Markets nosedive into new year

Stock trading on the first business day of 2001 was decidedly rocky, as fear of a slowdown in the U.S. economy spread north of the border and took its toll on markets here.

The bellwether Toronto Stock Exchange 300 index slumped 3.6% on Jan. 2 after the National Association of Purchasing Management in the U.S. released a report showing that American factory activity was at a decade low.

However, by presstime, Canadian markets were rallying strongly after the U.S. Federal Reserve unexpectedly lowered its benchmark Fed funds rate (the rate banks charge each other for overnight loans) by 50 basis points to 6% in a bid to avert recessionary pressures. Economists had anticipated the bank would be lowering its rates by a quarter percentage point at the completion of a Federal Open Market Committee meeting on Jan. 31.

It was first time the U.S. central bank has cut interest rates between regular FOMC meetings since the fall of 1998, when an economic crisis threatened the world’s financial markets.

Immediately after the Fed’s announcement on Jan. 3, 2001, the TSE 300 rocketed 219.90 points, or 2.6%, to 8,831.40 after plunging more than 100 points earlier in the session and 322.17 points on the previous day.

In other good news, the Canadian dollar started the year with gusto, popping up briefly above US67 — the loonie’s best showing in more than three months. Most major currencies, notably the euro, have been showing renewed strength against the greenback since early November.

In the metal markets, palladium continued to outshine the other precious metals, closing up US$3 to US$975 per oz., while platinum rose US$4 to US$614 per oz. and gold reversed its upward trend and shed US$5.70 per oz. to reach US$269.00 per oz.

Canada’s gold majors were mixed: Barrick Gold rose 56 to $25.56; Placer Dome fell 45 to $14.80; Franco-Nevada Mining jumped 85 to $17.65; Kinross Gold was unchanged at 84; TVX Gold fell 42 to $2.38; and Cambior rose 6 to 46.

Nickel, copper, zinc and lead prices all declined slightly over the report period. However, that didn’t stop some of Canada’s base metal majors from advancing: Falconbridge rose 50 to $16.95 as it temporarily laid off about 100 workers at its Nikkelverk refinery in Norway as a result of the ongoing, 5-month-long strike at its Sudbury operations; rival Inco slipped 6 to $24.66; Noranda dropped 5 to $14.95; Teck‘s B shares fell 30 to $13.30; Cominco fell $1.80 to reach $23.50; Boliden rebounded 26 to $1.10; and Breakwater Resources was up 8 to hit $1.43.

The top-performing junior was Denver-based Summo Minerals, which rose 5 to 14 in advance of releasing results from a drilling program at the Doctor Mine zinc-oxide property in Gunnison Cty., Colorado.