to rise.
"I have been picking up negative divergences for the last month and half in breadth, in volume, leadership and rotation," said John Schlitz, chief market technician at Instinet in New York. "The stocks that took us to new highs last week were the garbage stocks when all the other stuff was starting to fade."
The developments that underscored the precariousness of the stock market's technical picture on Wednesday included a surge back above 20 in the CBOE Volatility index, Wall Street's gauge of sentiment.
Just last week the VIX had traded as lows as 16.86 -- a 19-month low -- spurring some concern that bullish sentiment may have gone to one extreme.
But even more alarming, the Dow Jones industrial average finished Wednesday below its 50-day moving average for the first time since October when the stock market made an abortive attempt to correct.
To be sure, nearly every apparent correction since July has proven to be short-lived, with buyers quickly coming in to bid beaten-down shares higher. This time, though, could it be any different? Bulls will certainly hope so.
"Everybody wants to know if this is the start of the long overdue 10 percent correction. What I am saying is I don't have enough evidence to say that yet. Right now we've broken out of a very minor two-week top," said Schlitz at Instinet.
Both the Dow and the S&P 500 have lost 3 percent since Wednesday, backing off from their 15-month closing highs of the day before.
--- Ellis Mnyandu, Reuters
About Thomson Reuters: The unique insights of Thomson Reuters drive productivity and performance by helping our clients generate investment and business ideas, gain fresh perspectives on the markets, and, ultimately, make more money.
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This publication is not, nor is it to be construed as, a solicitation or recommendation to investors to purchase, sell or hold any of the securities referred to in this publication. Global Securities Corporation is a member of the Canadian Investor Protection Fund
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Jan 21, 2010
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THURSDAY, JANUARY 21, 2010, CANADIAN EDITION
TOP NEWS
• Viterra posts small Q4 loss
• MDS posts narrower prelim Q4 loss
• Xerox posts better-than-expected Q4 profit
• UnitedHealth Q4 profit tops Wall St views
• PNC posts Q4 profit; loan losses decline
BEFORE THE BELL
Toronto's main stock index may open flat on Thursday, as oil recovers but weak gold prices is seen offsetting gains. On the macro front, wholesale trade for November is expected to rise 0.3 percent, according to a Reuters poll. Investors will also track Wall Street, which is set for a higher open, ahead of a slew of corporate results including Google. European shares were up paring early losses while Asian shares were mixed, with Nikkei gaining on positive sentiment for tech stocks. Oil shed early losses to trade around US$78 a barrel while gold fell towards US$1100 an ounce.
STOCKS TO WATCH THIS MORNING
• Gale Force Petroleum Inc. (GFP). The company said on Wednesday shareholders approved a consolidation common shares on the basis of one new share for fifty old shares, and the company's would remain suspended from trading until TSX approves application for reinstatement to trading.
• Genco Resources Ltd. (GGC). The company said on Wednesday it would restart production at La Guitarra Mine in Mexico and added with the exception of some flooding in the San Rafael Mine which is now being addressed, the infrastructure is in good condition.
• Husky Energy Inc. (HSE). The integrated oil company and BP Plc are ready to proceed with their $2.5 billion Sunrise oil sands project, the partners said on Wednesday, after cutting costs for the development by more than $1 billion.
• Inmet Mining Corp. (IMN). The company said on Wednesday it expects copper and zinc production to be higher than 2009 levels but forecast gold production to be lower as production will end at troilus mid-year. The company's fourth-quarter copper production was 3,300 tonnes.
• Kinross Gold (K). The company said on Wednesday it has agreed to acquire the Dvoinoye gold deposit and Vodorazdelnaya gold property in eastern Russia for US$368 million, expanding the Canadian company's presence near its huge Kupol mine.
• MDS Inc. (MDS). The health sciences company reported a smaller fourth-quarter loss on Thursday as it narrows its focus to nuclear imaging and the company added CFO Doug Prince is expected to leave the company in March 2010.
• Quebecor Inc. (QBRa). The media and publishing group said on Wednesday its Videotron cable company expects to hire more than 600 staff by the end of 2010 as it readies to roll out a wireless network.
• SouthGobi Energy Resources Ltd. (SGQ). The coal miner said on Thursday it would offer 27 million shares priced at $17 each.
