|
|
| Market News: News Archive : Morning News Call Week ending |
|
|
Jan 29, 2010
|
|
|
|
|
|
FRIDAY, JANUARY 29, 2010, CANADIAN EDITION
TOP NEWS
• Mattel posts higher net for holiday quarter
• Autoliv upbeat on Q1 and full year, shares rise
• Honeywell Q4 profit eases 1 percent
• Canada's Norbord posts narrower Q4 loss
• SouthGobi drops sharply on Hong Kong debut
BEFORE THE BELL
Toronto's main stock index may open slightly lower on Friday as commodity prices fall but corporate results in U.S. could lift investor sentiment. Market would also track GDP by industry, which is likely to have risen 0.2 percent in November, according to a Reuters poll. Wall Street is set for a higher open ahead of U.S. GDP that is expected to show the economy grew at its fastest pace in nearly four years, a day after Ben Bernanke won Senate approval for a second term as Federal Reserve chairman. European shares rose, bouncing back after their worst sell-off in a year, led by the banking sector. Asian shares fell, weighed by tech stocks and as worries about the fiscal health of Greece and Portugal undermined investor confidence. Oil steadied below US$74 per as it heads for its third consecutive weekly drop on evidence fuel demand was lacklustre despite recovery from the global downturn. Gold prices moved away from near three-month lows to US$1085.70 an ounce.
STOCKS TO WATCH THIS MORNING
• Avion Gold Corp. (AVR). Gold producer Avocet Mining Plc said it would divest its non-core exploration licences in West Arica for a 5 percent stake in Avion.
• Canadian Oil Sands Trust (COS_u). The trust said on Thursday its fourth-quarter profit fell 23 percent despite strengthening oil prices as it wrote down the value of some Arctic gas fields.
• Dalsa Corp. (DSA). The digital imaging solutions company recorded lower revenue but swung to a profit in the fourth quarter, due mainly to a loss from discontinued operations in the prior-year period.
• Genworth MI Canada Inc. (MIC). The company reported fourth-quarter earnings of 67 cents a share, before items.
• Kinross Gold (K). The company said on Thursday its proven and probable gold reserves totaled 51 million ounces at the end of 2009, a 12 percent increase over the previous year, thanks largely to contributions from its Lobo-Marte project in Chile.
• Norbord Inc. (NBD). The producer of wood-based panels on Friday posted a narrower fourth-quarter loss, helped in part by cost-cutting initiatives and lower input prices, and said it expects 2010 to be a more positive building materials market, particularly in Europe.
• SouthGobi Energy Resources Ltd. (SGQ). Shares in the Canadian-listed coal miner fell about 11 percent on their Hong Kong debut on Friday, hurt by the stock's overly high valuation and poor timing.
• Triton Energy Corp. (TEZ). The company said on Thursday it agreed to acquire oil and gas properties in West Central Alberta for about $45.0 million and that it secured about $25 million in bought deal financing.
• Zarlink Semiconductor Inc. (ZL). The company's third-quarter profit plunged 95 percent, hurt by a non-cash foreign exchange charge, and the firm forecast a fourth-quarter profit range whose lower end was below market estimates.
ECONOMIC CALENDAR
08:30 GDP by industry m/m for Nov: Prior 0.2% Expected 0.2%
08:30 Producer prices m/m for Dec: Prior 1.0% Expected 0.4%
08:30 Raw materials m/m for Dec: Prior 2.2% Expected 1.2%
CORPORATE EVENTS
10:30 Genworth MI Canada Inc. (MIC). Q4 earnings conference call
11:00 CE Franklin Ltd. (CFT). Q4 earnings conference call
11:00 Norbord Inc. (NBD). Q4 earnings conference call
14:30 TransCanada Corp. (TRP) and ExxonMobil to host media teleconference on Alaska Pipeline Project open season plan
ANALYST RECOMMENDATION
• Petrobakken Energy (PBN) price target cut to $41.50 from $42.50 at Raymond James
• Result Energy (RTE) rating cut to market perform from outperform at Raymond James
Note: All values in Canadian currency, unless otherwise stated
|
|
|
|
INSIGHT
BREAKINGVIEWS-Wall Street can't escape Obama's cross-hairs
Jobs may be President Barack Obama's "number one focus" but Wall Street looks a competitive second.
His State of the Union address signaled a will to try regaining political momentum on the backs of bankers. Whether Congress will match this populist rhetoric with policy is another matter.
A simple review of the speech gives a glimpse into Obama's thinking. "Jobs" received 23 mentions. Some form of "banks" and "Wall Street" got 14. Healthcare, which dominated Obama's 2009 agenda, received only seven. The president also used the occasion to repeatedly bash bankers. He just "hated" having the government bail them out -- and said it three times to emphasize the point. Obama promised to veto any financial reform bill deemed unworthy of the description.
But pierce the superficial layer of tough talk, and the agenda looks to have limited ambition. For instance, a big component of Obama's reform plan is the creation of a Consumer Financial Protection Agency. That goal appears to have been downgraded, however. As long as consumers have enough information to make financial decisions, Obama indicated he would be satisfied.
The president also spoke obliquely about his idea to limit proprietary trading by banks. There seems to be plenty of room to backpedal.
