December 7, 2011 Newsletter
Dear Friends,
“Follow your dreams…They know the way…”
-Kobi Yamada
Photos of the Day:
December 7, 2011
Lightning Flashes in Chile above a volcano, in this June 5th Reuters Photo of The Year entry for 2011. (Reuters)
People participate in an early-morning Yoga session in Chandigarh India. (Reuters)
Market Commentary
Canada
By Matt Walcoff
Dec. 7 (Bloomberg) — Canadian stocks rose, led by banks, on speculation the Group of 20, International Monetary Fund and European Central Bank may take measures to alleviate the European debt crisis.
Bank of Nova Scotia, Canada’s third-largest lender by assets, gained 2.3 percent after an analyst at Royal Bank of Canada boosted his rating on the shares. Enbridge Inc., the country’s biggest pipeline company, increased 2.5 percent after releasing plans for its Seaway pipeline. Canadian Oil Sands Ltd., the largest owner of the Syncrude project, fell 4 percent after saying it may have to shut down an oil-sands upgrader for maintenance. The Standard & Poor’s/TSX Composite Index advanced 67.48 points, or 0.6 percent, to 12,148.73 a day before a meeting of European Union leaders.
“Everyone is waiting and holding their breath to see what happens in Europe,” David Cockfield, a money manager at Northland Wealth Management in Toronto, said in a telephone interview. The firm oversees about C$200 million ($198 million). “The great hope is with France and Germany more or less on the same page, with a little strong-arming they can bring the rest of the group in line and at least give some indication of a joint front to meet some of these problems.”
Like every other developed-market benchmark stock index besides the S&P 500, the S&P/TSX has fallen this year on concern the European debt crisis may weaken the global economy. The Canadian gauge dropped 10 percent this year through yesterday after advancing seven of the previous eight years. The S&P/TSX Banks Index gained after three euro-region officials with knowledge of the discussions said the European Central Bank may announce measures to stimulate bank lending tomorrow. The officials spoke on condition of anonymity because the deliberations are private.
Stocks extended their rally after Nikkei reported the G-20 is considering establishing a $600 billion IMF lending program for Europe. Shortly before markets closed, CNBC said the IMF denied the report. Royal Bank, Canada’s largest lender by assets, advanced 2.2 percent to C$49.56. Toronto-Dominion Bank, its biggest domestic competitor, increased 1.3 percent to C$73.85. Scotiabank climbed 2.3 percent to C$49.03 after Andre- Philippe Hardy, an analyst at Royal Bank, raised his rating on the shares to “outperform” from “sector perform.” Hardy cited “Scotiabank’s consistent strategy and execution, the greater growth potential of its international banking arm versus purely North American banking franchises, and the improved wealth management platform” in a note to clients.
Enbridge rallied 2.5 percent to C$35.80, the first advance in a week, after forecasting capacity of 375,000 barrels of oil a day for its Seaway pipeline in 2013. Enbridge is reversing the pipeline’s flow to run from Cushing, Oklahoma, to Houston-area refineries. Canadian Oil Sands dropped 4 percent to C$20.35. The company may it may shut down its oil-sands upgrader for maintenance if it can’t return to full production rates after a disruption last month.EnCana Corp., Canada’s largest natural gas producer, rose 1.7 percent to C$20.48 after agreeing to sell two processing plants to Veresen Inc. for C$920 million.
Petrominerales Ltd., an energy producer with operations in Colombia, fell 5.9 percent to C$16.10 after sinking 16 percent yesterday. Ian W. Macqueen, an analyst at Canadian Imperial Bank of Commerce, cut his rating on the stock to “sector perform” from “sector outperform” a day after Petrominerales said it suspended drilling at two wells.
Among other S&P/TSX energy companies, Imperial Oil Ltd., the country’s second-biggest company in the industry, gained 3 percent to C$44.50. Cenovus Energy Inc., the fifth-largest, advanced 2.5 percent to C$33.89. Great Basin Gold Ltd. advanced 16 percent, the most since February 2009, to C$1.21. The prospector with operations in South Africa and Nevada said it executed a $150 million loan agreement. Gold producer Jaguar Mining Inc. had the largest decline in the Canadian stock benchmark index, falling 9.2 percent to C$6.62, after saying Chief Executive Officer Daniel Titcomb left the company.