• Strateco Resources Inc. (RSC). The company on Wednesday said it plans to raise about $15 million through a private placement with independent equity fund Sentient Group to finance its Matoush uranium project in Quebec's Otish mountains.
• SunOpta Inc. (SOY). The company's unit BioProcess signed contract with major ethanol producer in China, which is expected to generate revenue of about $6.5 million from supply of equipment and a technology license.
• Superior Plus Corp. (SPB). The propane distributor said on Wednesday it will raise about $60 million through a bought deal to repay debt related to its purchase of Griffith Holdings Inc.
• Viterra Inc. (VT). The grain handler posted a small fourth-quarter loss on Thursday as the company grappled with weak fertilizer margins and declining commodity prices. Separately, the company said it intended to reduce the short-term debt of its Australian operations by $300 million in an attempt to lower its interest expenses.
ECONOMIC CALENDAR
08:30 Wholesale trade mm for Nov: Prior 0.3% Expected 0.3%
CORPORATE EVENT S
08:00 Viterra Inc. (VT). Q4 earnings conference call
09:30 MDS Inc. (MDS). Q4 earnings conference call
ANALYST RECOMMENDATION
• Amerigo (ARG) price target raised to $1.10 from $1; rating market perform at Raymond James
• Anvil Mining (AVM) price target raised to $5.50 from $5; rating outperform at Raymond James
• Baffinland (BIM) price target raised to $0.75 from $0.60; rating market perform at Raymond James
• Bombardier (BBDb) started with outperform rating; price target of $7 at CI Capital
• First Uranium (FIU) rating cut to market perform from outperform at Raymond James
• Inmet Mining (IMN) rating cut to sector perform from outperform at RBC
• Ivanhoe Mines (IVN) price target raised to $8.50 from $8; rating underperform at Raymond James
• Lumina Copper (LCC) rating raised to strong buy from outperform at Raymond James
EXDIVIDEND
• Iroc Energy Services Corp. (ISC). Amount $0.02
• Sceptre Investment Counsel (SZ). Amount $0.06
Note: All values in Canadian currency, unless otherwise stated
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INSIGHT
Google/China spat may hurt Motorola's Android push
Google Inc's threat to exit China could create a big headache for its cellphone partners, especially Motorola Inc, which has bet its turnaround on Google's mobile software and China.
The possible withdrawal of Google from the world's most populous country could also provide new growth opportunities for Nokia and Apple Inc in phone sales, and for Microsoft Inc in Web search, analysts said.
Google said on Tuesday it postponed the China launch of two phones running its Android mobile software, one made by Motorola and one by Samsung Electronics Co Ltd. This came after Google said last week that it and other companies were targets of cyber-spying from China, and that Google would no longer accept censoring of search results on the Chinese google.cn search site.
Many analysts say a Google China exit may hurt sales of Android phones, which are also being built by several Chinese firms including ZTE Corp and Huawei. Motorola, which is banking on Android to revitalize a flagging cellphone unit, could be hurt the most.
"Motorola has made China and the U.S. the two markets it's focusing most closely on, and it's placed a big bet on Android," said Current Analysis analyst Avi Greengart.
Morgan Stanley analyst Ehud Gelblum wrote in a research note that he was cutting his current quarter estimates for Motorola's Android phone sales by half a million to 1.5 million due to uncertainty around its ability to ship phones in China.
BMO Capital Markets analyst Tim Long estimates that Motorola sells about 10 percent of its phones in China, where it announced plans this month to sell two Android phone models. Motorola had said, before news of the delay, that it would sell five or six smartphones for China this year.
Long sees China becoming increasingly important for mobile growth, though less than 5 percent of phones sold there are smartphones, versus roughly a quarter in the United States.
"It's certainly something (Motorola's) going to need this year and into 2011," he said.
Motorola declined to give details about the product delay except to say it is working closely with China's network operators to bring out a wide range of devices there.
NOKIA, BAIDU MAY BENEFIT
Long noted that a postponement for even a matter of months could help Android rivals such as Nokia -- already strong in China -- to improve phone sales there.
The disagreement could also help Microsoft make inroads into China's mobile market, the largest in the world. Some analysts are skeptical, however, as Microsoft's mobile system has lost some of its luster, with more handset makers choosing Android.
Microsoft could have better luck getting its Bing search engine on rival phones like Android in China.