Obama does appear ready to fight for his bank tax, or "fee" as he prefers to call it. The White House is betting the fear of being labeled "pro-Wall Street" will dissuade enough Republicans from voting against it.
But the administration may be wrong about that. GOP strategists see limited appeal to anti-bank populism, citing polls that suggest Americans are growing less enthusiastic about more financial regulation. Republicans also believe the tactic was a dud for Democrats in the Massachusetts U.S. Senate race.
A financial reform bill is still on track to pass. But it's more likely to be a moderate, bipartisan compromise that Wall Street can live with. And the president, desperate for concrete accomplishments, will probably be all too eager to sign it.
CONTEXT NEWS
-- President Barack Obama put job creation atop his agenda during the annual State of the Union speech on Jan. 27. He promised not to abandon his struggling healthcare overhaul. He also pledged tough new rules for Wall Street but said he was "not interested in punishing banks." He said he would work to dig the country out a "massive fiscal hole" and was willing to use his presidential veto power to enforce budgetary discipline.
--- James Pethokoukis, Reuters
The author is a Reuters Breakingviews columnist. The opinions 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.
|
|
|
|
|
|
|
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
|
Jan 28, 2010
|
|
|
|
|
|
THURSDAY, JANUARY 28, 2010, CANADIAN EDITION
TOP NEWS
• Canadian Pacific Q4 net income rises slightly
• Potash Corp Q4 earnings tumble
• Ford posts first full-year net profit since 2005
• P&G Q2 result beat Street view
• Methanex posts Q4 profit
BEFORE THE BELL
Toronto's main stock index may open higher on Thursday as oil and gold rebounded after U.S. President Barack Obama's State of the Union address and the Fed's decision to maintain low interest rates revived some confidence about economic growth. Wall Street is also set for a higher open after a set of strong corporate results. European stocks and Asian shares gained, bouncing back from sharp declines, led by upbeat earnings expectations. Oil and gold rose to trade at US$74.22 a barrel and US$1,091.05 an ounce, respectively.
COMPANIES REPORTING RESULTS
• Dalsa Corp. (DSA). Expected to report Q4 earnings of 6 cents a share, according to Thomson Reuters I/B/E/S
• Genworth MI Canada Inc. (MIC). Expected to report Q4 earnings of 62 cents a share
• Richelieu Hardware Ltd. (RCH). Expected to report Q4 earnings of 45 cents a share
• Tembec Inc. (TMB). Expected to report Q1 loss of 28 cents a share
• Zarlink Semiconductor Inc. (ZL). Expected to report Q3 earnings of 3 U.S. cents a share
STOCKS TO WATCH THIS MORNING
• C.A. Bancorp Inc. (BKP). The company on Wednesday advised its shareholders not to tender to the hostile offer by Maxam, as it looks towards other value-maximizing alternatives with third-parties.
• Canadian Natural Resources Ltd. (CNQ). The company said on Thursday it has submitted a joint proposal with North West Upgrading Inc to the Alberta Government to construct and operate a bitumen refinery near Redwater. The company will hold 50 percent interest in the venture.
• Canadian Pacific Railway Ltd. (CP). Canada's No 2 railway said on Thursday fourth-quarter net income rose slightly due to lower operating expenses.
• Cash Store Financial Services Inc. (CSF). The company reported second-quarter profit that rose 28 percent and said it will continue to expand at a rate of 18 to 20 branches per quarter through fiscal 2010.
• Celestica Inc. (CLS). The contract electronics maker posted a 24 percent drop in adjusted fourth-quarter earnings on Wednesday as the markets it sells into, notably telecoms, remained under pressure from the recession although the worst looked to be over.
• Exco Technologies Ltd. (XTC). The auto parts maker on Wednesday swung to a first-quarter profit, helped by improving sales trends at its automotive solutions segment.
• Methanex Corp. (MX). The world's largest producer of methanol reported a fourth-quarter profit, helped by demand for methanol and higher energy prices that led to stronger methanol prices.
• New Gold Inc. (NGD). The Australian-listed Beadell Resources Ltd on Wednesday agreed to buy News Gold's Brazilian unit Mineracao Pedra Branca do Amapari Ltd for US$63 million, in a cash and stock deal.
• Points International Ltd. (PTS). The company on Thursday raised its fiscal 2010 outlook and announced a multi-year extension of its partnership with US Airways Dividend Miles.
• Potash Corp of Saskatchewan (POT). The world's largest fertilizer maker said on Thursday that fourth-quarter earnings fell almost 70 percent as pricing of key crop nutrients like potash and phosphate have declined sharply from a year ago.
• Sino Forest Corp. (TRE). The forest plantation operator on Thursday signed its sixth long-term deal to acquire pine and Chinese fir trees in China's Guizhou Province.
• Transglobe Energy Corp. (TGL). The company on Thursday said its total proved reserves increased 53 percent to 19.2 mmbbl at December 31, 2009, from 12.6 mmbbl, a year ago.
