June 18, 2012 Newsletter

Dear Friends,

Tangents:

Today marks a day in China that many will remember after The Shenzhou 9 capsule completed the manoeuvre with the Tiangong 1 module.  On Saturday China launched its most ambitious space mission to date. The goal: to dock the shuttle with an orbiting module and work on board for more than a week.  With 3 members on board, this orbit marks the first for 33 year old Liu Yang; the first female astronaut China has sent to space.  Two of the astronauts will live and work inside the module to test its life-support systems while the third will remain in the capsule to deal with any unexpected emergencies. China is hoping to join the United States and Russia as the only countries to send independently maintained space stations into orbit. It is already one of just three nations to have launched manned spacecraft on their own. At a sending off ceremony for the astronauts, the ruling Communist Party’s No. 2 official, Wu Bangguo, told the crew, “The country and people await your victorious return.”

The Shenzhou 9 spacecraft rocket lifts off from the launch pad at the Jiuquan Satellite Launch Center in Jiuquan, China, Saturday, June 16, 2012

Today in History

June 18

photos of the day June 18, 2012

A young re-enactor drinks from a horn during an open day at the medieval Fort Saint Angelo in Vittoriosa in Valletta’s Grand Harbour, Malta. The fort served as the headquarters of the Knights of St John during the 1565 Great Siege.

A Hindu priest carries a basket of mangoes to distribute among devotees after it was offered to Hindu God Lord Krishna inside a temple during a mango festival in the western Indian city of Ahmedabad, Sunday.

Market Closes for June 18, 2012:

North American Markets

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By David Friend

June 18 (The Canada Press) — The Toronto stock market overcame pessimism out of Europe and weaker commodity prices on Monday to end the session higher as markets around the globe weighed the outcome of the Greek elections against concerns about Spain’s debt troubles.

The S&P/TSX composite index moved up 76.23 points to 11,601.13, while the TSX Venture Exchange gained 8.73 points to 1,259.75.

The Canadian dollar dropped 0.18 of a cent to 97.65 cents US.

Much of the attention was focused on the outcome of the Greek election won by a party backing harsh austerity measures. That was considered a positive development, though concern then shifted toward Spain’s debt problems.

Commodity prices fluctuated as both developments influenced markets.

The July crude contract on the New York Mercantile Exchange was down 76 cents at US$83.27 a barrel.

Gold bullion dropped $1.10 to US$1,627 an ounce while July copper edged up one cent to US$3.39 a pound.

On the TSX, materials stocks rose 2.1 per cent with Barrick Gold (TSX:ABX) rising 90 cents to C$41.18.

Financials were on the downside, off 0.4 per cent, with TD Bank (TSX:TD) dropping 41 cents to $78.57.

The outlook for the global economy appeared to be weighing slightly heavier on U.S. markets.
On Wall Street, the Dow Jones industrial average was off 25.35 points at 12,741.82. The Nasdaq composite index rose 22.53 points to 2,895.33 and the S&P 500 index inched up 1.94 points to 1,344.78.

The Greek election results suggested the country would not drop out of the euro currency union, a scenario that would have put severe stress on the financial system.

But much of the relief faded when it became clear that Spain’s fundamental economic and fiscal problems remain huge. Spanish borrowing rates spiked Monday above levels that forced other countries to take bailouts, a sign that bond investors fear Spain will default on its debts.

European stocks ended slightly higher in the afternoon. Britain’s FTSE 100 rose 0.22 per cent while Germany’s DAX added 0.3 per cent and France’s CAC-40 fell 0.69 per cent.

“The mind set seems to be forming that the Band-Aid approach is too little too late, and there’s not much of a concerted set of initiatives to really tackle the problem appropriately,” said Garey Aitken, director of equity research, Bissett Investment Management.

“Until people see there’s really significant change coming, I think we’re just in this washing machine of a market.”

In Canada, Yamana Gold Inc. (TSX:YRI) announced the acquisition Monday of Extorre Gold Mines Ltd. (TSX:XG), a miner with a promising gold-silver project in Argentina for about $400 million. Yamana will pay $3.50 in cash and 0.467 of a Yamana share for each Extorre share, while also saying it plans to increase its dividend by 18 per cent. Yamana shares rose 39 cents to $16.75.