According to a BusinessWeek report, Apple is considering using Bing instead of Google as the default search engine on the iPhone, a move that would reflect the growing rivalry between Apple and Google.
If Google does leave China, Avian Securities analyst Matthew Thornton said Chinese search firms like Baidu may have a better chance of usurping Google's mobile search than Microsoft.
"It's probably a big opportunity for some of the local search guys," he said.
Last year Baidu had a 33.7 percent share of mobile web search page views versus Google's 19.5 percent share, according to second quarter research.
However, some analysts played down the impact on Android even if Google exits search in China. Since Android is an open source system, phone makers could keep selling Android phones there -- just without Google's map, email and search services.
Though these services have been key to attracting U.S. mobile users to Android, in China -- where Google is less dominant -- a nice user interface could be enough to keep Android relevant.
"Even if Google pulls out, the Android platform and the Android brand will still be in China," said Zhang Yanan, an analyst with Beijing's Analysys International.
"If they were to leave, it may be a short-term boost for players like Apple as China users won't have access to many of the applications or Google functions on the Android platform."
However, growth for phones from rivals such as Apple and BlackBerry maker Research In Motion could be curtailed by high prices, something which Chinese consumers have been sensitive to so far, according to analysts.
Even if some phones are canceled, some analysts are reassured by existing commitments from China Mobile and China Telecom to sell Motorola's Android phones.
"This is clearly a negative for Motorola if Google's decision to 'delay' turns into 'cancel,' but probably only impacts the minority of Motorola's China opportunity in the near term," Morgan Keegan analyst Tavis McCourt said.
Another analyst, Elinor Leung of Hong Kong based CLSA, said China Mobile would likely have to reexamine its mobile search partnership with Google if it pulls out of local search.
Google's surprise announcement also raises concerns about its predictability as a business partner since just this month it launched direct phone sales out of the blue, catching some partners unaware, said Deutsche Bank analyst Brian Modoff.
"None of this helps selling Android phones in China."
--- Sinead Carew and Melanie Lee, Reuters
About Thomson Reuters: The unique insights of Thomson Reuters drive productivity and performance by helping our clients generate investment and business ideas, gain fresh perspectives on the markets, and, ultimately, make more money.
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This publication is not, nor is it to be construed as, a solicitation or recommendation to investors to purchase, sell or hold any of the securities referred to in this publication. Global Securities Corporation is a member of the Canadian Investor Protection Fund
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Jan 20, 2010
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WEDNESDAY, JANUARY 20, 2010, CANADIAN EDITION
TOP NEWS
• BofA posts Q4 loss on credit costs, TARP
• Canada inflation hits 10-month high on gasoline
• China leans on banks to curb lending, stocks drop
• JPMorgan in exclusive talks on RBS Sempra - report
• U.S. Bancorp Q4 profit jumps on fee business
• Manitoba Telecom told to pay $43 mln in pension suit
BEFORE THE BELL
Toronto's main stock index could open lower on Wednesday, following a drop in global markets after reports of bank lending restrictions in China and disappointing result from Bank of America. Markets will weigh Statistics Canada's report which said higher gasoline prices pushed annual inflation rate to a 10-month high in December, which was still below market expectations, and inflation was in the lower end of the Bank of Canada's target range of 1 percent to 3 percent. Energy and mining stocks would also be pressured as oil and gold prices remained weak. Wall Street is set for a lower open as earnings reports from a host of U.S. banks increased uneasiness about the state of financial companies. European shares fell from 15-month closing highs with miners dragging on the index. Asian stocks were also down after move by Beijing to curb bank lending. Oil fell below US$78 a barrel, pressured partly by stronger dollar and expectations that U.S. refiners processed less crude in the latest week. Platinum retreated from a 17-month high and gold slipped to US$1128.70 an ounce.
STOCKS TO WATCH THIS MORNING
• Advantage Oil and Gas Ltd. (AAV). The company on Tuesday forecast corporate production to average 24,200 to 25,200 boe/d for the first half of the year, with capital expenditure estimated to about $110 million.
• Alexco Resource Corp. (AXR). The company announced an equity offering, which would be co-lead by Canaccord Financial Ltd and Cormark Securities Inc, and intends to use the net proceeds of the offering at the Bellekeno mine. The company said final terms of the offering to be detremined at the time of pricing.
• Chartwell Technology Inc. (CWH). The company said on Tuesday it appointed Daniel Phillips as CEO of Chartwell Games (international) Ltd.