CORPORATE EVENTS
11:00 Canadian Pacific Railway (CP). Q4 earnings conference call
11:00 Cash Store Financial Services Inc. (CSF). Q2 earnings conference call
11:00 Methanex Corp. (MX). Q4 earnings conference call
11:00 Tembec Inc. (TMB). Annual general shareholders meeting
13:00 Potash Corp. of Saskatchewan Inc. (POT). Q4 earnings conference call
14:30 Richelieu Hardware Ltd. (RCH). Q4 earnings conference call
15:00 Tembec Inc. (TMB). Q1 earnings conference call
17:00 Dalsa Corp (DSA). Q4 earnings conference call
17:00 Zarlink Semiconductor Inc. (ZL). Q3 earnings conference call
ANALYST RECOMMENDATION
• CGI Group (GIBa) price target raised to $16 from $15.50; rating outperform at Raymond James
• Oncolytics Biotech (ONC) rating starts with buy; price target of $4.25 at Versant
• Paladin Energy (PDN) price target cut to $4.60 from $4.90; keeps outperform rating at Raymond James
EXDIVIDEND
• Brookfield Asset Management (BAMa). Amount US$0.13
• Emera Inc. (EMA). Amount $0.2725
• Vitreous Glass Inc. (VCI). Amount $0.06
Note: All values in Canadian currency, unless otherwise stated
|
|
|
|
INSIGHT
Obama to angry Americans: I hear you
President Barack Obama had a message for Americans frustrated at high unemployment and skeptical of his handling of the U.S. economy: I hear you.
Facing strong pressure to change the course of his presidency after a year devoted to a now-stalled healthcare overhaul, Obama had no choice but to make a tactical shift.
"Jobs must be our number one focus in 2010," Obama declared in his first State of the Union speech.
The president entered the chamber of the U.S. House of Representatives in the biggest trouble since he took power a year ago.
His vision of hope and change has given way to voter anger over a stuttering, jobless recovery, bank bailouts and government spending, and polls show that Americans consider the country on the wrong track.
Looking to restore Americans' confidence in him, Obama adopted an apologetic tone in acknowledging political setbacks and admitting he did not properly explain the complicated healthcare legislation.
But, in line with a populist approach he has taken lately, he made no apologies about pursuing an overhaul of the U.S. health system that he said is needed now more than ever and vowed "we will not quit" trying to help the middle class.
And he spread the blame around, saying an ugly partisan tone infects Washington, fed by both parties and urged on by a willing news media.
He once again pointed fingers at his predecessor Republican George W. Bush for the economic mess he inherited, without mentioning him by name. That drew fire from critics who believe Obama has contributed to the problems by driving up the budget deficit with a US$787 billion stimulus.
"I think it was unfortunate," Republican Senator John McCain told Reuters in response. "He said, 'I'm not here to look back' then on several occasions blamed it on Bush. I was disappointed."
Just two weeks ago Obama was on the verge of a major victory on healthcare and had planned to celebrate passage of the legislation in his speech.
But Republican Scott Brown's win of a U.S. Senate seat in traditionally liberal Massachusetts changed all that. Democrats suddenly looked like a party under siege and vulnerable in November congressional elections.
NOT BACKING DOWN
Obama did not back down from his ambitious domestic agenda, but took pains to make it secondary to jobs.
"People are hurting," he said, and he emphasized the need for a multi-billion-dollar jobs bill along with US$30 billion in small business tax incentives and a three-year spending freeze on domestic spending.
Will independent voters who helped elect Republican governors in Virginia and New Jersey last November and Brown last week give Obama a second chance?
Economist William Galston of the Brookings Institution said they might, citing Obama's emphasis on spending restraint and deficit reduction.
"I think independents will continue to have doubts about the course of the administration but I think at least some of them will be at least be willing to give him a second chance," he said.
Obama urged members of the U.S. Congress to take another crack at healthcare reform "as temperatures cool" and told fellow Democrats they still hold a strong majority in Congress and should "not run for the hills."
But he offered no proposals on how to break a partisan deadlock on the issue, whether to fight on for an expansive overhaul or focus on a scaled-back plan.
"There were a lot of mixed messages in that very long speech," said Larry Sabato, a political science professor at the University of Virginia.
Obama also ceded ground on climate change, another item at the top of his 2009 list. He acknowledged it will be difficult to pass in an election year and called for energy efficiency measures.
But he did not mention the item at the heart of the debate, the cap-and-trade market on emissions blamed for warming the planet and considered by Republicans a likely route to higher taxes and energy bills.
--- 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.
|
|
|
|
|
|
|
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
|
Jan 27, 2010
|
|
|
|
|
|
WEDNESDAY, JANUARY 27, 2010, CANADIAN EDITION
TOP NEWS
• Caterpillar posts better-than-expected Q4 earnings
• Boeing posts Q4 profit on revenue increase
• United Technologies Q4 profit falls 6 percent
• BlackRock Q4 earnings surpass estimates
• Tyco Electronics Q1 profit beats expectations
BEFORE THE BELL
Toronto's main stock index may open lower on Wednesday as commodity prices fall, though losses might be capped by crude stocks as it pares early losses. Wall Street is set for a higher open as investors await the Federal Reserve interest rate decision and President Barack Obama's first State of Union address to the Congress, where he is expected to reassure Americans worried about jobs and the economy. The U.S. Senate on Tuesday moved to clear the way to confirm Ben Bernanke to a second term as Fed Chairman, setting a procedural vote for Thursday in a sign that the needed votes were now secured. European shares fell, dragged by banks and commodities. Asian stocks were down for the ninth straight day on fears that China's efforts to rein in soaring credit growth could hamper economic recovery. Oil rose to trade near US$75 while gold fell slightly hovering around US$1095 an ounce.
