May 9, 2012 Newsletter

Hello All,

Tangents:

As you might have noticed from today’s Google Doodle, today would have been famous Egyptologist Howard Carter’s 138 birthday. Carter is of course best known for discovering the tomb of  the boy king Tutankhamen in 1922.  King Tut’s tomb remains the most intact  pharaoh’s tomb ever to be found in modern archaeology. Years after, the New York Times had this to say of the historical find: “The splendor of the tomb and its rich furnishings within it revealed a Golden Age of arts and crafts equal to any other period of ancient times.”

After finding King Tut’s tomb, the high point of his career, Carter retired from archeology and worked as an agent for museums and collectors.

The discovery of King Tut’s tomb has also long been shrouded in mystery. After the excavation, several members of Carter’s team died, including his benefactor Lord Carnarvon. While this spooky coincidence may have perpetuated the myth of cursed tombs and mummies, a 2002 study found that their death rate was statistically normal.

Photos of the day May 9, 2012

A couple dances in Gorky Park in Moscow.- Denis Sinyakov/Reuters

Astana’s riders cycle to third place during the team time trial 33.2-km fourth stage of the Giro d’Italia in Verona, Italy.- Alessandro Garofalo/Reuters

Market Closes for May 9, 2012:

North American Markets

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Joseph Ciolli

May 9 (Bloomberg) — Canadian stocks fell for a sixth day after financials and energy producers declined amid concern Europe’s debt crisis may worsen, potentially curbing demand, following an inconclusive Greek election.

Royal Bank of Canada, the nation’s biggest lender, slipped 1.3 percent. Toronto-Dominion Bank, Canada’s second-largest lender, dropped 1 percent. Barrick Gold Corp., the world’s largest producer of the metal, increased 2.6 percent. Avion Gold Corp., which explores for the metal in Mali, plunged 31 percent after suspending a project in the country.

The Standard & Poor’s/TSX Composite Index fell 29.73 points, or 0.3 percent, to 11,675.01 in Toronto.

“Europe continues to dominate the headlines,” Brian Huen, a managing partner at Red Sky Capital Management Ltd. in Toronto, said in a telephone interview. The firm oversees about C$55 million ($55 million). “The question is whether the global growth forecasts that people have are in jeopardy again because of what’s going on there.”

Canadian stocks are extending their slump following a decline last week, when a U.S. industry report showed employers added fewer jobs than forecast last month and commodity prices dropped. Energy and mining shares account for 44 percent of Canadian stocks by market value, compared with 20 percent in the U.S.

Financial companies fell as Greece’s political impasse intensified concern that the European sovereign-debt crisis is worsening. Spanish default risk climbed to a record, while Alexis Tsipras of Greece’s Syriza party squared off with political leaders before talks on forming a coalition. Greece has 436 million euros (C$566 million) of debt coming due on May 15.

Royal Bank of Canada decreased 1.3 percent to C$53.37. Toronto-Dominion Bank slipped 1 percent to C$79.61. Bank of Nova Scotia, the country’s third-largest lender, fell 0.9 percent to C$52.56.

Materials companies gained today as gold rebounded from its lowest intraday level since Jan. 3. The metal reached $1,578.50 an ounce on the Comex in New York before recovering to settle at $1,594.20.

Barrick Gold increased 2.6 percent to C$37.65. Goldcorp Inc., the second-largest producer of the metal, climbed 3.5 percent to C$35.60. Eldorado Gold Corp., a Vancouver-based mining company, rose 2.1 percent to C$11.91.

Avion Gold plunged 31 percent to 59 Canadian cents after saying in a statement that it temporarily suspended its Tabakoto mill expansion project because of disruption associated with the military coup in Mali.

US

By Stephen Kirkland and Rita Nazareth

May 9 (Bloomberg) — Stocks fell, sending the Standard & Poor’s 500 Index to a two-month low, while the euro extended its longest slump since 2008 as Greece struggled to form a government and concern grew hat Spanish banks are underfunded.

The S&P 500 slipped 0.7 percent to 1,354.58 at 4 p.m. in New York, trimming an earlier tumble of as much as 1.5 percent as developments in Europe whipsawed markets. The euro depreciated 0.5 percent to $1.2940, weakening for an eighth day and reaching the lowest level since January. Spain’s benchmark IBEX 35 Index sank 2.8 percent to an eight-year low and costs to protect the nation’s government debt rose to a record. The S&P GSCI Index of 24 commodities lost 0.1 percent as wheat and corn led declines and oil fell for a sixth consecutive day.

Concern that Greece will be forced out of the euro zone grew after weekend elections resulted in a parliament divided over whether to implement austerity measures needed to qualify for rescue funds. The nation’s political turmoil was set to enter a fourth day with coalition talks deadlocked, raising the possibility that another election will have to be held.

“There’s something to worry about here,” said James Dunigan, who helps oversee $112 billion as chief investment officer in Philadelphia for PNC Wealth Management. “We expected there would be flare-ups again in Europe. People were scratching their heads why they didn’t show up a little sooner. Certainly as a result of the elections in Greece, the odds of a default and an exit from the euro have increased.”