• ConjuChem Biotechnologies Inc. (CJB). The company said on Tuesday it is evaluating strategic alternatives, which include selling of the company or a substantial part of its assets.
• First Uranium Corp. (FIU). The company said on Tuesday Environmental Authorization unexpectedly withdrew from its MWS future tailings storage facility, without notifying the company, and it is seeking clarification.
• Gluskin Sheff Associates Inc. (GS). The wealth manager said on Tuesday assets under management was about $5.3 billion, as of December 31.
• Manitoba Telecom Services Inc. (MBT). The communication provider said on Wednesday a court ruled that the company make a $43 million one-time payment in a pension lawsuit, and said this could lead to a one-time future payment totaling $100 million.
• Rogers Communications (RCIb). The wireless carrier said on Tuesday that it was cutting jobs and programs at its Citytv stations across Canada as the recession and the drop in advertising revenues squeeze broadcasters and publishers.
• Silver Standard Resources Inc. (SSO). The company said on Tuesday its CEO and president, Robert Quartermain, resigned and Michael Anglin would take Quartermain place for an interim period.
• The Bank of Nova Scotia (BNS). The company on Tuesday sold $2.5 billion of notes in two parts, said IFR, a Thomson Reuters service.
• Webtech Wireless Inc. (WEW). The provider of vehicle fleet said on Tuesday it sold InterFleet and NextBus and Fleet Management Solution to North American municipal government agencies.
• Wi-LAN Inc. (WIN). The technology licensing on Tuesday said it sued LG Electronics and its U.S. unit for fraud and breach of contract relating to a certain license agreement. Wi-LAN said its claim, filed in the U.S. District Court Southern District of New York, is related to LG's failure to pay Wi-LAN as per an earlier signed license agreement and for infringement of its V-Chip technology.
ECONOMIC CALENDAR
08:30 Manufacturing sales for Nov: Prior 2.0% Expected 0.6%
ANALYST RECOMMENDATION
• Advantage (AAV) price target raised to $8.50 from $8.25; rating outperform at Raymond James
• Anatolia Minerals (ANO) price target raised to $5.30 from $4.30; rating outperform at Raymond James
• Crocotta Energy Inc. (CTA) rating raised to outperform from market perform at Raymond James
• FNX Mining Co. (FNX) price target raised to $16 from $14; rating buy at UBS
• Talisman Energy (TLM) price target raised by $1 to $24; rating overweight at Barclays
• Teck Resources (TCKb) price target raised to $48 from $41; rating buy at UBS
EXDIVIDEND
• Jean Coutu Group (PJCa). Amount $0.045
• Lifeco Split Corp. (LSC). Amount $0.11
• Macquarie Nexgen Gbl Ifra Corp. (MNF). Amount $0.03
• Opmedic Group Inc. (OMG). Amount $0.015
Note: All values in Canadian currency, unless otherwise stated
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INSIGHT
Obama's job just got a lot harder
President Barack Obama's tough job just got a lot tougher.
Massachusetts voters fired off a modern-day "shot heard 'round the world" on Tuesday by doing what Democrats considered heresy -- electing a Republican to the Senate seat left open by the death last August of liberal lion Edward Kennedy.
The shock outcome in the special election spelled trouble for Democrats -- making it a sour first anniversary on Wednesday of the day Obama took power with high hopes and dreams.
Suddenly, the ambitious domestic agenda Obama sketched out that day is in jeopardy -- starting with a U.S. healthcare overhaul championed by Kennedy and extending to Democratic plans on energy and immigration.
It rang alarm bells for Democrats facing re-election in congressional elections come November and under pressure to create jobs in the weak U.S. economy as Republicans plot a comeback from losses in 2006 and 2008.
"This is further affirmation that Democrats are in deep trouble in the November 2010 elections," said Andy Smith, a political science professor at the University of New Hampshire.
ANGST AND ANGER
Linda Fowler, a professor of government at Dartmouth College, said the vote reflected economic angst and populist anger at bank bailouts.
There were long faces at the White House at the victory by Republican state Senator Scott Brown, who has vowed to give Senate Republicans the vote they need to help block Obama's top legislative priority, healthcare.
If Massachusetts voters were trying to send Democrats a message of concern about the healthcare bill, some Democratic congressional leaders did not appear to be listening.
