STOCK MARKETS — TSE neutral as economy shows signs of a slowdown

Fears that the Canadian economy may be headed back into a recession kept eastern markets in check this week as the TSE 300 composite managed only a slight gain. Over the 5-day report period ended June 13, the TSE 300 composite rose 7.55 points to close at 4,492.10.

Weaker economic performance indicators surfaced early in the week. On Monday, Statistics Canada reported that the gross domestic product (GDP) for the first quarter of 1995 rose by 0.7% on an annualized basis. This is down sharply from the 4.6% annualized increase in the GDP reported in the fourth quarter of 1994. The first-quarter results represent the smallest gain since the tail end of the recession in 1992.

The weaker economic performance forced the Bank of Canada to lower its key rate to 7.19%, down by 0.19%. Many of Canada’s chartered banks followed suit and lowered their prime lending rates by 0.25% to 8.75%.

The Canadian dollar was only marginally weaker, closing at US72.33 cents, down 0.04 cents.

All precious metals prices were stronger this week, with platinum and gold posting large gains. The London morning gold fix for June 14 was US$386.80 per oz., up US$2.15; the platinum fix was US$436.60 per oz., up US$4.45; and silver had a US3 cents gain to close at US$5.37 per oz. The gold and precious metals subgroup was also stronger, adding almost 2% to close at 10,447.48.

Base metal prices were mixed for the week, with lead and copper posting small gains and nickel losing US5 cents to close at US$3.46 per lb. The metals and minerals subgroup ended the week on a negative note, dropping 1.6% to close at 4,4921.48.

On the whole, senior gold producers continued to rack up impressive gains. Barrick Gold added $1 to close at $35.25; Placer Dome gained $1.25 to end at $35.50; Hemlo Gold Mines lost 63 cents to close at $15; and Echo Bay shed 13 cents to end at $12.13.

Speculation about a potential deal between Inco and Diamond Fields Resources was confirmed at the beginning of the week. The nickel giant agreed to buy a 25% interest in the Voisey Bay nickel-copper-cobalt deposit, as well as a 7% equity interest in Diamond Fields, for about $700 million. As details about the deal circulated, speculators pulled out of the market and Diamond Field’s share price plunged $10.25 to close at $69.75. Investors, impressed with Inco’s move, sent the nickel producer’s shares marginally higher, rising 13 cents to $34.75. The “B” class shares of Teck, which owns a 10% equity interest in Diamond Fields, lost ground, shedding 38 cents to $26.75.

Montreal-listed Fairstar Explorations saw its shares increase by 29 cents. The company has acquired property in the Voisey Bay area and is exploring gold properties in Ghana and Nevada, along with diamond properties in Quebec and Alberta. Fairstar shares hit a new 52-week high of $2.20 before rolling back to close at $1.75.

More than 1.8 million shares of Breakwater Resources changed hands following the company’s announcement of a 1-new-for-20-old-share consolidation. Breakwater shares added 1 cents to close at 13 cents. Breakwater’s major shareholder, Dundee Bancorp was also active. About 240,000 shares traded as the stock hit a new 52-week high of $12.88 before sliding back to $12.50, up 38 cents.

A new Merrill-Crowe circuit is expected to have a profound effect on annual gold production at Eldorado’s Colorada gold mine in northwestern Mexico. Annual production is expected to increase to 30,000 from the current 19,900 oz. In other news, the company has retained Richardson Greenshields to act as an adviser regarding an unsolicited takeover bid from Glamis Gold. Shares of Eldorado hit a new 52-week high of $6.59 before closing at $6.13, up 25 cents. Glamis shares also rose, adding 13 cents to close at $11.