COMPANIES REPORTING RESULTS
• Celestica (CLS). Expected to report Q4 earnings of 17 U.S. cents a share, according to Thomson Reuters I/B/E/S
• Cash Store Financial Services Inc. (CSF). Expected to report Q2 earnings of 29 cents a share
• CGI Group (GIBa). Expected to report Q1 earnings of 27 cents a share
• Methanex Corp. (MX). Expected to report Q4 earnings of 30 U.S. cents a share
STOCKS TO WATCH THIS MORNING
• AGF Management Ltd. (AGFb). The company on Wednesday reported fourth-quarter EPS of 40 cents, before items and said the total asset under management increased 25.5 percent as on November 30, 2009.
• Canadian Imperial Bank of Commerce (CM). The bank on Tuesday launched US$2.0 billion of three-year covered bonds, said IFR, a Thomson Reuters service.
• Canadian National Railway Co. (CNR). Canada's biggest railway, witnessing a revival in the economy after a bruising year of weak freight volume, is aiming for an increase of at least 10 percent in earnings this year, the company said on Tuesday. The company, which posted a 20 percent drop in adjusted fourth-quarter net income, also raised its dividend by 7 percent.
• Fairborne Energy Ltd. (FEL). The company on Tuesday forecast 2010 average annual production of 14,650 boe/d and expects operating costs to average between $10.00 and $10.50 per barrel of oil equivalent for 2010.
• Guestlogix Inc. (GXI). The company on Tuesday forecast earnings of $200,000 for the fourth-quarter, and said revenue rose 84 percent, for the period, in its preliminary report.
• Onex Corp. (OCX). The company and Greenbriar Equity Group have ended their bid to buy a part of American International Group's aircraft leasing unit, a person familiar with the situation said on Tuesday.
• Thomson Reuters Corp. (TRI). The news and information company's CEO Thomas Glocer said on Wednesday it saw a "marked uptick" in its sales at it progressed through the end of 2009. He told Reuters Insider television that because of the company's subscription model it would take time for the weakness earlier in the year to work through the system but that it was now well placed.
CORPORATE EVENTS
09:30
ANALYST RECOMMENDATION
• Aurizon Mines (ARZ) rating raised to outperform from market perform at Raymond James
• Canadian National Railway (CNR) price target raised to $61 from $58; rating neutral at Macquarie
• Canfor Corp. (CFP) price target raised to $10 from $9; rating outperform at Raymond James
• Celtic Exploration (CLT) rating cut to neutral from outperform at Macquarie
• Cequence Energy (CQE) rating cut to neutral from outperform at Macquarie
• Compton Petroleum (CMT) rating cut to underperform from neutral at Macquarie
• Cinch Energy (CNH) rating cut to neutral from outperform at Macquarie
• Enbridge Inc. (ENB) price target raised to $47 from $43; rating equal weight at Barclays
• Fairborne Energy (FEL) rating cut to neutral from outperform at Macquarie
• First Uranium (FIU) rating raised to outperform from market perform at Raymond James
• International Forest Products (IFPa) price target raised to $6 from $5; rating outperform at Raymond James
• Metro (MRUa) price target raised to $42 from $40; rating neutral at UBS
• Norbord Inc. (NBD) rating cut to market perform from outperform at Raymond James
• NuVista Energy (NVA) rating cut to neutral from outperform at Macquarie
• Paramount Resources (POU) rating cut to underperform rating at Macquarie
• West Fraser Timber (WFT) price target raised to $44 from $38; rating outperform at Raymond James
EXDIVIDEND
• Black Diamond Group Ltd. (BDI). Amount $0.09
• Canadian Banc Recovery Corp. (BK). Amount $0.0625
• Canadian Energy Services & Technology Corp. (CEU). Amount $0.06
• Canadian Tire Corp. (CTC). Amount $0.21
• Killam Properties Inc. (KMP). Amount $0.0467
• Petrobakken Energy Ltd. (PBN). Amount $0.08
• Sentry Select Primary Metals Corp. (PME). Amount $0.05
• Sportscene Restaurants Inc. (SPSa). Amount $0.30
• Superior Plus Corp. (SPB). Amount $0.135
Note: All values in Canadian currency, unless otherwise statedCGI Group (GIBa). Q1 earnings conference call
11:00 AGF Management (AGFb). Q4 earnings conference call
16:15 Celestica Inc. (CLS). Q4 earnings conference call
|
|
|
|
INSIGHT
Would world economy miss the financial 'froth'?
The political backlash against profligate global banks is underway; regulators everywhere are sizing up "hot" cross-border money flows; and capital controls in developing economies are back in vogue. Financial globalisation, in short, is on the back foot.
The questions for policymakers, and for investors, is whether it is possible to skim the froth off global finance without undermining the benefits of "real" globalization in trade and direct investment.