Democrats who control 60 votes in the Senate -- a supermajority able to prevent delaying tactics by outnumbered Republicans -- were considering strong-arm tactics to push healthcare through.
"We will have a healthcare reform bill, and it will be soon," House of Representatives Speaker Nancy Pelosi told reporters.
But some Democrats argued that peril would ensue if the Massachusetts outcome was ignored by the party's leaders.
All 435 House seats and about a third of the 100 Senate seats will be up for election in November. The party in power usually loses seats in the first election after a new president takes office.
"There's going to be a tendency on the part of our people to be in denial about all this," Senator Evan Bayh told ABC News, but "if you lose Massachusetts and that's not a wake-up call, there's no hope of waking up."
OUT OF NOWHERE
The fact that Brown came out of nowhere to defeat Democratic state Attorney General Martha Coakley rankled Democrats who were quick to point fingers at Coakley for what they called a bungled campaign.
Among her sins: Acting as if she were entitled and appearing out of touch with the people.
"You have a candidate who took the election for granted, who waited too long to make a real argument," Democratic strategist Bob Shrum said on MSNBC.
It was not lost on White House officials that voters in Massachusetts were expressing frustration with the country's 10 percent jobless rate. Obama was expected to pivot quickly to a focus on jobs.
"The president understands that there is frustration out there and is frustrated himself," said White House spokesman Robert Gibbs.
Obama's losing streak is now at three -- he was unable to save Democrats who lost in governors' races last November in Virginia and New Jersey.
He was only invited to campaign on Coakley's behalf late in the game, after she had lost a 15-point lead in the polls she held as recently as 10 days ago.
Obama's one-year reviews have not been kind, a point the president mentioned in a somber speech at a black church on Sunday marking the Martin Luther King Jr. holiday.
"There are times when progress seems too slow. There are times when the words that are spoken about me hurt. There are times when the barbs sting. There are times when it feels like all these efforts are for naught, and change is so painfully slow in coming, and I have to confront my own doubts," he said.
--- Steve Holland, Reuters
About Thomson Reuters: The unique insights of Thomson Reuters drive productivity and performance by helping our clients generate investment and business ideas, gain fresh perspectives on the markets, and, ultimately, make more money.
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This publication is not, nor is it to be construed as, a solicitation or recommendation to investors to purchase, sell or hold any of the securities referred to in this publication. Global Securities Corporation is a member of the Canadian Investor Protection Fund
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Jan 19, 2010
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TUESDAY, JANUARY 19, 2010, CANADIAN EDITION
TOP NEWS
• Kraft snares Cadbury for US$19.6 bln
• JAL files for US$25 bln bankruptcy; job cuts loom
• Goldman delays bonus decision
• Google postpones cellphone launch in China
• Williams to restructure pipeline partnerships
BEFORE THE BELL
Toronto's main stock index could open lower on Tuesday as weak crude oil hits energy producers, while investors await the Bank of Canada's interest rate announcement before the market opens. Bank of Canada is expected to keep its key overnight rate unchanged at 0.25 percent, and leading indicators for December is seen up 1 percent, according to Reuters polls. Canadian stocks could also follow world markets, which slipped, as investors awaited a wave of U.S. company earnings reports to give them an idea of how well the micro side of the global economic recovery is faring. Wall Street is set for a lower open ahead of key corporate IBM. Airlines will be in the spotlight after Japan Airlines Corp filed for bankruptcy protection, owing more than US$25 billion and vowed to slash 15,700 jobs and unprofitable routes as part of a plan to survive an industry beset by volatile fuel costs and fickle flyers. European shares retreated as banks slipped, but Cadbury hit record highs after the British confectioner accepted a US$19.2 billion takeover offer from Kraft. Asian stocks fell as investors took profits on a recent run-up in technology shares, while casting a wary eye on regional central banks taking more steps to tighten policy. Oil fell below US$78 a barrel and gold was down to trade around US$1129 an ounce.
STOCKS TO WATCH THIS MORNING
• Alexis Minerals Corp. (AMC). The company said on Monday its bid to acquire Garson Gold Corp has now resulted in over 90 percent of Garson shares being tendered.
• Bombardier Inc. (BBDb). The company is going to find difficulty in getting c-series aircraft orders done before end of fiscal year, Commercial Aircraft President Gary Scott said on Tuesday.