US
Dec. 7 (Bloomberg) — U.S. stocks rose, sending the Dow Jones Industrial Average to the highest level since October, amid optimism that European leaders will announce greater efforts to halt the debt crisis at a summit this week.
Treasuries gained, commodities fell and the euro fluctuated. The Dow rose 46.24 points, or 0.4 percent, to close at 12,196.37 and the Standard & Poor’s 500 Index advanced 0.2 percent at 4 p.m. New York time. The euro was little changed at $1.3412, recovering from a loss of as much as 0.4 percent. Ten- year Treasury yields decreased for the first time this week, losing six basis points to 2.03 percent. The S&P GSCI Index of commodities slumped 0.9 percent as sugar, coffee, gasoline and wheat lost more than 2 percent. The S&P 500 erased an earlier loss in the final hour of trading after Nikkei reported that the Group of 20 nations is considering a $600 billion International Monetary Fund lending program to supplement Europe’s efforts to tame the sovereign- debt crisis. Stocks trimmed gains in the final minutes as CNBC said the IMF denied the report.
“It’s difficult to get a bottom line outcome on the European situation,” Philip Dow, director of equity strategy at Minneapolis-based RBC Wealth Management which oversees about $160 billion, said in a telephone interview. “Macro concerns are driving the market,” he said. “It’s a challenging environment to manage money.” Financial shares in the S&P 500 rose 1.2 percent as a group, leading gains among seven of the 10 main industry groups.
JPMorgan Chase & Co. climbed 2.3 percent after Chief Executive Officer Jamie Dimon said the company can buy back $1 billion or more in stock, adding that the bank may or may not repurchase more shares. JPMorgan led the Dow’s advance, followed by gains of at least 1.2 percent in Bank of America Corp., Johnson & Johnson, Cisco Systems Inc. and American Express Co. The S&P 500 extended its gain for the year to 0.3 percent
and the Dow is up 5.4 percent in 2011. Pressure on Europe’s leaders to halt the spread of the region’s debt crisis at a summit starting tomorrow intensified as the EU had its AAA long-term rating put on “creditwatch negative” by S&P following a similar action on 15 of the 17 euro governments. The action “does not have any impact on the sovereign credit ratings on non- eurozone members of the European Union,” John Piecuch, director of communications at S&P, said in an e-mail. Deutsche Bank AG and BNP Paribas SA were among European lenders that also were given a negative outlook by S&P.
The Stoxx Europe 600 Index slipped 0.2 percent. Banca Monte dei Paschi di Siena SpA, Italy’s third-biggest bank, led a drop among lenders. ING Groep NV fell 4.7 percent after saying it plans to take a charge related to its U.S. annuity business. European stocks gained earlier after the Financial Times reported yesterday that officials were negotiating a bigger rescue effort to discuss at the European summit, including running both temporary and permanent rescue funds in tandem.
Gains evaporated after Germany rejected combining the current and permanent euro-area rescue funds and expressed pessimism over the outcome of this week’s summit. Three euro-area officials with knowledge of policy makers’ deliberations said the European Central Bank may announce a range of measures tomorrow to fight the crisis. Options for the ECB include loosening collateral criteria so that institutions have more access to cheap ECB cash and offering them longer-term loans, said the officials, who spoke on condition of anonymity because the discussions are private.
After U.S. financial markets closed, Canadian Finance Minister Jim Flaherty said today there has not been discussion among the Group of 20 nations on a $600 billion plan to boost lending to the IMF. He reiterated that Canada opposed the idea of the IMF leading a loan package for Europe and said the region’ s governments should solve the problem internally.
The euro depreciated against 11 of its 16 major peers, while the dollar weakened against 13. Most international investors predict at least one nation will eventually dump the euro and they say greater fiscal ties or a smaller currency area are the best fixes for the region’s debt crisis, according to the quarterly Bloomberg Global Poll. Almost half the respondents in the poll say one or more countries will leave the 17-nation bloc within a year and almost a third more predict an exit by the end of 2016. Never before has the euro influenced U.S. stocks as much as this year, a sign that American equities aren’t going anywhere until Europe’s crisis is solved. The link between the Dow average and swings in the currency reached a record on Dec. 2, according to data compiled by Bloomberg. The so-called correlation coefficient showing how much two markets rise and fall in tandem hit 0.85, the highest level since the euro was founded in 1999, data on 60-day rolling averages show. A reading of 1 means assets are moving in lockstep.
Have a wonderful evening everyone!
As Always,
Kyle for Carolann.