And for many emerging economies, is slightly lower but more stable growth a price worth paying for damping volatile and destabilising financial flows?
To judge by the International Monetary Fund's world growth projections this week, the risks to underlying growth so far appear to be modest.
The IMF boosted this year's global growth projection by almost a full percentage point to 3.9 percent and upped next year's to 4.3 percent -- far in excess of the average 3.3 percent rate of the past decade and the fastest clip since the 5.2 percent peak of the boom in 2007.
That's clearly not the full picture. Apart from moves by emerging giants such as Brazil to tax capital inflows flooding their local markets, most of the post-crisis proposals to rein in global banks and finance are still in gestation.
But U.S. President Barack Obama's bombshell in proposing to ban U.S. banks from proprietary trading unrelated to customer business was the clearest sign yet that months of post-mortems and suggestion are finally gaining traction among policymakers and other proposals should be taken seriously.
The downsizing of global mega banks, previously seen too big to fail or bail, has many fans abroad and could have far-reaching implications for cross-border capital over time.
The thinking also tallies with calls for more "host country" rather than "home country" regulation, as outlined by economists writing for the UK's Warwick Commission last November.
This would see global banks being forced to replace foreign branches with fully-capitalised subsidiaries, regulated by the host country rather than the regulator in the parent's country -- moves flagged by Bank of England governor Mervyn King as making life "a whole lot easier for the national regulators."
What is more, one new proposal from the Basel Committee on Banking Supervision excludes the banks' use of minority stakes in affiliates -- typical of how many Western banks operate in emerging markets -- from being used as capital buffers.
All the above would have the effect of raising the cost of cross-border banking and finance and could well see it retreat, but they remain looming intangibles and hard to quantify.
HOW FAR WE'VE COME
To benchmark how fast and big global finance has become in step with trade globalization, the IMF estimates that between 1980 and 2007, the ratio of goods and services trade to global gross domestic product -- currently about $60 trillion -- rose to 62 percent from about 42 percent.
But foreign direct investment rose to some 32 percent from just 6 percent. And the stock of international bank loans and other financial claims rose to 48 percent from 10 percent.
The recent credit and banking crisis clearly took a toll on cross-border capital moves, but flows to emerging economies in particular have already rebounded sharply and many estimates of the shock are already being revised higher.
Global banking association the Institute of International Finance (IIF) this week revised up its estimate of net private capital flows to emerging markets last year by almost $100 billion to $435 billion and expects the total to jump further this year to $722 billion -- above 2008 levels even if still shy of 2007's peaks of over $1 trillion.
The IIF highlighted several headwinds to these flows ahead, including capital controls in developing countries as well as banks' higher capital requirements and reluctance to finance interest rate "carry trades" by themselves or for clients such as hedge funds.
"The prospect of this tighter regulatory environment is, of course, already being factored into current lending decisions," it said in a report on the findings.
Significantly, the rebound in capital flows over the next two years is expected to be driven by direct investments and equity investments, with portfolio flows expected to decline again this year and next.
So, from that, it seems possible that a tightening of the regulatory screw on banks and curbing excessive "hot money" flows can be done without too much of a hit to overall growth, something borne out by many recent prominent studies.
In a paper entitled "Why did Financial Globalization Disappoint?", Harvard economist Dani Rodrik and Peterson Institute fellow Arvind Subramanian concluded that the real economic benefits of financial globalization are hard to find.
"Countries that have grown most rapidly have been those that rely less on capital inflows. Financial globalization has not led to better smoothing of consumption or reduced volatility."
Uneven sovereign and regulatory regimes mean international financial flows are condemned to suffer distortions far worse than domestic finance, they argue.
"The appropriate role of policy will be as often to stem the tide of capital flows as to encourage them. Policymakers who view their challenges exclusively from the latter perspective will get it badly wrong."
--- Mike Dolan, 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.
|
|
|
|
|
|
|
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
|
Jan 26, 2010
|
|
|
|
|
|
TUESDAY, JANUARY 26, 2010, CANADIAN EDITION
TOP NEWS
• Quad/Graphics to buy rival World Color Press
• DuPont posts Q4 profit as revenue jumps 10 percent
• Travelers Cos Q4 profit jumps on underwriting
• Verizon posts Q4 loss, mobile subs beat view
• S&P helps McGraw-Hill Q4 earnings rise 44 pct
BEFORE THE BELL
Toronto's main stock index may open lower on Tuesday as oil and gold fell pressuring the mining and energy stocks. Investors would be following the Wall Street, which is also set for a lower start, after China clamped down on lending requirements, though losses were limited by results from DuPont and Travelers Co. European shares extended their sharp losses, falling for a fifth straight session, with banks taking a beating and miners retreating along with metals. Asian stocks were also down with Taiwan suffering its worst one-day fall in six months. Oil fell about 1 percent and gold fell about half a percent, being pressured by a stronger dollar.
COMPANIES REPORTING RESULTS
• Canadian National Railway (CNR). Expected to report Q4 earnings of 91 cents a share, according to Thomson Reuters I/B/E/S
• Metro Inc. (MRUa). Expected to report Q1 earnings of 76 cents a share
STOCKS TO WATCH THIS MORNING
• Catalyst Paper Corp. (CTL). The papermaker said on Monday its CEO Richard Garneau resigned due to personal reasons, effective April 28, 2010.