U.S. equities extended losses earlier as the Wall Street Journal reported that European nations were debating whether to delay Greece’s next aid payment. Stocks trimmed declines as the European Financial Stability Facility’s Board of Directors confirmed the release of a 5.2 billion euro ($6.7 billion) tranche of aid to Greece, saying 4.2 billion euros will be disbursed May 10 and the remaining 1 billion euros will be released depending on the nation’s financing needs.

The S&P 500 extended its retreat from a four-year high last month to more than 4.5 percent. Gauges of industrial and financial shares fell more than 1 percent to lead declines among all of the 10 main industry groups in the index. United Technologies Corp., Boeing Co. and JPMorgan Chase & Co. lost at least 1.8 percent for the biggest declines in the Dow Jones Industrial Average, which fell for a sixth straight day in its longest slump since August.

Macy’s Inc., the owner of its namesake and Bloomingdale’s department stores, slid 3.7 percent after keeping its forecast for profit this year lower than analysts’ estimates.

Ten-year Treasury yields were little changed at 1.83 percent as the U.S. sold $24 billion of 10-year notes at a record low yield of 1.855 percent, lingering near the lowest level since January. Pacific Investment Management Co.’s Bill Gross and Jan Hatzius at Goldman Sachs Group Inc. say investors should prepare for additional bond purchases by the Federal Reserve to combat a slowing U.S. economy.

A decision to buy more debt is “getting closer,” Gross, who runs Pimco’s Total Return Fund, the world’s largest mutual fund, wrote on Twitter yesterday. Hatzius, the chief economist at New York-based Goldman Sachs, predicted in a report the same day that the Fed will announce additional monetary easing when it meets in June.

The Stoxx Europe 600 Index lost 0.3 percent after sliding as much as 1.4 percent. Banks fell 1.7 percent as a group for the biggest decline among 19 industries.

Spain’s IBEX led losses among European national benchmarks. The nation’s seven biggest banks need 68 billion euros of additional capital as a buffer against bad loans and to meet regulatory requirements, Royal Bank of Scotland analysts said. Bankia SA slumped 5.8 percent as JPMorgan Chase & Co. cut the shares to underweight, the equivalent of sell, and said the Spanish lender risks becoming a “zombie bank” that has to rely on the European Central Bank for funding.

Mediaset SpA sank 11 percent as the broadcaster controlled by former Italian Prime Minister Silvio Berlusconi said first- quarter profit dropped 85 percent on lower advertising sales. Bekaert NV, the world’s largest maker of steel cord for tires, surged 9.9 percent in Brussels after reporting sales that beat some analysts’ estimates.

The euro weakened 0.7 percent versus the yen, falling for the fourth straight day, as the shared European currency slid against 12 of 16 major peers. The Dollar Index, which tracks the U.S. currency against those of six trading partners, rose for the eighth day, the longest run of gains since September 2008.

The yen strengthened against all 16 major peers, gaining 0.2 percent to 79.68 per dollar. The Japanese currency will end the year at 83 versus the dollar, according to the median of 49 estimates compiled by Bloomberg. Toyota Motor Corp., which forecast profit will more than double in the year ending March 2013, is basing the outlook on an exchange rate of 80 yen to the dollar and 105 yen to the euro.

The yield on the Spanish 10-year bond climbed 23 basis points to 6.08 percent, driving its premium to benchmark German bunds to the highest since November. The yield on the German 10- year bund, Europe’s benchmark government debt security, slid to a record 1.497 percent as the nation sold 4.03 billion euros of five-year notes.

“Until it becomes clearer that an accident in Greece can again be avoided, risk appetite is unlikely to recover,” Christoph Rieger, head of interest-rate strategy at Commerzbank AG in Frankfurt, wrote in a note today.

Evangelos Venizelos, the socialist Pasok leader and former finance minister, said he’ll try to form a new Greek government when he receives a three-day mandate from President Karolos Papoulias tomorrow. Pasok today rejected terms for a government set by Alexis Tsipras of Greece’s anti-bailout Syriza party which then gave up its bid to build a coalition.

Fifteen of 24 commodities in the S&P GSCI Index retreated, led by declines of more than 2.4 percent in wheat and corn and losses of at least 0.6 percent in silver, gold, lead, nickel and zinc.

Oil in New York dropped 20 cents to $96.81 a barrel as U.S. Energy Department data showed stockpiles climbed 3.65 million barrels to 379.5 million, the most since August 1990. Inventories were forecast to advance 2 million barrels, according to the median of 12 analyst estimates in a Bloomberg survey. The six-day decline is the longest since July 2010.

The MSCI Asia Pacific Index sank 1.3 percent to the lowest level since Jan. 19, with Japan’s Nikkei 225 Stock Average retreating 1.5 percent. The MSCI Emerging Markets Index declined 1.5 percent to the lowest level in almost four months. Benchmark gauges in China and Indonesia lost more than 1 percent and South Korea’s Kospi Index slipped 0.9 percent.

Have a wonderful evening everyone.

Kindest Regards,

Ellora Howie

Assistant to Carolann Steinhoff

Queensbury Securities Inc.,

St. Andrew’s Square

Suite 340A, 730 View St.,

Victoria, B.C. V8X 3Y7