Nerves steady as TSE reopens
'Nobody's panicking' as Canadian stocks rise in first day of trading since attacks
By DAVE EBNER, The Globe and Mail
With files from Canadian Press
Friday, September 14, 2001
Fighting off fears of a market panic, investors pushed Canadian stocks higher yesterday in the first full session of trading since Tuesday's terrorist attacks on Manhattan and Washington brought all continental markets grinding to a halt.
"I'm really pleased," said Sherry Cooper, chief economist at BMO Nesbitt Burns Inc. in Toronto. "I'm heartened. None of us knew what to expect and for the market to be up 53 points, it's very good."
U.S. equity exchanges remain closed, but will reopen Monday. U.S. bond markets reopened and promptly rallied, as investors rushed to the safety of government-backed U.S. Treasuries. The Toronto Stock Exchange 300 composite index rose to 7,102.26, up 53.46 points or 0.8 per cent, in heavy trading.
"It's not a major move," said Brendan Caldwell, president of Caldwell Securities Ltd. "It's not everybody all of a sudden being bullish. It's just that nobody's panicking; there's no reason to."
On Tuesday, the TSE opened briefly and plunged almost 300 points -- 4 per cent. As the scope of the carnage and damage to Wall Street's infrastructure became apparent, European stock markets tanked, as did markets in Asia. European markets recovered somewhat Wednesday and yesterday stabilized further, providing the Canadian market with a cue.
Bay Street brokerages successfully pushed the TSE 300 higher by more than 100 points in the session's first half hour. "Institutions indicated before the market open that they would be buyers of stocks," said the head of trading at one Canadian brokerage. "We saw strong interest."
Almost 135 million shares moved by day's end, far more than a typical day on the TSE 300. Some suggested U.S. investors fuelled the volume, but the majority of trading was driven by Bay Street. Indeed, stocks listed in the United States and Canada, such as Nortel Networks Corp. and Alcan Inc., saw less-than-average interest.
Domestic action is usually tepid at best when U.S. markets are closed.
Of 14 TSE subindexes, 11 were up. Defensive sectors, led by pipelines, rose the most.
Investors also pulled back from speculative positions taken during Tuesday's abbreviated session.
Gold and oil and gas fell after jumping sharply on Tuesday. Banks rose, cutting their Tuesday declines. However, Air Canada and the other airlines continued to drop as the outlook for that industry dimmed. Bombardier Inc., which makes planes and trains, also declined. Insurers held fairly steady.
David Rosenberg, chief economist and strategist at Merrill Lynch Canada Inc. in Toronto, said "it's too early" to conclude that the markets are on sound ground.
"I don't think anyone should rush to conclusions," he said. "There's just too many unknowns. The investor who sits back and assesses the situation in the next few weeks is going to be the investor who comes out ahead."
Economists predict harder times for the North American economy in the coming months. Many believe consumer confidence will erode further and the economy will fall into recession because of disrupted business activity.
Indeed, economic data yesterday were not good. According to the U.S. Labor Department, jobless claims rose 21,000 to 431,000 last week. The preliminary University of Michigan consumer confidence survey, taken before the World Trade Center attacks, fell to an 8½-year low.
The question, Mr. Rosenberg said, is the economic slump's length. But recovery will come, he said. It's widely believed that the U.S. Federal Reserve Board will slash its benchmark interest rate for the eighth time this year in the coming weeks, possibly by as much as 75 basis points. That would leave the rate at 2.75 per cent, the lowest in three decades.
The U.S. government is expected to pump more money into the economy, spending a good chunk of its surplus on an effort to rebuild southern Manhattan and the Pentagon. In addition, observers believe U.S. military spending will rise dramatically.
"This is not the time to be running government surpluses," Mr. Rosenberg said. "My sense is there's going to be vigorous policy response, both from the fiscal and monetary side. Under that proviso, I think we're going to outlast near-term angst."
Most stocks listed on the TSE traded yesterday, but 17 issues of companies based in the United States remain halted until U.S. markets reopen Monday. TD Waterhouse Group Inc. and Magna Entertainment Corp. were among those halted.
And, in matters unrelated to the troubles in New York, the Canadian Venture Exchange had computer problems yesterday. For about an hour, the CDNX couldn't calculate the value of its main index, the third such failure in three months. Trading was not interrupted. Based in Calgary, the CDNX is home to most of the country's small-capitalization companies. It is owned by the TSE.