Markets fall on war worries, loonie climbs

www.thestar.com Feb. 4, 2003. 06:10 PM

CANADIAN PRESS The Canadian dollar closed above the 66 cent (U.S.) level for the first time since July 9 on Tuesday as worries over a war with Iraq further depressed the American dollar and boosted gold.

The loonie closed up 0.10 of a cent to 66.02 cents (U.S.).

"There's a fair number of geopolitical issues the world is focused on and currencies tend to trade in the safe-haven manner, and the U.S. dollar is not seen as that safe haven at the moment," said Gerard Buckley, director of foreign exchange at Scotia Capital.

The American dollar is at a three-year low against the euro, which traded at $1.0882 (U.S.), up from $1.0785 Monday.

On the stock markets, anxiety over Iraq, a big charge by the world's largest insurer and a glum report from French telecom-equipment maker Alcaltel sent indexes lower, a day before U.S. State Secretary Colin Powell makes a key presentation to the United Nations regarding Iraq's weapons program.

The price of gold rattled up $8.20 to $379 (U.S.) an ounce in New York.

Losses in the information technology and telecom sectors took Toronto's S&P/TSX index down 48.75 points to 6,544.93. Nortel lost 20 cents to $3.50 and BCE dipped 37 cents to $28.75.

Also contributing to the Toronto loss was Inco, tumbling $2.50 to $30.65 after the nickel producer said a huge writedown of the Voisey's Bay nickel project contributed to a net loss of $1.48 billion (U.S.) last year.

The TSX was supported by a 4.25 per cent rise in the gold sector. Barrick gained 82 cents to $25.57.

The TSX Venture Exchange gained 12.06 points to 1,130.02.

On Wall Street, the Dow Jones industrial average dropped 96.53 points to 8,013.29.

The Nasdaq composite fell 17.64 points to 1,306.15 while the S&P 500 was down 12.12 at 848.20.

Investors are worried that a war with Iraq would further undermine a sluggish economy in which earnings continue to languish.

"The market is very concerned," said Katherine Beattie, senior technical analyst at MMS in Toronto.

"Everybody is waiting and unfortunately this waiting is hard on the market and the charts look horrific. We're waiting to see if we break last week's lows of 7,917 (intraday) for the Dow. And so, if Powell stands up tomorrow, provides evidence, the market is not going to bounce on it."

United Nations arms investigators found another empty chemical warhead on Tuesday, while chief inspector Hans Blix warned Iraq's government that "it's five minutes to midnight."

Markets paid little attention to a bit of positive economic news - the U.S. Commerce Department said orders to American factories in December rose by a slightly better than expected 0.4 per cent.

Techs were under particular pressure after Alcatel forecast a drop in sales of between 25 and 30 per cent in the current quarter. It also reported a fourth-quarter loss of $1.2 billion (U.S.). Alcatel shares lost 22 cents to $6.78 (U.S.).

Wall Street financial stocks took a hit as American International Group, the world's biggest insurer, slid $3.63 to $51.70 (U.S.) after announcing an after-tax charge of $1.8 billion to boost reserves.

Most Toronto financials were also depressed, with Royal Bank down 61 cents to $54.61. But Manulife was up 1 cent to $36 after its 2002 profit rose 19 per cent to $1.39 billion.

Networking giant Cisco Systems declined 28 cents to $13.20 (U.S.) ahead of its quarterly earnings. After the close, Cisco reported a quarterly profit of $991 million on sales of $4.7 billion, up from $660 million on $4.8 billion a year ago. Excluding one-time items, Cisco earned 15 cents per share, beating analyst expectations by 2 cents a share.

On the Toronto market, declines beat advances 631 to 461 with 201 unchanged.

Canada's largest appliance maker, Camco Inc. reported solid fourth-quarter profits but warned its Hamilton plant faces an uncertain future. Camco shares were ahead 10 cents to $2.70.

Canada Bread, Canada's biggest bakery company and a unit of food giant Maple Leaf Foods, is closing its London, Ont. bakery, affecting 181 jobs. Canada Bread shares were down 5 cents at $22.20; Maple Leaf rose 9 cents to $11.49.

St. Lawrence Cement Group declined 39 cents to $19.01 after it posted higher profits but lower sales for 2002.

EnCana was down 23 cents to $47.77 after Monday's announcement of the sale of 10 per cent of the Syncrude oilsands venture to Canadian Oil Sands for almost $1.1 billion.

Canadian Oil Sands units slid $2.40 to $36.50 after the income trust said the expansion of the Syncrude stake will be funded largely by new issues of units, with the rest supported by debt.

The Toronto energy sector was up slightly as crude oil rose 80 cents to $33.58 (U.S.) in New York. Compton Petroleum gained 20 cents to $5.

TSX volume was 222.9 million shares worth $2.58 billion.

The Nasdaq Canada index lost 3.53 points to 223.48.