Markets rise on Citi talks

Feb. 10, 2009 (Baystreet.ca) --

10:35 am EST North American markets enjoyed a stronger open Monday on a report Citigroup Inc. is in talks for the U.S. government to boost its stake in the bank.

Worries that major Western banks like Citigroup and Bank of America Corp might have to be nationalized because of mounting bad debts sent global markets sharply lower last week.

But investors seemed relieved by a Wall Street Journal report that Citigroup is negotiating with authorities to increase the U.S. government's stake in the teetering lender to as much as 40%.

The S&P TSX Composite Index regained 28.11 in the first half-hour of trading, to 7,978.10, led mostly by financials.

Canadian investors also took in a major deal as Nova Chemicals Corp. has agreed to be bought out for $2.3 billion U.S. by Abu Dhabi-based International Petroleum Investment Co.

Shares in Nova Chemicals plunged to a new low earlier this month as traders assessed heavy losses and looming financing deadlines in a deepening recession but soared $5.08 or 306% to $6.74 in Monday trading.

Investors are also braced for earnings reports from the big banks later in the week.

Canada's big banks are preparing to report their first-quarter earnings for 2009 this week. TD Bank, which reports Wednesday, was ahead 53 cents to $33.78.

Manulife Financial moved ahead 43 cents to $13.55.

The energy sector rose as EnCana Corp. gained 86 cents to $49.13 and Suncor Inc. 50 cents to $22.65.

The base metals sector on the TSX gained as the price of copper rose six cents to $1.47 U.S. a pound. Teck Cominco Ltd. moved up 13 cents to $3.95.

The gold sector was the leading decliner, as. Barrick Gold Corp. gave back $1.86 to $44.22.

On the economic front, retail sales in December fell 5.4% to $33 billion - the largest monthly decline in over 15 years.

Statistics Canada says three-quarters of the December retail decline was rooted in the automotive sector, without which retail sales fell 1.8%.

The markets in Canada may have been cheered, however, by news consumer confidence reversed ground in December and was making its way up to its highest levels since August.

The Harris-Decima survey of 2,000 people between Feb. 5 and Feb. 15 found 27% predicting they'll be better off a year from now, against 13% who expect to be worse off in early 2010.

This was an improvement from the previous tally in December, when only 20% expected to be better off and 18% had a pessimistic one-year outlook.

The proportion saying now is a good time for a major purchase rose to 41% this month from 35% in December.

The Canadian dollar was up a third of a cent in the early going to 80.20 cents U.S.

BAYSTREET Of the 13 TSX sub-groups, all but two were up to start the day; financials were ahead 1.6%, energy stocks 1.3 to the good, while health-care stocks shot up 1.2%.

Gold stocks slid 3.4% brighter, while materials were down 1.6%.

The TSX Venture Exchange dropped 4.80 points to 888.10 while the NASDAQ Canada index inched ahead 0.62 points, to 412.20

ON WALLSTREET

The Dow Jones industrials index gained 36.40 points to 7, 402.07. The Standard & Poor's 500 index picked up 3.01 points to 773.06, while the NASDAQ composite index subsided 6.47 points to 1,434.76.

Citigroup is in discussions with regulators about a plan for the federal government to take a larger ownership stake in the bank, according to a published reports Sunday.

The Wall Street Journal and The New York Times, citing sources familiar with the matter, reported that the government would convert a large portion of its preferred Citigroup shares - obtained as part of the bank bailout plan - to common shares.

Citi shares rose 9% Monday morning.

Economically speaking, a survey of 47 leading economists by The National Association of Business Economists finds that the recession will deepen before a turnaround begins later this year, projecting stronger-than-average gross domestic product growth in 2010.

The group, which officially determined that the nation entered recession in December 2007, said Monday that the economists see a 5% decline in GDP this quarter and a 1.7% drop in the second quarter. But a pickup will begin in the second half, and growth of 3.1% is seen next year, the economists predict.

Investors will also be watching a summit at the White House, where President Barack Obama is bringing together dozens of advisers and adversaries to discuss how to curb a burgeoning federal deficit laden with Social Security, Medicare and Medicaid obligations.

The summit is the first meeting toward a strategy to address America's long-term fiscal health and comes as Obama prepares ambitious plans to cut the federal deficit by half within four years.

The April crude contract on the New York Mercantile Exchange rose $1.18 to $41.21 U.S. a barrel.

The April bullion contract on the New York Mercantile Exchange dipped $16.70 to $985.50 U.S. after closing above $1,000 U.S. on Friday