A multi-billion dollar offer for yet another of Canada's major mining companies helped send the Toronto stock market higher Monday.
New York markets were mixed after disappointing data on U.S. house sales renewed concerns about how the rapidly cooling sector could affect the overall economy.
“People are seeing sales drop and all of a sudden you have a backlog of inventory on the market at a lower price,” said John Stephenson, portfolio manager at First Asset Funds Inc.
“People have taken the inflated value of their house, borrowed against it and then bought consumer goods — which is great if the price is rising but already many markets are turning over.”
Toronto's S&P/TSX composite index closed up 65.22 points to 13,302.88 after European-based Xstrata PLC made a $4.6-billion bid for LionOre Mining International Ltd.
The all-cash offer of $18.50 a share — which represents a 5.8-per-cent premium over the closing price of $17.49 on Friday — was unanimously approved by LionOre's board of directors and LionOre shares jumped $1.80 to $19.29.
Last fall, Xstrata bought Canada's Falconbridge Ltd. for $24.8-billion.
The LionOre deal helped send the TSX metals and mining sector up 3.2 per cent on hopes that other companies will be bought up for big share premiums.
The TSX also benefited from energy stocks on higher oil prices.
The Canadian dollar was off 0.07 of a cent (U.S.) to 86.08 cents after charging ahead 1.3 per cent last week on rising commodity prices and inflation data.
The TSX Venture Exchange gained 20.49 points to 3,175.03.
On Wall Street, losses on the Dow Jones industrials moderated considerably from late morning losses of more than 100 points, declining 11.94 points to 12,469.07 after the Commerce Department reported Monday that sales of new homes fell by 3.9 per cent last month to a seasonally adjusted annual rate of 848,000, the slowest pace in nearly seven years and much lower than the 985,000 economists had expected.
The February decline followed an even larger 15.8-per-cent drop in sales in January.
Economists have been watching the housing industry for a hint about where the U.S. economy is heading.
The disappointing data come amid continued concern about the subprime mortgage market in the United States, which has been slammed by an increase in delinquencies in recent months.
The Nasdaq composite index was up 6.7 points to 2,455.63 and the S&P 500 index added 1.39 points to 1,437.5.
The May contract for light sweet crude on the New York Mercantile Exchange gained 63 cents to $62.91 a barrel on continued tensions between Iran and the West following Iran's detention of British naval personnel. Recent declines in U.S. oil stocks also supported the market and the TSX energy sector 0.88 per cent.
The consumer staples sector was the biggest percentage decliner, down 0.68 per cent with shares in grocer Loblaw Cos. down 64 cents (Canadian) to $46.16 and Shoppers Drug Mart off 52 cents to $50.90.
On the TSX, advances beat declines 918 to 664 with 240 unchanged as 369.2 million shares traded worth $6.1-billion.
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FORZANI MAY ATTRACT
The fourth-quarter numbers beat consensus, a stock buyback has been announced and an initial dividend is being talked about. What else could be in the offing for Forzani Group? Desjardins Securities believes the sporting goods retailer may even attract suitors.
Analyst Keith Howlett has upgraded the stock to “buy” from “hold,” raising its price target to $25 from $19 on the back of a strong fourth quarter reported last Friday and a prudent capital program, bringing return on equity back above 10 per cent.
In the past two weeks, the private equity folks at KKR and Apollo have announced acquisitions of retailers with strong positions in their respective niches. The deals, at high multiples of 9.5-to-12.5 times EBITDA, exceed the multiple of seven times that Forzani is trading at, Mr. Howlett points out.
