August 25th, 2011 Newsletter
Dear Friends,
Tangents:
August 25th, 1939: The Wizard of Oz is released!
He lives long who lives well.
-English proverb, mid 16th century.
On this day, August 25th, in 1879. Robert Lois Stevenson wrote to W. E. Henley, the following:
(Stevenson was on his way to California to see Fanny Osbourne, the American with whom he had fallen in love in France in 1876 and whom eventually he married. The train was crossing south-west Wyoming, and he had been taken ill at Laramie.)
What it is to be ill in an emigrant train let those declare who know. I slept none till late in the morning, overcome with laudanum, of which I had luckily a little bottle. All today I have eaten nothing, and only drunk two cups of tea, for each of which, on the pretext that the one was breakfast, and the other dinner, I was charged fifty cents, and neither of them, I may add, stood by me for three full minutes. Our journey is through the ghostly deserts, sage brush and alkali, and rocks, without form or colour, a sad corner of the world. I confess I am not jolly, but mighty calm in my distresses. My illness is a subject of great mirth to some of my fellow travelers, and I smile sickly at their jests. –from The Book of Days.
Joy is a net of love by which you can catch souls. – Mother Teresa
Photos of the day
August 25, 2011
An artisan works on a statue of Mother Teresa ahead of her 101st birth anniversary, at a workshop in Kolkata, India. Rupak De Chowdhuri/Reuters
Nepalese are seen as they spend their time in a temple at Bashantapur Durbar Square, in Kathmandu, Nepal. Navesh Chitrakar/Reuters
Market Commentary:
Canada
By Matt Walcoff
Aug. 25 (Bloomberg) — Canadian stocks fell for the first time in four days, led by financial companies and energy producers, after the U.S. reported an increase in initial jobless claims and European equities plunged.
Suncor Energy Inc., Canada’s largest oil and gas producer, dropped 1.4 percent. Royal Bank of Canada, the country’s largest lender by assets, lost 1.2 percent as financial shares slid.
Barrick Gold Corp., the world’s largest gold producer, increased 1.6 percent as companies in the industry rebounded after sinking 7.2 percent in the previous two days.
The Standard & Poor’s/TSX Composite Index slipped 45.96 points, or 0.4 percent, to 12,297.85 at 2:05 p.m. in Toronto after gaining 0.3 percent earlier on speculation the U.S. Federal Reserve will signal new measures to stimulate the economy at a symposium in Jackson Hole, Wyoming, tomorrow.
“A lot of hopes had been put into tomorrow’s Jackson Hole meeting,” Luciano Orengo, a money manager at Manulife Financial Corp. in Toronto, said in a telephone interview. Orengo oversees C$1.6 billion ($1.6 billion). “People are coming to the realization that nothing of substance is going to come out tomorrow.”
The S&P/TSX slipped 4.7 percent this month through yesterday, the second-least among major developed-market stock benchmarks behind New Zealand’s, as gold rallied to a record while oil futures sank 11 percent. Gold tumbled 5.6 percent yesterday, the most since March 2008, after the U.S. reported a bigger increase in durable-goods orders than most economists had forecast.
Last week, 417,000 Americans filed for first-time unemployment claims, the Labor Department said today in Washington. The figure exceeded all 46 forecasts in a Bloomberg survey of economists.
Crude oil and natural gas swung between gains and losses as European equity markets tumbled on concern the region’s debt crisis is worsening.
Suncor dropped 1.4 percent to C$29.87. Encana Corp., the country’s largest natural gas producer, declined 2.9 percent to C$24.17. Niko Resources Ltd., an oil and gas producer with operations in South Asia, sank 7.1 percent to C$52.34, the lowest since March 2009, after reporting a quarterly loss.
Athabasca Oil Sands Corp., PetroChina Co.’s partner in oil- sands development, surged 5.5 percent to C$13.01 after the Washington Post said the U.S. State Department will take a step toward approving a proposed TransCanada Corp. pipeline to the Gulf Coast as early as tomorrow. The newspaper cited unnamed sources familiar with the process.
