Financial Update for March 30, 2009

If market history is any guide, stock rally may extend into April

Historical data support hopes for a near-term continuation of the run-up ignited March 10 when American financial services giant Citigroup said it was profitable in the first two months of the year. Andrew Pyle, a wealth adviser at ScotiaMcLeod in Peterborough, said as of last week the market has matched the average percentage gain of a bear market rally since the late 1930s.

"It doesn't mean you can't have above average but we had already hit average. And the biggest rally that we have ever seen is about 62 per cent -- so clearly, we could keep going,'' Pyle said. U.S. markets also had another remarkable week, although indexes veered into negative territory Friday as investors took some profits.

• TSX-174.44 as traders took profits from an exuberant rally which is into its third week. This still leaves the main Toronto index up 16.5% since the market's rally took off March 10
• DOW -148. up almost 19% since the start of the rally, which has been prodded along by better-than-expected U.S. economic indicators ranging from home sales to durable-goods orders.
• Dollar -.56c to 80.81USD
• Oil -$1.96 to $52.38US per barrel.
• Gold +$16.60 to $923USD per ounce
• Canadian 5 yr bond yields +.02bps to 1.90 Four weeks ago it was at 2.10
• http://www.financialpost.com/markets/market_data/money-yields-can_us.html

Obama gives GM its bailout

White House asks CEO Rick Wagoner to resign as part of executive shakeup in auto industry

TONY VAN ALPHEN
THE CANADIAN PRESS

The White House plans to announce today that it will give General Motors Corporation enough government aid to restructure over the next 60 days, sources say, while Chrysler will get up to 30 days to complete an alliance with Italian automaker Fiat SpA.

News of the bailout plan came just hours after GM's chair and CEO, Rick Wagoner, resigned at the request of the Obama administration.

U.S. President Barack Obama's plan includes U.S. government backing of warranties for GM and Chrysler vehicles to give consumers confidence.

GM, the world's second biggest automaker after Toyota, and Chrysler are currently operating on a $17.4-billion US lifeline of government loans after an industry crash in sales over the last year that has left the automakers starving for cash.

GM had sought an additional $16.6 billion, while Chrysler wants another $5 billion to help them through the worst sales slump in the U.S. in more than a quarter of a century.

The Canadian Auto Workers head said Wagoner's resignation makes workers in this country nervous.

Analysts said Wagoner's resignation raises fears that concessions by stakeholders including workers, suppliers and bondholders will increase because the Obama administration wants to make sure the restructurings work and that taxpayers don't lose their investments in the companies.

Wagoner has faced increasing political pressure to step down as part of a broader industry executive shakeup as a condition of receiving billions of dollars in additional public loans.

U.S. administration officials confirmed Wagoner's departure. But GM did not address it in a brief statement last night that said the company will wait for the U.S. government's restructuring announcement.

Obama said in a broadcast earlier yesterday that GM, Chrysler LLC and other stakeholders still need to take bigger steps so they can gain further public aid and survive.

"They're not there yet," Obama said.

"We think we can have a successful U.S. auto industry," Obama told the CBS program Face the Nation. "But it's got to be one that's realistically designed to weather this storm and to emerge -- at the other end -- much more lean, mean, and competitive than it currently is."

Obama added the U.S. government would require a "set of sacrifices" from all industry players from managers, dealers, bondholders, workers and suppliers.

"Everybody's gonna have to come to the table and say it's important for us to take serious restructuring steps now in order to preserve a brighter future down the road."

In Canada, GM has requested more than $6 billion (Cdn) from the federal and Ontario governments. Chrysler is asking for almost $3 billion.

The two automakers hoped to submit survival plans to the governments tomorrow but Chrysler and the Canadian Auto Workers remain in a deadlock in negotiations on labour cost cuts.

Ottawa has indicated that it would give Chrysler more time if the government sees progress in those talks.

The federal and provincial governments are also holding a noon news conference to provide updates on restructuring efforts in Canada in view of the release of Washington's plan for the industry.

"We've said whatever the United States government is ultimately going to do, we're prepared to do our 20 per cent share because we have 20 per cent of the industry," Prime Minister Stepher Harper told Reuters in an interview yesterday.
"And we've been working daily with the American administration to ensure we're on the same page."

"I'm certainly very confident that the Obama administration is going to require the automobile manufacturers and their stakeholders to make the difficult decisions necessary so that any government support will be successful and will create a viable industry," said Harper.

Despite recent rumblings that further U.S. aid would be conditional on major upheaval, including the executive ranks, Wagoner's departure stunned many industry officials.

"I'm really shocked," said Ken Lewenza, president of the Canadian Auto Workers. "I hope this doesn't divert attention from the paramount goal of getting this industry on its feet at this critical time."

Lewenza also questioned whether it was a good move because of Wagoner's experience and knowledge of the industry. Wagoner, 56, has led GM Corp as CEO since 2000.
While admitting past mistakes, Wagoner has driven the company hard in cutting costs and shifting to hybrids models and electric cars from big trucks and sport utility vehicles in the last two years.