July 22, 2011 Newsletter

Dear Friends,

 “…People are like stained-glass windows. They sparkle and shine when the sun is out, but when the darkness sets, their true beauty is revealed only if there is a light from within…”

-Elizabeth Kubler Ross

Photo of the day:

Veterinary physiotherapist Livia Pereira (L) applies cream on a paralyzed lion Ariel as the veterinary chiropractic Camila Morandini works on it at the living room of Pereira’s home in Sao Paulo July 20, 2011. Pereira’s home has turned into a hospital since the 3-year-old lion started a landmark treatment to cure a rare autoimmune disease which paralyzed his legs about a year ago. Through an internet campaign launched on social networking websites such as Facebook and Twitter, Borges has been managing to raise funds to pay for his $11,000 monthly hospital bills. Nearly 60,000 people have clicked on the “like” button on Facebook and hundreds of others made donations to two bank accounts linked to Borges’ foundation aimed at helping abandoned animals. The 310-pound (140-kg) lion started limping over one year ago prompting doctors to carryout a surgery to remove a herniated disc which they believed was causing the problem. But the procedure only made things worse and his rear legs were soon paralyzed as well. As Ariel grew weaker, Borges decided to turn to alternative methods such as chiropractic therapy and acupuncture. According to Pereira, head of the team of vets who have been treating the lion, he has so far responded well to the procedures.

(REUTERS) 

Market Commentary:

Canada

Canada’s inflation rate slowed more than economists forecast in June as carmakers offered larger discounts, hotel rates declined and gasoline prices eased.

The consumer-price index increased 3.1 percent from a year earlier, Statistics Canada said today in Ottawa, following a May increase of 3.7 percent that was the fastest since March 2003. The lowest prediction in a Bloomberg survey of 24 economists was 3.4 percent, with a median forecast of 3.6 percent.

The core inflation rate, which excludes eight volatile items such as gasoline, unexpectedly slowed to a 1.3 percent pace in June from May’s 1.8 percent. Economists forecast it would accelerate to 1.9 percent.

Bank of Canada Governor Mark Carney said this week that inflation will exceed 3 percent, the top of his target range, in “the short term,” while keeping his key interest rate at 1 percent to foster an economic recovery. Policy makers are weighing rising prices against the risks posed by Europe’s debt crisis and slow U.S. growth.

“It certainly gives the Bank of Canada a little bit more flexibility to stay on the sidelines,” said Sal Guatieri, a senior economist at Bank of Montreal in Toronto.

The Canadian dollar fell 0.7 percent to 94.99 cents per U.S. dollar at 12:55 p.m. in Toronto. One Canadian dollar buys $1.0527. The two-year Canadian government bond yield fell six basis points to 1.50 percent.

Currency Weakens

The currency weakened from about 94.35 cents to 94.65 cents during the 40 minutes before Statistics Canada released the CPI data at 7 a.m. Toronto time.

“There was, once again, heavy speculation about the number before the release,” said Sebastien Galy, a senior foreign- exchange strategist at Societe Generale SA in London, via e- mail.

Canada’s statistics agency made economic data available to companies licensed to distribute its data up to 59 seconds before the official publication time for more than six years, according to a KPMG LLP report published yesterday on Ottawa- based Statistics Canada’s website.

“KPMG contacted a number of licensed distributors and concluded that it is unlikely that any data were actively released to their clients prior to the official release time,” a Statistics Canada summary of the report said.

KPMG Investigation

The KPMG investigation was ordered in December by then- Industry Minister Tony Clement after the agency, Canada’s primary source of economic information, said it had allowed distributors to get information as much as 59 seconds before it was released to the public. The agency stopped the practice on Nov. 25 after being alerted to it by Bloomberg News.

“Statistics Canada applies strict security procedures during media lockups to prevent release of protected information prior to official release time,” Peter Frayne, head of Statistics Canada’s media relations in Ottawa, said in an e- mail. “These procedures were followed during this morning’s lockup and we have no indication that anything unusual occurred.”

The currency reached the strongest in more than three years yesterday on speculation the Bank of Canada will increase its policy interest rate this year. The central bank’s statement at its July 19 rate decision dropped the word “eventually” from a phrase about when policy makers will move.