Celestica Inc. (TSX:CLS) said it will wind down manufacturing services for Research In Motion (TSX:RIM) over the next three to six months. Celestica says it has been working with RIM as the troubled BlackBerry maker assesses its supply chain strategy. Celestica shares rose 28 cents to $7.89, while RIM stock fell 30 cents to $10.87.

Chartwell Seniors Housing Real Estate Investment Trust (TSX:CSH.UN) is selling six properties in the United States for about US$165.5 million, including outstanding mortgages. Its units rose 40 cents to $9.20.

A report in the Globe and Mail says Manitoba Telecom Services Inc. (TSX:MBT) is trying to find a buyer for its Allstream division and has hired investment bank Morgan Stanley to find foreign suitors, particularly in the United States, after failing to find a Canadian buyer. Company shares were up 2.1 per cent, or 67 cents, to $33.41.

Microsoft is expected to make a “major” announcement on Monday, with speculation leaning toward either a tablet computer or a system that uses an upcoming version of Windows to help people access TV shows and movies across a range of devices.

US

By Rita Nazareth

June 18 (Bloomberg) —  Most U.S. stocks advanced, sending the Standard & Poor’s 500 Index higher for a third day, as optimism about Greece’s attempts to form a coalition government tempered concern about a surge in Spanish bond yields.

Apple Inc. (AAPL), the world’s most valuable company, added 2 percent to pace gains in technology shares. D.R. Horton Inc. and Lennar Corp. (LEN) climbed at least 3.9 percent as confidence among homebuilders rose to a five-year high. Facebook Inc. (FB) rallied 4.7 percent in the one-month anniversary of its initial public offering. Energy and financial shares in the S&P 500 declined.

Ten stocks gained for every nine falling on U.S. exchanges at 4 p.m. New York time. The S&P 500 rose 0.1 percent to 1,344.78, after dropping 0.6 percent. The Dow Jones Industrial Average lost 25.35 points, or 0.2 percent, to 12,741.82. The Nasdaq Composite Index added 0.8 percent to 2,895.33. Trading volume for exchange-listed stocks in the U.S. was about 5.8 billion shares, 13 percent below the three-month average.

“We managed not to drive off the cliff in Greece, but we still got flat tires,” said Alan Gayle, a senior strategist at RidgeWorth Capital Management in Richmond, Virginia, which oversees about $47 billion. “The challenges in Spain are very much in front of us. There’s not a lot of conviction.”

Equities rebounded as Antonis Samaras, leader of Greece’s New Democracy party, said he had a constructive discussion with Democratic Left leader Fotis Kouvelis. German Chancellor Angela Merkel’s said Greece shouldn’t be granted leeway on terms for its bailout. Group of 20 chiefs began a two-day meeting as Spain’s borrowing costs soared to a euro-era record. Policy makers are discussing ways to stimulate the economy if necessary, a Canadian official said.

Federal Reserve policy makers meet June 19-20 to discuss whether more U.S. stimulus is need. The National Association of Home Builders/Wells Fargo confidence index rose to 29, the highest since May 2007, from a revised 28 in May that was lower than first estimated, a report from the Washington-based group showed today. The gauge exceeded the median estimate of 28 in a Bloomberg News survey.

“It’s somewhat tenuous at this juncture,” said Mark Luschini, chief investment strategist for Philadelphia-based Janney Montgomery Scott LLC, which manages about $54 billion. “With the G-20 meeting going on and the Fed policy meeting this week, investors are somewhat hesitant.”

Concern about a global slowdown and a worsening of Europe’s debt crisis put the S&P 500 on the brink of a so-called correction this month. It fell 9.9 percent from an almost four- year high in April through June 1. Since then, the lowest valuation in six months and bets on global policy action drove the measure up 5.2 percent.