• Indigo Books & Music (IDG). The book retailer on Monday posted a 29 percent rise in third-quarter profit, helped by higher sales from its Indigo and Chapters superstores.
• Palladon Ventures Ltd. (PLL). The company on Tuesday appointed Dale Gilbert as the CEO and president, and John Cutler as the COO of the company.
• World Color Press Inc. (WC). U.S. commercial printing company Quad/Graphics Inc said it agreed to buy rival World Color in order to expand its coverage. Earlier in the day, the WSJ said the deal value is expected to be US$1.3 billion to US$1.4 billion, citing people familiar with the matter.
• YM BioSciences Inc. (YM). The company said on Tuesday FDA has permitted to enroll patients at U.S. clinical sites into two ongoing randomized, double-blind Phase II trials of its lead product, nimotuzumab.
CORPORATE EVENTS
11:00 Metro Inc. (MRUa). Annual general meeting
16:00 Metro Inc. (MRUa). Q1 earnings conference call
16:30 Canadian National Railway (CNR). Q4 earnings conference call
ANALYST RECOMMENDATION
• Indigo Books & Music Inc. (IDG) price target raised to $19 from $17; rating outperform at RBC
• Rona Inc. (RON) price target raised to $18 from $17; rating neutral at UBS
• Semafo Inc. (SMF) price target raised to $7 from $4.75; rating outperform at Macquarie
• Monterey Exploration Ltd. (MXL) price target raised to $6 from $5.75; rating buy at Acumen Capital
Note: All values in Canadian currency, unless otherwise stated
|
|
|
|
INSIGHT
COLUMN-There's no way to hedge politics
Ben Bernanke in peril and the Volcker crackdown on proprietary trading by banks show two truths of the current dispensation: there is no effective hedge against politics and the reflation trade rests on fragile foundations.
Neither of these realities is particularly good for financial markets and neither is going away any time soon.
Both, too, are utterly related not just to each other, but to the Senate election in Massachusetts which installed a Republican into what had been a Kennedy seat, in the process terrifying Democrats who fear they will be sunk by association with a set of policies perceived to be favoring Wall Street.
In the aftermath, President Obama unveiled a policy authored by former Fed chief Paul Volcker, which is intended to make financial firms get out of the business of using government insurance to underwrite speculative bets; well, er, not all speculative bets, but the bad kind.
At the same time the confirmation of Bernanke is under threat, and he and the institution he works for had to endure the humiliation of seeing Senator Harry Reid issue a statement endorsing him but implying that he'd extracted some sort of undertaking from the central banker to "redouble" his efforts to help those struggling in the recovery.
Whether all of this is good or bad, or even if it has much of an impact, the fact is that both are the result of a financially struggling electorate which is going to strive to control things that they've previously been convinced to more or less let alone.
That's quite a change from a few years ago, when most of us sat around stroking our chins and praising Alan Greenspan, banks and market forces as if they were one and the same. Everyone still agrees that you need banks, a market and a Federal Reserve Chairman, but there is a lot less agreement about how much freedom the three should be given.
This may be just a few politicians getting the vapors, and soon everyone may ignore finance and economics and get back to the Super Bowl and dancing competitions on television, but there is a real possibility that this popular upsurge has legs. Markets famously hate uncertainty, but this is worse: this is uncertainty mixed with hostility.
This does not have to play out one particular way, and this in some ways is the problem for investors. That stocks have been going their merry way higher in recent months while this issue lurked in the background is astounding. There is an extremely high level of uncertainly over how the world will work in coming years.
BRING ME THE HEAD OF, WELL, ANYONE
As for the Volcker Rule, if it works it is probably only fair, but you have to admit that it is also an arrow in the side of the whole reflation balloon which the administration has been pumping up since last year.
Wanting to avoid a Depression but being unwilling politically to take huge swaths of the banking system over temporarily, U.S. policy in essence underwrote the liabilities of the banking system without taking much of it over, leaving it to get on with arbitraging its new guarantee into profits with which to meet its losses and rebuild its capital. That worked, if by worked you mean prevented big banks from falling over and revived asset markets.
But seeing as how shareholders are impotent, the bankers are continuing to take a huge, and often growing, share of the loot, a fact that is also politically untenable. Fixing that without undermining the recovery of banking and the reflation of markets is not going to be easy.
Bernanke's plight, and the related effort to impose a new audit and other controls on the Federal Reserve are similarly both understandable and dangerous.
It's not as if Bernanke and crew didn't ask for it -- first by standing as godfather to the bubble and latterly by buying up mortgages in what amounts to poaching on the Congressional prerogative of doling out money to specific sectors of the economy.
Even so two things stand out. A Fed chief who has been through a bruising political fight to retain office is an impaired Fed chief, both in terms of perceptions of independence and, potentially, real power and will to fight for that independence. Secondly, even if Bernanke was blameless, unemployment is high, former truths look pretty fragile and we can expect politicians to continue to meddle, or, if you like, to represent their electorates more actively.
It's possible that Bernanke can play scapegoat, resign, and in going protect the Fed. It's also possible that he is confirmed and stays with little long-term damage.
