North American markets were in the red Wednesday morning despite news of a rise in crude oil supplies that was good news for some U.S. investors but added to the negative sentiment on Bay Street that was already dealing with news of a merger in the mining industry.

At midday, Toronto’s S&P/TSX composite index was down 31.89 points or 0.32% to 9871.45 after rising 17.25 points Tuesday and the TSX Venture Exchange was off 9.52 points or 0,47% at 2008.87. Wall Street’s Dow industrial average slid 38.50 points or 0.35% at 10874.12 after dropping 24.24 points in the previous session. The Nasdaq was down 1.63 points or 0.08% at 2071.92 following Tuesday’s 16.66-point loss while the Standard & Poor’s 500 index had lost 4.63 points or 0.38% to 1214.80.

The Canadian dollar continued on a roll, up 0.50 of a cent to 82.85 cents US after jumping a full U.S. cent Tuesday on the latest bout of U.S. dollar selloffs.

Noranda Inc. announced Wednesday it plans to merge with Falconbridge Ltd., a major nickel and copper producer that it already controls, in a multibillion-dollar transaction. Falconbridge stockholders would receive 1.77 Noranda shares for each Falconbridge share. Brascan Corp., which owns about 41% of Noranda, said it will tender its stock to this offer.

Noranda was down 26¢ or 1.12% to $23.04, while Falconbridge shares gained 1.19¢ or 3.02% to $40.34 after jumping $2.20 before trading in its stock was halted late Tuesday afternoon, while Brascan traded up a dime to $46.35.

On the TSX, only energy and gold issues were in the black, up 0.29% and 0.68%. The metals sub-sector was off 0.43%.

In New York, stocks eased off early lows after a government report on domestic fuel inventories showed a greater-than-expected build in crude supplies, but a weaker dollar and climbing yields on long-term Treasury bonds countered the good news.

A gradual acceleration of inflation measures and a rally in commodities have combined to make investors nervous about stocks, as many on Wall Street predict a slow down in corporate profits for 2005. The feeble U.S. dollar and bearish bond market, combined with a rise in gold prices, underscored those concerns Wednesday.

Oil futures were up 21¢ at US$54.80 per barrel on the New York Mercantile Exchange, having surged past US$55 early in the session. Prices moderated following the release of the government’s weekly supply data, which showed a better-than-expected rise in crude inventories, but declines in supplies of gasoline and distillate fuel, which includes heating oil.

Overseas, Japan’s Nikkei stock average added 0.67%. In afternoon trading in Europe, France’s CAC-40 shed 0.33%, Britain’s FTSE 100 fell 0.20% and Germany’s DAX index declined 0.35%.