Eight out of 10 groups in the S&P 500 rose as consumer discretionary and technology shares had the biggest gains. Apple jumped 2 percent to $585.78. A measure of homebuilders in S&P indexes gained 3.5 percent. D.R. Horton increased 3.9 percent to $16.50. Lennar climbed 4.1 percent to $26.97.

The Chicago Board Options Exchange Volatility Index, which measures the cost of using options as insurance against S&P 500 losses, tumbled 13 percent to 18.32, the lowest since May 3.

Facebook, which last week had the first weekly advance since its initial public offering, rose 4.7 percent to $31.41. The shares have jumped 15 percent in three days.

Groupon Inc. (GRPN) rallied 11 percent to $11.15. The largest daily coupon website advanced after Morgan Stanley (MS) analysts upgraded the stock to overweight from equalweight, citing international sales opportunities.

EBay Inc. (EBAY) rallied 4.5 percent to $42.49. The world’s largest Internet marketplace was rated outperform in new coverage at Keefe, Bruyette & Woods Inc.

Solar manufacturers led by LDK Solar Co. and First Solar (FSLR) Inc. rallied as Japan approved subsidies that will encourage at least $9.6 billion in new installations in the country. U.S. shares of Xinyu, China-based LDK climbed 1.8 percent to $2.21. Tempe, Arizona-based First Solar, the world’s largest maker of thin-film panels, gained 3.7 percent to $14.47.

A measure of energy (S5ENRS) shares in the S&P 500 fell 0.8 percent, the most among 10 groups, as oil slumped amid a stronger U.S. dollar.Halliburton Co. (HAL), the world’s largest provider of hydraulic-fracturing services, declined 1.7 percent to $28.96. Morgan Stanley, owner of the world’s largest brokerage, slumped 3.4 percent to $13.82 to pace losses in financial companies.

SAIC Inc. (SAI) declined 3.1 percent to $11.86 after losing its largest government contract to Lockheed Martin Corp. (LMT) Bethesda, Maryland-based Lockheed on June 15 beat SAIC for a $1.91 billion, seven-year Defense Department contract to operate a communications network known as the Global Information Grid.

Body Central Corp. (BODY) plunged 49 percent to $8.22, the lowest ever. The operator of almost 250 women’s clothing stores cut its second-quarter profit forecast amid declining sales at established stores.

DSW Inc. (DSW) slumped 11 percent to $52.13 after the shoe retailer’s second-quarter profit forecast trailed estimates.

The largest U.S. companies are beating the average stock in the S&P 500 by the most in more than a decade, fueled by rising dividends, valuations 31 percent below the historical average and fear.

Companies in the S&P 100 from Apple to Bank of America Corp. (BAC) have gained 7.7 percent in 2012, compared with 5.1 percent for a version of the S&P 500 that strips out weightings for market value, the widest margin since 1999, data compiled by Bloomberg show. With price-earnings ratios down 6.6 percent this quarter to 12.7 and payouts at 2.2 percent of share prices, analysts raised buy recommendations for the group to the highest level since 2007.

The biggest stocks are showing corporate America’s resilience even though Mitt Romney, the presumptive Republican candidate in this year’s national election, criticized President Barack Obama earlier this month for saying the private sector is “doing fine.” A second year of record profits is helping the S&P 100 beat every developed market index in the world as investors seek the relative safety of the U.S. after $5.1 trillion was erased from global equities since March 27.

“The mega-caps are just cheap compared to other segments of the stock market,” Russ Koesterich, the San Francisco-based global chief investment strategist for the IShares unit of BlackRock Inc., said in a June 14 phone interview. His firm oversees $3.68 trillion. “There are a lot of things that are wrong in the economy, to state the obvious, and these are companies that have the wherewithal to survive.”

Have a wonderful weekend everyone!

”You must be the change you want to see in the world.” – M.K. Gandhi

Regards,

Amanda Bourke

Assistant to Carolann Steinhoff

Queensbury Securities Inc.

St. Andrew’s Square

Suite 340A, 730 View St.,

Victoria, B.C. V8X 3Y7

Tel: 778-430-5808

Fax: 778-430-5838