• Crocotta Energy Inc. (CTA). The company said on Tuesday it allocated about $8 million towards first-quarter budget and has approved a capital budget of $24 million for 2010.
• Exeter Resource Corp. (XRC). The company said on Tuesday it would spin-out assets of Exeter into two independent companies. Under the term, Exeter will retain all assets relating to the Caspiche gold-copper discovery, together with approximately $50-million in working capital, and focus on the advancement of Caspiche. Exeter would transfer to a new corporation, Newco, it's Cerro Moro and other exploration properties in Argentina and about $25 million in working capital.
• Medoro Resources Ltd. (MRS). The company said on Monday it has acquired over 90 percent of issued and outstanding shares of Colombia Gold plc and is on track to complete the acquisition by end of January.
• Northgate Minerals Corp. (NGX). The company on Monday forecast 2010 gold production of 316,000 ounces from three operating mines.
• Shaw Communications Inc. (SJRb). The cable and telecom company on Monday agreed to purchase for cancellation 1.6 million of its outstanding Class B non-voting participating shares for an aggregate of $30.5 million.
• Supremex Income Fund (SXP_u). The company said on Monday it would reduce its monthly distribution to 1 cent from 5 cents a unit and added it intends to convert into a corporation. The company also intends to pay quarterly dividend of 3 cents after successfully turning into a corporation.
ECONOMIC CALENDAR
08:30 Leading indicators for Dec: Prior 1.3% Expected 1.0%
09:00 BOC overnight rate for Jan: Prior 0.25% Expected 0.25%
ANALYST RECOMMENDATION
• Canfor Corp. (CFP) price target raised to $7.50 from $6; rating sector perform at RBC
• Finning International (FTT) price target raised to $21 from $19; rating buy at UBS
• Iteration Energy (ITX) rating cut to underperform from neutral at Macquarie
• Uranium One (UUU) rating raised to outperform from sector perform at RBC
STOCK SPLIT
• Colonia Energy Corp. (CLA). Reverse split in the ratio of 1-10
EXDIVIDEND
• Potash Corp. of Saskatchewan Inc. (POT). Amount US$0.10
Note: All values in Canadian currency, unless otherwise stated
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INSIGHT
COLUMN-U.S. pension allocations to commodities still small
U.S. state pension funds have invested only a tiny fraction of their assets in commodities, despite the hype about a "wall of money" descending on the asset class. Only two of the top ten funds have any direct exposure to commodities.
Public retirement systems, investing on behalf of teachers and other public employees, controlled almost US$2.6 trillion dollars worth of assets at the end of Fiscal 2008, according to the National Association of State Retirement Administrators (NASRA). The ten largest systems accounted for almost half the total (US$1.2 trillion).
While many retirement systems have adopted some sort of allocation for "alternative investments", most funds have been directed towards private equity, real estate and timber. Only two of the ten largest systems have adopted an allocation towards commodities:
(1) California Public Employees Retirement System (CALPERS) is targeting an allocation of 1.5 percent to commodities (with a range of 0.5-3.0 percent) as part of a larger allocation to an inflation-linked asset class (ILAC). In theory, CALPERS could allocate US$3.6 billion of its US$239 billion assets to commodity futures and options. As of June 2008, however, total investments in ILAC amounted to only 2 percent of the fund (US$4.7 billion) so the commodity component is likely to be considerably smaller.
(2) The Teacher Retirement System of Texas (TRS) is the only other top-ten state pension manager with a formal allocation to commodities. It is targeting 2.0 percent of the fund, with a range of 0.0-7.0 percent of total assets. The actual allocation to commodities hit US$3.214 billion in Fiscal 2008 (3.1 percent of the fund). But it had been cut to US$1.697 billion in Fiscal 2009 (1.9 percent), close to the target neutral allocation.
Other major systems in New York, Florida, North Carolina, Wisconsin and Ohio have not so far adopted a commodity target, though most do have exposure to alternatives, notably private equity and real estate.
If the top 10 funds, with 46 percent of state retirement system assets, are representative of the other smaller systems, then the total allocation to commodities by state managers is likely to be no more than US$12 billion, possibly less.
--- John Kemp is a Reuters columnist. The views expressed are his own
About Thomson Reuters: The unique insights of Thomson Reuters drive productivity and performance by helping our clients generate investment and business ideas, gain fresh perspectives on the markets, and, ultimately, make more money.