The underlying trend -- call it populism or call it democracy -- is not going away.
--- James Saft, a Reuters columnist. The opinions expressed are his own
At the time of publication James Saft did not own any direct investments in securities mentioned in this article. He may be an owner indirectly as an investor in a fund.
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.
|
|
|
|
|
|
|
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
|
Jan 25, 2010
|
|
|
|
|
|
MONDAY, JANUARY 25, 2010, CANADIAN EDITION
TOP NEWS
• EU opens probe into BHP, Rio iron joint venture
• New Gold sees increase in 2010 gold production
• Thompson Creek to adopt US GAAP, sees FY09 loss
• Embattled Bernanke edges closer to second term
• Exxon, Shell sign deal for Iraq's W.Qurna Phase One
BEFORE THE BELL
Toronto's main stock index may open slightly higher on Monday, as gold climbed about a percent and oil pared its early losses. Investors will follow Wall Street, which is set for a rebound following last week's sharp sell-off, as key companies are scheduled to report during the week. Markets would also wait to hear whether U.S. Fed Reserve Chairman Ben Bernanke will serve a second term, after the Senate's Republican leader predicted confirmation and Democrats aimed to have a vote this week. European and Asian shares were down. Oil steadied below US$75 a barrel, while gold topped US$1100 an ounce, led by President Barack Obama's proposal to limit financial risk-taking.
COMPANIES REPORTING RESULTS
• Indigo Books & Music Inc. (IDG). Expected to report Q3 earnings of $1.18 a share, according to Thomson Reuters I/B/E/S
STOCKS TO WATCH THIS MORNING
• Catalyst Paper Inc. (CTL). The papermaker on Friday said a claim filed against it by Quebecor World's litigation trustee, seeking repayment of about US$18.8 million, is not expected to result in any significant liability.
• Corus Entertainment Inc. (CJRb). The TV and radio broadcaster said on Friday it would offer upto $500 million in debt securities after the shelf prospectus becomes final.
• CryptoLogic Ltd. (CRY). The internet casino and branded gaming software company said on Monday it agreed to license at least 10 of its most popular online betting games to Bet24.
• New Gold Inc. (NGD). The mid-sized gold miner said on Monday it expects its annual gold production to increase by about 10 percent to 20 percent over 2009 levels, helped by increased production from its Mesquite gold mine in California.
• Research In Motion (RIM). Motorola Inc on Friday asked U.S. regulators to bar the Blackberry maker from the U.S. sale of its products, accusing the Research In Motion of infringing on five Motorola technology patents.
• Stratic Energy (SE). The oil and gas explorer has reached an agreement with its banking syndicate for an amendment on its loan facility and an additional line of credit, the company said on Monday.
• Thompson Creek Metals Co. (TCM). The company said it will report its 2009 financial results as per U.S. GAAP, and sees a net loss for the year due to the change in the accounting method.
ANALYST RECOMMENDATION
• Allied Properties REIT (AP_u) price target raised to $20 from $17.60; rating market perform at Raymond James
• Canadian REIT (REF_u) rating cut to market perform from outperform at Raymond James
• Chariot Resources (CHD) price target raised to $0.60 from $0.55; rating speculative buy at Canaccord Adams
• First Capital Realty (FCR) price target raised to $23.50 from $21.50; rating outperform at Raymond James
• Globestar Mining (GMI) price target raised to $1.50 from $1.40; keeps speculative buy rating at Canaccord Adams
• Killam Properties (KMP) price target cut to $8.50 from $8.75; rating market perform at Raymond James
• Methanex Corp. (MX) rating cut to outperform from strong buy at Raymond James
• Thomson Reuters (TRI) rating raised to buy from hold at Citigroup
Note: All values in Canadian currency, unless otherwise stated
|
|
|
|
INSIGHT
COLUMN-Obama bank plan is good policy, good politics
President Barack Obama's proposed curbs on bank size and proprietary risk-taking will be criticised for being vague, hard to implement, and focusing on issues that were only part of the cause of the recent crisis.
But the president should ignore self-interested counsels of perfection from the industry that aim to preserve the status quo. The plan is good politics, and good policy.
On the political front, the plan is a belated attempt to reposition the administration and congressional Democrats. It aims to channel the popular revolt that washed away Democrats in New Jersey and Virginia last autumn and now in Massachusetts.
For much of the year, the administration and its allies have seemed obsessed by issues which are low on the list of voters' concerns (healthcare, climate change) or reward special interests (bank bailouts) while appearing impotent to do anything about the rising tide of unemployment and punish those responsible for causing the crisis.
The president was radical where the electorate is cautious (healthcare and climate) but appeared to advocate the status quo where voters wanted change (banking, jobs and incomes). While each of these policies can be justified, the combination made the administration appear dangerously out of touch. The bank plan is an attempt to reconnect with the voters.
COVERING FIRE
The bank plan is crucial to the administration's course correction. It has been apparent for months that the rising tide of anti-incumbent sentiment would force the administration and congressional Democrats to change priorities or risk heavy defeat in November's mid-term congressional elections.