“It’s comforting in so far that some of the immediate pressure on the Bank of Canada” to raise interest rates is lifted, said David Tulk, chief Canada macro strategist at Toronto-Dominion Bank’s TD Securities unit.

Monthly Data

On a monthly basis, consumer prices fell 0.7 percent in June and the core measure fell 0.6 percent. Economists forecast consumer prices would drop 0.2 percent from May and that core prices would be unchanged.

Gasoline prices fell 3.7 percent on the month in June, slowing the year-over-year advance to 28.5 percent from May’s 29.5 percent, Statistics Canada said.

The main factor behind the decline in the annual inflation rate was a 3.1 percent drop in passenger vehicle prices that was due to “larger discounts given by some manufacturers,” the report said.

Traveler accommodation prices fell 2.9 percent in June from a year earlier, compared with a May gain of 3.3 percent.

The Bank of Canada two days ago raised its inflation forecast over the next nine months, saying consumer prices will average 2.8 percent from July through September and slow to 1.9 percent in the second quarter of next year. They also said the core rate, which excludes eight volatile items, will peak at 2.1 percent in the first quarter of 2012.

Underlying Pressures

“The underlying inflationary pressures are stronger in Canada than they are in the United States,” said Paul Fenton, chief economist at Caisse de Depot et Placement du Quebec, Canada’s biggest pension-fund manager and a former Bank of Canada economist, before the report. “Starting to raise interest rates in the fall is the most likely outcome,” he said, adding the central bank “will go at a measured pace.”

Statistics Canada also said today that retail sales rose 0.1 percent in May, compared with economist predictions for a 0.3 percent decline. Gasoline receipts were the highest in almost three years and building material and gardening store sales rose 3.3 percent.

(Bloomberg)

 US

U.S. technology stocks rallied on improving earnings, sending the Nasdaq-100 Index to a 10-year high and extending a weekly gain for the Standard & Poor’s 500 Index, while lower-than-estimated results at Caterpillar Inc. dragged the Dow Jones Industrial Average lower.

AMD rose 19 percent after the chipmaker forecast more sales than analysts estimated. Technology stocks in the S&P 500 gained 1.2 percent, the most among 10 industries, as SanDisk Corp. added 9.6 percent after earnings beat projections. Caterpillar slid 5.8 percent as profit trailed projections because of Japan’s record earthquake and slower demand from China. C.R. Bard Inc. declined 12 percent, the most in the S&P 500, after reporting a loss in the second quarter.

The S&P 500 rose 0.1 percent to 1,345.01 at 4 p.m. in New York and gained 2.2 percent for the week. The Dow Jones Industrial Average dropped 43.25 points, or 0.3 percent, to 12,681.16. Gains in technology stocks pushed the Nasdaq-100 Index up 1.1 percent to a 10-year high.

“You’re seeing fast money gravitate to the large-cap tech names, viewing them as better able to withstand slower economic growth,” said Mark Bronzo, who helps manage $26 billion at Security Global Investors in Irvington, New York in a telephone interview. “There are a couple stocks weighing on the Dow where the earnings came out a little less than expected but overall, earnings have been pretty good. All eyes are on the budget deficit discussion. It’s not a market people really want to short.”

Aid for Greece

Stocks surged yesterday after euro-area leaders eased the terms of loans for cash-strapped nations and announced the latest aid for Greece after eight hours of talks yesterday. Officials empowered their 440-billion euro ($635 billion) rescue fund to buy debt across stressed nations, helping to erect a firewall around Spain and Italy even as they risked temporary default to lighten the Greek debt burden.

“Policy makers have made an important step,” said Jeffrey Palma, global equity strategist at UBS AG, in an interview on Bloomberg Television’s “In the Loop.” “Is this the be-all end-all package? No, and I think we need to be concerned still that there are medium-term challenges, but I do think it eliminates some of those tail risks.”

Quarterly reports from corporations have helped boost U.S. stocks this week. Among 122 S&P 500 companies that have reported earnings since July 11, 83 percent exceeded the average analyst estimate, according to data compiled by Bloomberg. The S&P 500 climbed 2.1 percent this week through yesterday.

(Bloomberg)

Have a Wonderful Weekend!

As Always,

Kyle, for Carolann.