The S&P/TSX Financials Index decreased after jumping the most since July 2009 in the previous two days.
Royal Bank retreated 1.2 percent to C$50.65. Manulife, North America’s fourth-biggest insurer, slipped 2.6 percent to C$12.88. National Bank of Canada, the country’s sixth-biggest lender, fell 2.3 percent to C$70.72 after reporting third- quarter revenue that trailed the average analyst estimate in a Bloomberg survey.
Precious-metals producers advanced as silver gained and gold rebounded from a two-week intraday low.
Barrick increased 1.6 percent to C$49. Goldcorp Inc., the world’s second-largest gold producer by market value, climbed 1.9 percent to C$49.66. China Gold International Resources Corp. rallied 11 percent, the most since July 2010, to C$4.61 after reporting a fivefold resources increase at its Jiama copper and gold mine in Tibet.
Electronic-products maker 5N Plus Inc. jumped 16 percent, the most intraday since June 2009, to C$8.31. The company reported fourth-quarter profit that beat the average of four analyst estimates by 48 percent, excluding certain items.
US
By Sarah Jones, Alexis Xydias and Rita Nazareth
Aug. 25 (Bloomberg) — Stocks dropped worldwide, snapping a three-day rally for the Standard & Poor’s 500 Index, after the U.S. said jobless claims increased and traders sold German equity futures before France, Italy and Spain extended curbs on short selling. Gold, the dollar and Treasuries rallied.
The S&P 500 fell 1.6 percent to 1,159.27 at 4 p.m. in New York, after climbing 4.8 percent over the past three days. The Stoxx Europe 600 Index lost 1.2 percent. Germany’s DAX Index ended the day with a 1.7 percent slump, recovering from a 15- minute plunge of 4 percent. Gold added 0.3 percent, halting its biggest decline since 2008. The Dollar Index jumped 0.3 percent.
Yields on 10-year Treasury notes lost seven basis points before Federal Reserve Chairman Ben S. Bernanke begins a speech in Jackson Hole, Wyoming, at 10 a.m. New York time.
Traders hedged their investments by selling DAX futures, lifting volume to a quarter of the daily average within a 30- minute period. That dragged down the index, pulling equities in the U.S. and throughout Europe lower, and drove Treasuries and the dollar higher. After European markets closed, French, Italian and Spanish stock-market regulators extended bans on short selling introduced this month.
“We’re not out of the woods, and the market is reflecting that,” Paul Zemsky, the New York-based head of asset allocation for ING Investment Management, said in a phone interview. His firm oversees $550 billion. “The European situation is still a mess. Sometimes these markets get hit because they are the most liquid. If you want to dump risk quickly in Europe, shorting Germany is probably the best way to do it.”
When U.S. exchanges opened, the S&P 500 advanced as much as 1.1 percent after Warren Buffett’s Berkshire Hathaway Inc. agreed to invest $5 billion in Bank of America Corp., which had plunged 53 percent in 2011. The stock rallied 9.4 percent after surging as much as 26 percent. At the same time, Nasdaq-100 Index futures erased losses that had been driven by Steve Jobs resigning as Apple Inc.’s chief executive officer. Apple shares lost 0.7 percent.
Declines in stocks intensified at about 9:45 a.m. New York time. The DAX dropped from about 5,681, yesterday’s closing level, to 5,451.52 at 10:01 a.m. A report at 8:30 a.m. showed an increase in American jobless claims that economists didn’t anticipate. Nobel-prize winning economist Joseph Stiglitz said the chances of the U.S. economy going back into recession are “very high,” speaking at a conference today in Lindau, Germany. The city of Harrisburg, Pennsylvania, said it may miss a $3.3 million bond payment on Sept. 15.
“It’s such a mishmash,” Hank Smith, chief investment officer at Haverford Trust Co. in Radnor, Pennsylvania, said in a telephone interview. His firm manages about $6.5 billion.
“You have Buffett investing in Bank of America, which is a bet on the U.S. economy. Still, the employment picture is not a good one,” he said. “Then, there’s the European debt crisis. If global growth slows, that could be more of an issue.”
