March 3, 2014 Newsletter

Dear Friends,

Tangents:

As Carolann is out of the office this afternoon, I will be writing the newsletter on her behalf.

Who watched the Oscar’s last night? What did you think of Ellen’s performance as the host this year?  Even though I did not have a chance to watch all the movies nominated, I always like to watch the red carpet and look at all the beautiful dresses the actress’ wear. So many amazing films to choose from this year, but 12 Years a Slave stole best picture.  For the first, a film directed by a black filmmaker (Steve McQueen), won best picture.  Steve McQueen dedicated his award to “all of the people who endured slavery and the 21 million people who still suffer slavery today”.  This is one film that has definitely been added to my “must watch” list.

Happy Monday Everyone!

“We must use time wisely and forever realize that the time is always ripe to do right.”

Nelson Mandela

Photos of the day

A partially frozen Niagara Falls is seen on the American side during sub freezing temperatures in Niagara Falls, Ontario. Mark Blinch/Reuters

A tourist boat, decorated with green lights, travels on the Pearl River amid heavy haze in Guangzhou, Guangdong province. China’s environment ministry has vowed to ‘harshly punish’ factories and power plants that contributed to a hazardous smog which enveloped much of Northern China, official state media reported. Alex Lee/Reuters

Market Closes for March 3^rd, 2014

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada
By Eric Lam and Callie Bost

March 3 (Bloomberg) — Canadian stocks were little changed, erasing an earlier loss in the last minutes of trading, as a rally in gold companies offset a global equities selloff from the escalating Crimea conflict.

OceanaGold Corp. and Detour Gold Corp. climbed at least 2.9 percent as the metal’s price surged. Osisko Mining Corp. advanced 6.4 percent after settling a lawsuit against Goldcorp Inc. related to the latter’s hostile bid for the company. Magna International Inc. jumped to a record after reporting better- than-estimates profit. National Bank of Canada and Bank of Montreal each lost 1 percent as financial shares slumped. Lundin Mining Corp. dropped 3.6 percent as copper fell.

The Standard & Poor’s/TSX Composite Index rose 3.15 points, or less than 0.1 percent, to 14,212.74 at 4 p.m. in Toronto, after dropping as much as 0.3 percent earlier in the day. The index has gained 4.3 percent this year.

“People are looking for a safe haven as a result of the conflict in Ukraine so investors are looking at gold,” said Anish Chopra, fund manager at TD Asset Management Inc. in Toronto. The firm manages C$218.3 billion ($196.9 billion). “There’s always a geopolitical risk premium when it comes to the pricing of oil, and this is playing a part as well.”

Ukraine put its forces on combat readiness over the weekend after Russian President Vladimir Putin got parliamentary approval to send troops into its southern neighbor. Ukraine said Russia’s navy ordered two of its ships in Crimea to surrender amid the worst standoff between the West and Russia since the end of the Cold War. A Russian Defense Ministry official denied the claim.

Canadian Prime Minister Stephen Harper, speaking at a mining conference in Toronto, said the situation in Ukraine was “extremely serious” and Putin’s military action in Ukraine may mean Russia would leave the Group of Eight nations.

The tensions sent stocks tumbling around the world, with the MSCI All-Country World Index sliding 1.2 percent, the biggest decline in a month.

The S&P GSCI Index of 24 raw materials climbed 1.6 percent, the biggest increase in six months, paced by gains in oil on concern supplies will be disrupted by the conflict. Russia is the world’s largest energy exporter, and more than half of the country’s gas exports to the European Union flow through Ukraine.

Gold for April delivery rose 2.2 percent to $1,350.30 an ounce in New York, the highest settlement in more than four months. Gold is seen by many investors as a haven in times of increased market volatility.

Raw-materials stocks jumped 0.7 percent as a group. Trading volume in the benchmark index was 12 percent lower compared with the 30-day average.

OceanaGold rose 4.5 percent to C$2.77 and Detour Gold rallied 2.9 percent to C$9.90 as 18 of 23 members of the S&P/TSX Gold Index advanced. The gauge of gold mining stocks increased 1.4 percent.

Fortuna Silver Mines Inc. jumped 3.1 percent to C$4.92 as silver for May delivery rose 1.1 percent.

Magna, the auto-parts manufacturer, soared 5.3 percent to C$103.75, a record high, after posting adjusted earnings of $2.33 a share. Analysts surveyed by Bloomberg had forecast $1.55.

Osisko Mining jumped 6.4 percent to C$7.50, the highest in a year, after settling a lawsuit against Goldcorp, which added 1.9 percent to C$30.32.

Goldcorp, which is trying to acquire Osisko for C$2.96 billion, said it has agreed to put its hostile bid on hold until April 15. As part of the agreement, Osisko will allow Goldcorp “full due diligence access to its business and assets” by April 1 and will not apply its shareholder rights plan.

Trilogy Energy Corp. gained 2.5 percent to C$28.80 and Canadian Natural Resources Ltd. rose 0.8 percent to C$40.83 as crude for April delivery climbed 2.3 percent to $104.92, the highest since September.

Industrial shares lost 0.6 percent as Air Canada decreased 2.8 percent to C$5.81. The carrier soared 323 percent last year, the biggest gain in the S&P/TSX.

Financial companies in the index tumbled 0.3 percent. Bank of Montreal slipped 1 percent to C$72.23 and National Bank of Canada dropped 1 percent to C$44.

