Toronto Stock Exchange Market responds to offshore interest rate

A round of interest rate cuts by West Germany, The Netherlands and France had the desired short- term effect of bolstering the bloodied U.S. dollar. Markets everywhere responded with modest enthusiam. The tse composite index moved back over the 3,000-pt mark for the first time in weeks, closing at 3,028.04 pts for a 33.41-pt daily gain. Yesterday, the interest rate news helped propel the index by another 76 pts.

Markets are also responding, to a degree, to the Federal Reserve Board’s tactic of preserving and increasing liquidity in the market by injecting cash.

Both manoeuvres are deemed short term Band-aid solutions by many, which fail to address the real causes of the October crash — the huge U.S. debt and Washington’s lack of responsible fiscal disipline. Although some ground has been made towards cutting the monstrous U.S. budget deficit for 1988, most economists are saying it’s too little too late.

The good news, at least for the next three to six months, is that there appears to be no evidence of that looming recession, which just about every analyst was predicting after Oct 19. As pointed out immediately after the crash in this paper, consumer confidence remains unchanged. Numerous new surveys are confirming this fact. The Royal Bank of Canada concludes that a slowdown in the Canadian economy is expected in 1988, but not a recession. This from the bank’s leading Trendicator, which charts seven leading economic indicators.

One group acting obviously bullish are base metals investors. Both copper and nickel are fast becoming the glamor metals as prices remain near recent highs. (The bears note that this is a classic top cycle, late bull stage indicator.) Regardless who might be right, the tse’s metals and minerals index advanced smartly by 62.35 pts to 2,514 pts.

The star of the group is Inco Ltd. The big nickel producer churned through a whopping 1.3 million shares today for a value of more than $30 million. The issue added more than $3 this week to $23.38 after touching $24.13 this morning. Competitor Falconbridge Ltd. was also strong, trading more than $12.5 million worth of stock. The issue closed at $21.75. Both companies are looking to very strong fourth quarters. The question remains “how long will it last?”

Precious metals are also responding to the rate cuts. In fact, since the crash, gold has been rather resilient to price decline. Today, the second London fix was $475(US) per oz. The much stronger price saw many institutional buyers snapping up senior highly liquid issues.

American Barrick Resources, which is on its way to becoming the first Canadian miner to produce one million oz of gold per year from North America, closed at $26.38 — up $1.10 today. Latest news from the company’s Goldstrike project in Nevada is that in situ reserves total a mind-numbing 9 million oz. Franco-Nevada Mining, which holds a big royalty interest in this property, advanced on the news to $7.75.

Staid giant Kerr Addison Mine, which has not generally been known as a big shooter, is taking on a more aggressive color. Recently the cash-rich company bought a (post October crash) block of msv Resources shares at $3. This week, Kerr added to its holdings in Golden Shield Resources, increasing its stake to 29.3%. Kerr’s common shares closed at $19.88.

The over-all weakened share price picture is starting to flush raiders out. Dickenson Mines, which has been accumulating Wharf Resources shares, appears to be the target of Pamour Inc. Pamour says it has purchased a 9.9% interest in Dickenson (see front page story). Dickenson was firm at $10.75 — up $1 for the day. Pamour was steady at 9.

Trading in the shares of St. Joe Gold was halted today. The company plans to buy out the minority shareholder interest held in the company. St. Joe is controlled by Australian mining magnate, Alan Bond.