Financial Update

TSX +111.15 kicking off the week by surging higher, buoyed by firm oil prices and a jump by BCE Inc after Canada's top court backed the buyout of the telecom company....

· Dow -.33

· Dollar -.11c to $98.44.

· Oil +1.38 to $136.74US per barrel

· Gold -$16.50US to $887.20US

Bond Rates: http://www.bankofcanada.ca/en/rates/bonds.html <http://www.bankofcanada.ca/en/rates/bonds.html>


Bank of Canada ceases $1B in liquidity injections

Email the author

Record staff and Record news services The Bank of Canada says it won't renew a $1 billion term liquidity injection to chartered banks once it has matured on Thursday, a further sign that the central bank believes the credit crisis is easing in Canada. The central bank cited "continuing improvement in market conditions since the end of April'' for the decision. "Indicative measures of bank funding costs remain well below those in a number of other major currencies,'' the bank said in a statement. The bank has been providing two streams of $2 billion in cash injections through 28-day purchase-and-resale agreements since December, but has of late begun to reduce the rollovers to $1 billion upon reaching maturity. Yesterday's announcement effectively removes one stream with the second maturing on July 10.

CIBC likely to take another big hit after downgrades

Email the author

David Friend The Canadian Press

Canadian Imperial Bank of Commerce is likely to endure another multi-billion charge that could dig more than $2 billion out of its flesh in the third quarter, some industry watchers are predicting. Estimates ranged from $1 billion to more than $2 billion yesterday as analysts weighed in on Moody's downgrading monoline insurer XL Capital Assurance to junk late last week."We expect CIBC will write off its remaining fair value exposure to XLCA in its third-quarter 2008 results,'' Blackmont Capital analyst Brad Smith wrote in a note, putting the total writedown at $1 billion.

Financial Update

Oil and financials could weigh on TSX this week as Fed mulls interest rates

· TSX -209.48 as financial issues were hurt by inflation fears and worries over more U.S. mortgage-related problems, while consumer stocks also fell.

· Dow -220.40

· Dollar -.17c to $98.33.

· Oil +2.69 to $134.62US per barrel

· Gold -$.50US to $903.70US

Bond Rates: http://www.bankofcanada.ca/en/rates/bonds.html <http://www.bankofcanada.ca/en/rates/bonds.html>

By Malcolm Morrison, The Canadian Press

TORONTO - Gains could be tough to find on the Toronto stock market this week as investors wonder how much further the oil sector can carry the TSX, while financial shares fight fresh headwinds.

Concerns around those two areas again stopped the Toronto market's main index from establishing itself above the 15,000 mark last week.

On Monday, traders will be looking for the market's reaction to the Supreme Court's decision to allow the takeover of BCE Inc. to go ahead and a statement by the banks financing the deal that they "expect that the transaction will close in accordance with the definitive agreement between BCE and the sponsors."

Shares of BCE have traded well below the $42.75 per share price offered by the group led by the Ontario Teachers' Pension Plan in recent weeks.

But investors will likely want to hold off on any big bets on the market ahead of the announcement on interest rates from the U.S. Federal Reserve on Wednesday.

"It's a Fed week," observed Michael Gregory, senior economist at BMO Capital Markets, adding that most analysts expect the U.S. central bank to leave its key interest rate unchanged at a four-year low of two per cent.

"I think they're very much on hold for awhile until they see how things pan out," Gregory said.

"I think they essentially indicated that (last) week with various Fed officials giving a sense that the market was getting way too ahead of itself in factoring in tightening."

But economists think there isn't much doubt that the Fed and other central banks will have to move rates upward sooner or later to prevent inflation from taking hold as near-record oil prices threaten to ripple through the economy.

"You talk about 2009, of course I think that's well within the cards," said Gregory.

Last week, the TSX composite index hit a record close of 15,073.13 before China moved to restrain fuel consumption by raising government-controlled prices and the energy sector stalled.

The index ended the week down 1.3 per cent, led by falling energy and financials.

The move by the Chinese government sent a chill through the Toronto market, where the oil sector has been largely responsible for the index's six per cent year-to-date gain.

The sector has surged 27 per cent so far this, but oil prices have been volatile.

"The fundamentals have put the market in such a position that even little things like (the Chinese announcement) cause huge price swings," said Gregory.

"We're at the point now where commodity price volatility has increased and will likely remain high going forward."

Meanwhile, the financial sector ended lower on a run of bad news at the end of the week.

This included a decision by Moody's Investors Service to downgrade the two biggest bond insurers, MBIA Inc. and Ambac Financial Group Inc., which underscored U.S. money-centre problems and heightened fears of bond-market instability.

And Citibank warned of more writedowns.

"I think there's more (bad news) out there somewhere," said Gregory, noting that investors remain cautious about banks and other financial service providers, especially in the United States.

"Yes these stocks are cheap but maybe there's a reason why they're cheap."

Financial Update

Lower oil prices sent TSX tumbling, helps send NY markets higher <http://ca.news.finance.yahoo.com/s/19062008/2/biz-finance-lower-oil-prices-sent-tsx-tumbling-helps-send.html> -

· TSX -282.98 The market also took a hit from financials in the wake of a much higher-than-expected 2.2% inflation report for May and more disquieting news from the banking sector in the United States as Citigroup warns of more “substantial” write-downs

· Dow +34.03

· Dollar -.28c to $98.50 as domestic data topped estimates, but a sharp drop in oil prices dragged the currency from the 2week high it reached early in the session.

· Oil -4.75 to $131.93US per barrel Oil, which influences the commodity-linked Loonie’s performance, tumbled $5 a barrel after China decided to raise domestic fuel prices which is likely to crimp demand

· Gold + $10.70US to $904.20US

Bond Rates: http://www.bankofcanada.ca/en/rates/bonds.html <http://www.bankofcanada.ca/en/rates/bonds.html>

Hundreds swept up in U.S. mortgage fraud arrests

Report on Business The Globe and Mail

LARA JAKES JORDAN The Associated Press

WASHINGTON — The FBI says it has arrested about 300 real estate industry players since March — including dozens over the last two days — in its crackdown on incidents of mortgage fraud that have contributed to the country's housing crisis.

One law enforcement official put the losses to homeowners and other borrowers who were victims in the schemes at over $1-billion (U.S.).

The U.S. Justice Department and FBI planned to announce the recent arrests — including apprehensions in Chicago, Atlanta, Miami, and suburban Maryland — at a news conference Thursday afternoon in Washington.

Two former Bear Stearns managers in New York were also included in the sweep, becoming the first executives to face criminal charges related to the collapse of the subprime mortgage market.

More than 400 people are being charged in the sting that began March 1 and ended this week, authorities said. They include industry borrowers, loan originators and real estate agents. An estimated 50 people were arrested in the last two days alone.

Across the country, reports of mortgage fraud have soared over the past year as the subprime mortgage market collapsed and defaults and foreclosures soared.

Banks reported nearly 53,000 cases of suspected mortgage fraud last year, up from more than 37,000 a year earlier and about 10 times the level of reports in 2001 and 2002, according to the Treasury Department's Financial Crimes Enforcement Network.

The most common type of mortgage fraud was misstatement of income or assets, followed by forged documents, inflated appraisals and misrepresentation of a buyer's intent to occupy a property as a primary residence.

Over the last several months, the FBI has been investigating an estimated 1,300 mortgage fraud cases — including 19 involving subprime lending practices by U.S. financial institutions.

The Justice Department also is expected to ask Congress for more money to help combat mortgage fraud as part of a larger funding request to curb white collar crime and violent crime.