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This publication is not, nor is it to be construed as, a solicitation or recommendation to investors to purchase, sell or hold any of the securities referred to in this publication. Global Securities Corporation is a member of the Canadian Investor Protection Fund
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Jan 18, 2010
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MONDAY, JANUARY 18, 2010, CANADIAN EDITION
TOP NEWS
• Swiss Re gets US$1.27 bln in Berkshire life deal
• Google probing possible inside help on attack - report
• Abu Dhabi's Dubai aid shrinks to US$5 bln
• Iteration gives production update, says CFO quits
BEFORE THE BELL
Toronto's main stock index could open higher on Monday as commodity prices advance on hopes of strong Chinese demand supported by weaker U.S. dollar. Trading is seen to be relatively low as U.S. markets are closed on account of Martin Luther King Jr. Day. European shares rose, recovering some of Friday's losses, with miners gaining on higher metals prices. Most Asian stocks were down following report of JPMorgan's heavy losses on mortgage and credit card loans on Friday, casting doubt on consumer demand in the region's largest export market. Oil rose above US$78 per barrel, snapping a five-day losing streak. Palladium hit an 18-month high, while platinum touched a 17-month peak, buoyed by strong investor interest for new exchange-traded funds, while risk aversion supported gold.
STOCKS TO WATCH THIS MORNING
• Asia Bio-Chem Group Corp. (ABC). The company said on Friday its newly completed Daqing corn- processing plant has reached designated production capacity for 48 hours of continuous operation in the first week of January 2010.
• Ballard Power Systems (BLD). The hydrogen fuel-cell developer said on Monday it acquired a controlling interest in Denmark-based Dantherm Power, partnering with co-investors Danfoss A/S and Dantherm A/S. The joint partnership is expected to result in accelerated development of fuel cell backup power applications across Europe.
• Enbridge Inc. (ENB). The pipeline operator said on Sunday it expects throughput on its Spearhead Pipeline between Chicago and Cushing, Oklahoma, to return to average amounts "in the next week or so," according to a spokesman.
• Iteration Energy Ltd. (ITX). The company said on Monday its 2009 production would be near the upper end of its prior view, and added its CFO Peter Scott had left the company. The company also said vice president Willie Dawidowski will provide ongoing continuity and leadership of the accounting and financial groups.
• Just Energy Income Fund (JE_u). The company and Home trust company, a unit of Home Capital Group Inc (HCG), entered into a water financing agreement, the initial funding of which is expected to be about $45 million.
• ProSep Inc. (PRP). The company said on Monday it was awarded a US$3.5 million contract to provide gas membrane equipment to a large independent North-American oil and gas company.
• Questerre Energy Corp. (QEC). The energy producer said interest in its business has surged since it made what it called a "giant discovery of shale gas" in Canada, Norwegian newspaper Aftenposten reported on Monday.
• Rodinia Minerals Inc. (RM). The company said on Monday it acquired three separate lithium-brine projects in Argentina from Borax Argentina SA, a subsidiary of Rio Tinto Minerals.
• Second Wave Petroleum Inc. (SCS). The company said on Monday it has set $18 million as capital budget for the first half of 2010.
• TG World Energy Corp. (TGE). The oil and gas exploration company said on Monday it secured a loan facility of $7.5 million from an institutional lender and the proceeds will be used to fund ongoing exploration efforts in Alaska and Niger as well as to actively pursue other oil and gas opportunities.
ECONOMIC CALENDAR
08:30 Foreign investment in Canadian securities for Nov: Prior $5.81 bln
08:30 Canadian investment in foreign securities for Nov: Prior $4.20 bln
ANALYST RECOMMENDATION
• Finning International (FTT) price target raised to $21 from $19; rating buy at UBS
• Savanna Energy (SVY) rating raised to neutral from sell at UBS
• TransAlta Corp. (TA) rating cut to neutral from buy at UBS
EXDIVIDEND
• Matrikon Inc. (MTK). Amount $0.03
• Olympia Financial Group Inc. (OLY). Amount $0.50
Note: All values in Canadian currency, unless otherwise stated
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INSIGHT
Can U.S-China ties weather perfect storm in 2010?
Google "perfect storm" in 2010 and it is looking increasingly likely that U.S.-China relations will pop up as a top search result.