Massachusetts, by giving Senate Republicans the 41st vote needed to filibuster controversial legislation, has made a shift inevitable as well as desirable. In the next few weeks, the administration will disappoint many of its supporters on the left by abandoning ambitious elements of its healthcare and climate programme, as well as card-check.
But the president cannot afford to seem weak or be "triangulating" towards the centre. The unabashed populism of the bank plan enables him to shift attention from healthcare, dominate the political conversation for a while, and provides useful cover for dropping other parts of his domestic agenda.
It puts the opposition Republicans in an exquisite dilemma. With their 41st vote, Senate Republicans now have the power to block the proposals. But if they do, Obama and his Democratic allies will campaign against them as friends of Wall Street and its unpopular bailouts. If Republicans agree to go along with the curbs, Obama wins a significant and popular victory.
SENSIBLE POLICY
Imperfect though it is, the plan is a sensible contribution to the policy debate. The "Volcker Rule" (requiring the separation of banking functions from hedge fund, private equity and proprietary trading activity unrelated to serving customers) in effect reformulates Glass-Steagall for the 21st century.
Glass-Steagall separated commercial banking activities from investment banking. But the real fault line in terms of conflict of interest and the moral hazard created by taxpayer guarantees has shifted. So the Volcker Rule seeks to separate the prudent provision of services on behalf of customers from higher-risk speculation on own account.
It is a form of the "narrow banking" proposals that have been endorsed by a number of commentators as well as policymakers such as Bank of England Governor Mervyn King. There is much to commend this approach. It has so far failed to gather much traction because of the lack of top-level political support. Obama's endorsement should change that dynamic.
MARKET DISCIPLINE
Reimposing market discipline after the bank bailouts and ending rampant moral hazard means some institutions must face the real threat of failure in future. But for some institutions to be allowed to fail, the government must guarantee the survival of others to provide a safe haven for retail deposits, basic payment functions, and essential commercial lending.
For there to be a periphery that can fail there must also be a core that is absolutely guaranteed, and clear separation between the two. The Volcker Rule attempts to establish this division (albeit in a rough and ready way).
Core banking institutions will face severe restrictions on their proprietary trading activities so the taxpayer guarantee does not cross-subsidise non-core trading and investment activities. In contrast, non-core institutions will be free to take proprietary risk, but cannot benefit from federal deposit insurance and will be forbidden from turning up at the Federal Reserve's Discount Window and associated facilities.
If non-core institutions make poor choices they will fail and the losses will fall on shareholders rather than depositors or taxpayers. In the event of a systemic crisis they will also fail unless they keep sufficient liquidity on hand. Higher risk will be reflected in lower ratings and an increased cost of funding, ending the anomaly where institutions in the financial system that take the largest risk have the lowest funding costs.
OBJECTION OVERRULED?
Most of the objections to the Volcker Rule are easily disposed of:
(1) Some commentators will note hedge funds did not cause the crisis of 2007-2009 and did not suffer widespread failures; the focus on prop trading is therefore a mistake. But that is in fact an argument for separating out proprietary trading activities into separate institutions subject to rigorous market discipline and effective risk controls.
(2) Banks will argue proprietary trading creates substantial liquidity for both their customers and for the market as a whole. Pushing prop trading into separate institutions would cut the amount of liquidity they could offer their clients, and might cut the total amount of liquidity in the system as whole.
But shrinking the size of the financial sector might not in itself be a bad thing. Several commentators have noted the sector has grown much more rapidly in the last three decades than the real economy it is supposed to serve, and some of its activities have dubious social value.
Basic banking clearly has enormous social value. Hedge fund type speculation and private equity activities should also be allowed at investors own risk. The problem arises when one institution does both.
(3) Living wills and special resolution regimes are not a good substitute for the institutional separation of core banking and non-core proprietary risk-taking functions. These advanced directives are bedevilled by a credibility problem. The idea a universal bank can be one entity in life but broken up into separate entities in death stretches belief to breaking point.
If investors genuinely believed institutions would be broken up in death, and the cross-linkages between them severed, they would start assigning the different components different credit ratings and different funding costs in life, which would defeat the synergies involved in the universal banking model.
MARKET-MAKING FUNCTION
The biggest problem will be separately identifying proprietary trading on the banks' own account from legitimate market-making activities on behalf of customers. Most banks have separate private equity departments. Some also have dedicated prop trading desks and internal hedge funds. But in many cases prop trading and hedge fund like activities have not been separated out.
It will prove hard to identify which securities are being held for strategic "speculation" and which are being held as part of a tactical, liquidity-producing trading book. In many instances the distinction may not make much sense, and is not how banks organise their operations. Difficulty in implementation is not a reason not to press ahead. Detailed regulations can be drafted later.
Enforcing a separation between proprietary trading and market making will require considerable intrusion from regulators (either in the form of rather blunt prohibitions or very intensive supervisory visits and demands for data).
Until now, supervisors have been reluctant to interfere this much in the internal workings of banks. But beefed up regulation is the inevitable condition for taxpayer support, and Obama's endorsement will stiffen regulators' resolve in the United States and elsewhere.
--- 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.
|
|
|
|
|
|
|
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
|
|
|
|
|
|
|
|
|
|
|
(Please note Canadian quotes are delayed 15 min)
|
|
