Weekly Wrap-Up

April 19-23, 1999

The North American equity markets were the focus of the investment community over the week. After a horrible start to the week, which saw the Nasdaq shed almost 5%, positive earnings reports sent the markets higher. The Dow Jones posted two record high closes, while the S&P500 managed to post one record close. Bonds suffered from the exuberance demonstrated by various sectors of the equity markets. The release of CPI data in Canada indicated that the Bank of Canada will be on hold for the near term, as inflation edged back into the target 1-3% range. Corporate issuance, along with a heavy technical tone did little to help bonds.


TSE Change DJIA Change S&P Change Nasdaq Change
Monday 6907.69 -105.54 10,440.53 -53.36 1,289.48 -29.52 2,345.61 -138.43
Tuesday 6925.28 17.59 10,448.55 8.02 1,306.17 16.69 2,409.64 64.03
Wednesday 7019.77 94.49 10,581.42 132.87 1,336.12 29.95 2,489.08 79.44
Thursday 7017.01 -2.76 10,727.18 145.76 1,358.82 22.70 2,561.61 72.53
Friday 7028.49 11.48 10,689.67 -37.51 1,356.85 -1.97 2,590.69 29.08
% Change 0.22% 15.26 1.87% 195.78 2.87% 37.85 4.29% 106.65


GOLD Change $CDN/$US 30yr Cda Change 30yr US Change
Monday 284.80 0.70 1.4863 5.37 unch 5.52 -5bps
Tuesday 284.40 -0.40 1.4892 5.38 +1bps 5.51 -1bps
Wednesday 284.00 -0.40 1.4874 5.40 +2bps 5.52 +1bps
Thursday 283.90 -0.10 1.4804 5.47 +7bps 5.61 +9bps
Friday 283.60 -0.30 1.4756 5.48 +1bps 5.60 -1bps
% Change -0.18% -0.50 - 11 bps 3 bps


The North American bond markets suffered from the exuberance demonstrated by various sectors of the equity markets. The release of CPI data in Canada indicated that the Bank of Canada will be on hold for the near term, as inflation edged back into the target 1-3% range. Corporate issuance, along with a heavy technical tone did little to help. Bonds finished weak, with little to cheer about as more supply is coming to the market.

News from the international scene was mixed this week. On the positive side the Asian Development Bank released its forecast for the southeast Asian region. Growth for 1999 is predicted to be +0.8%, while 2000 is projected to grow +2.8%. This in comparison to the regional contraction of 6.9% in 1998. On the negative side, that growth will come at a price, as corporate restructuring pushes the unemployment figures higher. Indonesia expects a further 4.5 million people to lose their jobs over the next 6 months. Adding to the human cost was the announcement out of Hong Kong that the unemployment rate had risen to a record 6.2%.

Economic data released over the week indicates the same old pattern we have grown to know and love; inflation is tame and economic growth remains healthy. In the US the trade deficit for March was a larger than anticipated $US 19.4 billion. In Canada, the trade surplus for March totalled $CDA 2.6 billion; leading indicators rose 0.6%; manufacturing shipments fell 0.4%; new orders rose 0.5%; retail sales for February fell 0.4%; CPI for March rose 1.0% core, and 1.1% ex-food and energy on an annualized basis. The Canadian CPI reading puts the annual inflation rate back inside the Bank of Canada's target range of 1-3%, indicating that the Bank will be on hold with respect to interest rate cuts over the near-term.

The Government of Canada 30 year long bond added 11 basis points to close the week at 5.48%. The US Treasury 30 year long bond added 3 basis points, to close Friday at 5.60%. Corporate supply and the recognition that the central banks of both countries are on hold hurt the market. The Canada/US 30 year spread move in to -12 basis points. (A basis point is 1/100th of a percent.)

The North American equity markets were the focus of the investment community over the week. After a horrible start to the week, which saw the Nasdaq shed almost 5%, positive earnings reports sent the markets higher. The Dow-Jones posted a two record high closes, while the S&P500 managed to post one record high close.

The earnings reports indicated stronger than analyst expectation numbers, providing a strong bid to the markets. Big Blue - IBM - posted a 42% increase in profits, related to the services section of its business. This helped put a bid back into the tech stocks. The Nasdaq managed to close 10% higher than its low for the week. Although, beating analysts currently depressed expectations should not be difficult in a healthy economy.

Telecoms continued to have a merger and acquisition bid to them as more deals were announced this week. The German telecom company DeutscheTelecom entered into a merger agreement for $US82 billion with Telecom Italia. South of the border, AT&T bid $US 58 billion for MediaOne, which represents a 17% premium over the Comcast offer for MediaOne.

The TSE added 15.26 points, up 0.22%, closing at 7028.49. The sudden departure of TSE president, Rowland Flemming, provided more market attention than the Exchange would have liked over the week. The Dow added 195.78 points, or 1.87%, to close at 10689.67, only marginally below the record set Thursday. The S&P added 2.87%, while the performer of the week was the Nasdaq, up 4.29%.

Next week brings more supply in the bond market as the Government of Canada prepares to issue $CDA 1.8 billion 30 year bonds, and corporate issuers line up in the US to take advantage of low absolute rates. Economic data related to labour costs and economic growth will be released over the week. Good trading.

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