Investors are awaiting tomorrow’s speech by Bernanke in Jackson Hole, Wyoming, and will be looking for indications of whether the central bank will embark on further stimulus.
“The markets have been very sensitive to every piece of economic data,” Keith Wirtz, the Cincinnati-based chief investment officer at Fifth Third Asset Management, which oversees $16.7 billion, said in a telephone interview. “You still got an indication that we have a poor labor market. When it comes to Jackson Hole, the sentiment has been all over the place. It seems that the recent stock performance has been supported by expectations of QE3. If there’s no indication tomorrow, this market may retrace.”
Before Buffett’s Bank of America investment drove equities higher, stock futures erased gains after jobless claims climbed by 5,000 to 417,000 in the week ended Aug. 20, Labor Department figures showed today in Washington. Economists surveyed by Bloomberg News projected a drop in claims to 405,000, according to the median forecast. Claims were pushed up for a second time by a labor dispute at Verizon Communications Inc.
Data tomorrow may indicate the world’s biggest economy grew 1.1 percent in the second quarter, down from a previous estimate of 1.3 percent, according to the median of 80 forecasts in a separate survey.
Gold rebounded, erasing a loss of 3 percent, as the drop in equities increased the precious metal’s appeal as a haven asset.
Gold futures gained 0.3 percent to settle at $1,763.20. Prices tumbled 7.1 percent in the previous two sessions, after gaining as much as 18 percent this month to an all-time high of $1,917.90.
The yield on 30-year Treasuries dropped six basis points as the jobless claims report fueled concern the economic recovery is slowing and stoking demand for U.S. debt. Government debt snapped three days of declines.
The U.S. sold $29 billion in seven-year notes at a record low yield of 1.58 percent. Today’s offering is the third of three auctions of U.S. notes this week totaling $99 billion. The Treasury sold $35 billion of five-year debt yesterday at a yield of 1.029 percent and the same amount of two-year securities on Aug. 23 at 0.222 percent, both record auction lows.
The euro weakened for a second day against the dollar, dropping 0.2 percent to $1.4379. It touched $1.4328, the lowest level since Aug. 19, after gaining as much as 0.4 percent earlier. The yen dropped against all of its 16 major peers.
The Dollar Index, which IntercontinentalExchange Inc. uses to track the dollar against the currencies of six major U.S. trade partners including the euro and yen, gained 0.3 percent after declining 0.3 percent earlier.
Crude oil increased as Hurricane Irene threatened to shut refineries on the U.S. East Coast. Crude oil for October delivery gained 0.2 percent to settle at $85.30 a barrel on the New York Mercantile Exchange. Irene is on a course that would skirt the coast this weekend before slamming into New England.
Copper rose 2.3 percent, the most in two weeks, after Glencore International Plc, the largest publicly traded commodity trader, said demand growth for the metal is set to maintain its pace. Stockpiles of copper in bonded warehouses in China, the world’s biggest user of the metal, have dropped about 50 percent this year, according to Glencore.
The Shanghai Composite Index jumped 2.9 percent, the most in 10 months, after Bank of China Ltd. said first-half profit jumped 28 percent to a record while bad loans dropped.
Industrial & Commercial Bank of China Ltd., the world’s largest lender by market value, and Agricultural Bank of China Ltd. reported earnings that topped analysts’ estimates after local markets closed. The Czech PX Index advanced 1 percent, rallying for a second day after S&P upgraded the country by two notches to AA-.
Komercni Banka AS jumped 2.9 percent in Prague after Goldman Sachs Group Inc. recommended buying the bank’s shares. The MSCI Emerging Markets Index dropped 0.6 percent.
Have a wonderful evening everyone.
Be magnificent!
Variety is the first principle of life.
What makes us formed beings?
Differentiation.
Perfect balance will be destruction.
-Swami Vivekananda, 1863-1902
As ever,
Carolann
There are two levers for moving men –
interest and fear.
-Napoleon Bonaparte, 1769-1821