Even before the U.S. Internet giant's troubles with Chinese hacking and censorship came to a head this week with Google's threat to leave the Chinese market, some long-standing political and economic disputes loomed over bilateral ties.
"This is going to be a really ugly, turbulent year with China," said Dean Cheng, a China analyst at the Heritage Foundation, a conservative Washington think tank.
President Barack Obama enjoyed a honeymoon with China for much of 2009 as Washington and Beijing tried to set aside differences over Taiwan, Tibet, human rights and China's currency policies to combat the global economic crisis.
In short succession, however, those issues and new ones, including the cyber-security threat from China underscored by Google Inc's troubles, are set to roil ties this year as the United States gears up for congressional elections.
"This year the United States won't be like last year when it comes to human rights, political control and the Internet," said Shi Yinhong, a professor of international politics at Renmin University in Beijing.
"Then add to that, we have military problems, Taiwan, the Dalai (Lama), climate change -- so there will certainly be ructions in China-U.S. relations," he said.
Taiwan and Tibet -- regions where separatist ambitions vex Beijing -- could move to the front-burner with Obama having approved a package of Patriot air defense missiles to Taiwan and is set to meet the Dalai Lama as early as February.
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LIMITS OF COOPERATION
Google's case cuts across many sore spots with China: freedom of expression, intellectual property protection, industrial and military espionage, industrial policy and market access.
Citing attacks on its infrastructure originating from China, and access the Gmail accounts of Chinese human rights activists, Google announced on January 12 it would no longer continue censoring Internet search results in China and that it may quit the country.
Troubles are resurfacing along many old fault lines at a time when Americans are questioning why that vaunted Chinese help on global issues such as climate change and nuclear proliferation by Iran has not really materialized yet.
"I see whole lot of quid and not a whole lot of quo," aid Cheng.
The limits of cooperation were driven home in December with China's snub of Obama at the climate change summit in Copenhagen. China's Premier Wen Jiabao huddled with other developing country leaders and sent an underling to see the U.S. president.
The Eurasia Group consultancy says a mismatch between U.S. calls for more Chinese help on global issues and China's reluctance to step up -- and incompatible economic policies -- make U.S-China ties the biggest political risk of 2010.
ROLLER COASTER
Former George W. Bush administration official Mike Green said the Obama administration erred by overstating its reliance on Beijing -- making China "the central kingdom and us the tributary state asking for their help."
Concessions in 2009 such as shelving an Obama meeting with the Dalai Lama and arms sales decisions on Taiwan, were made to get Obama off to a good start with China, including a smooth November summit with President Hu Jintao in Beijing.
"But what happened was the Chinese were not cooperative at all," said Green, now at Center for Strategic and International Studies.
Ben Rhodes, a White House deputy national security adviser, confirms Obama will speak out strongly on Internet freedom in the wake of the Google case and meet the Dalai Lama this year.
But bilateral ties are better than headlines suggest and regular contact between Obama and Hu as well as high-level dialogue will help narrow differences, he said.
"Obviously, when you're going through a period when you're having a strong disagreement, the appearance is (that) the relationship is challenged," Rhodes said.
"Our point has been that our relationship with China is and should be mature enough that we can have disagreements, strong disagreements," he told Reuters in an interview.
"We'll voice those disagreements. It need not derail areas where we can cooperate," Rhodes he added.
Shi said bilateral spats seem worse than they really are because 2009 was a smooth year. China will react strongly on Taiwan and Tibet but try to get them out of the way before Hu's visit to the United States later in the year, he predicts.
"The reality is U.S.-China is always a roller coaster," said Ralph Cossa, head of the Pacific Forum/CSIS think tank in Honolulu.
"There's always going to be speed bumps. The question is 'How low do we go?" said Cossa, who said he thought the two countries could avoid a damaging plunge in ties this year.
--- Paul Eckert and Caren Bohan, Reuters
About Thomson Reuters: The unique insights of Thomson Reuters drive productivity and performance by helping our clients generate investment and business ideas, gain fresh perspectives on the markets, and, ultimately, make more money.
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This publication is not, nor is it to be construed as, a solicitation or recommendation to investors to purchase, sell or hold any of the securities referred to in this publication. Global Securities Corporation is a member of the Canadian Investor Protection Fund
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(Please note Canadian quotes are delayed 15 min)
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