Lundin Mining slumped 3.6 percent to C$5.07 and Teck Resources Ltd., Canada’s largest diversified miner, lost 1.3 percent to C$24.31 as copper fell to the lowest in 14 weeks in New York on weakening manufacturing in China, the world’s biggest consumer. An official Chinese manufacturing gauge released March 1 fell in February to an eight-month low of 50.2. Levels above 50 signal expansion.

US
By Callie Bost

March 3 (Bloomberg) — U.S. stocks sank the most in a month, joining a global selloff in equities, as investors sought havens on concern that Russia’s military presence in Ukraine could lead to a larger conflict.

General Electric Co. and 3M Co. plunged at least 1.4 percent to pace declines among large industrial shares. Financial shares tumbled, as Visa Inc. and American Express Co. slid more than 1.4 percent. The Market Vectors Russia ETF tracking companies from Gazprom OAO to OAO Lukoil dropped 6.9 percent. Yandex NV, a U.S.-listed online search engine operating in Russia, slumped 14 percent. Reynolds American Inc. rallied 4.8 percent after a report said the company might bid for Lorillard Inc.

The Standard & Poor’s 500 Index fell 0.7 percent to 1,845.73 at 4 p.m. in New York. Today’s drop was the biggest since Feb. 3 and erased a gain for the year after the index finished last week at a record. The Dow Jones Industrial Average dropped 153.68 points, or 0.9 percent, to 16,168.03. About 6.9 billion shares traded hands on U.S. exchanges today, 5.4 percent above the three-month average.

“Global markets typically sell off on news of an escalated geopolitical crisis like we’re seeing in Ukraine; how deep it goes depends on the effectiveness of diplomacy,” Frederic Dickson, chief investment strategist who helps oversee $44.5 billion at D.A. Davidson & Co. in Lake Oswego, Oregon, said in a telephone interview. “We’re in a camp that this is not a black swan event that will mark the end of the five year bull market for stocks in the U.S. and globally, but a modest correction event.”

The tensions sent stocks tumbling around the world, with the MSCI All-Country World Index sliding 1.3 percent. Russian stocks had their biggest decline in five years and the Europe Stoxx 600 plunged 2.3 percent, its biggest slide in five weeks. Emerging-market stocks dropped 1.7 percent. Gold soared 2.2 percent and Treasuries rallied.

Ukraine said Russia’s navy ordered two of its ships in Crimea to surrender amid the worst standoff between the West and Russia since the end of the Cold War. A Russian Defense Ministry official denied the claim.

The head of Russia’s Black Sea fleet gave the ships, located near the port of Sevastopol, until 5 a.m. local time tomorrow to give up weapons and capitulate, Oleksiy Kirchkov, deputy commander of the Ternopil, told Ukraine’s Channel 5 by phone.

Western diplomats are seeking to calm tensions in Ukraine, with U.S. Secretary of State John Kerry arriving in Kiev today.

“The Ukraine news is troubling, but there are always global risks and short-term fluctuations because of these risks,” Karyn Cavanaugh, a market strategist at ING U.S.Investment Management in New York, said in a phone interview. Her firm oversees about $200 billion. “I see this being short-term unless it escalates. If we do see some market gyrations and volatility, it could be a buying opportunity.”

The geopolitical tension comes after the S&P 500 rose 4.3 percent in February, the most since October, to end the month at a record 1,859.45. Investors have been speculating that recent weakness in data from housing to jobs was caused by inclement weather and that the Federal Reserve will continue to support the economy.

U.S. equities are set to enter the sixth year of a bull market that started March 9, 2009. Three rounds of stimulus have helped push the S&P 500 up 173 percent from a 12-year low.

Investor concerns of weakness in emerging markets sent the S&P 500 plunging 5.8 percent from Jan. 15 to Feb 3, amid signs that growth was slowing in China and a rout of currencies from the Turkish lira to the Argentine peso as the Fed began to reduce stimulus. Reports today showed two gauges of Chinese manufacturing in February signaled slower growth.

Data in the U.S. today showed manufacturing expanded at a faster pace than projected in February, a sign the industry was beginning to overcome bad weather across much of the country. The Institute for Supply Management’s manufacturing index rose to 53.2 in February from 51.3 a month earlier. Readings above 50 signal expansion.

A separate report indicated consumer spending rose 0.4 percent in January after a 0.1 percent gain the prior month. The median forecast of 76 economists in a Bloomberg survey called for a 0.1 percent rise. Incomes advanced 0.3 percent.

“There are other worries already built into this market,” Todd Salamone, director of research at Schaeffer’s Investment Research in Cincinnati, said by phone. “Whether it’s China or the U.S. slowing down or the Fed, we have had a market that has marched higher amid a lot of scary headlines. The good news for the bulls is that there’s a lot of fear already built into this market as is.”

The Chicago Board Options Exchange Volatility Index, a gauge for U.S. stock volatility, jumped 16 percent to 16.02 today, its biggest advance since Feb. 3. Options tied to gains in the VIX reached the highest prices in six years last week, reflecting bets that the calm prevailing in equities for the last year won’t last.

A series of calls that appreciate in tandem with the VIX climbed to the highest level since May 2007 relative to puts last week, according to data compiled by Bloomberg.

“It should be an enormous advantage for investors in stocks to have those wildly fluctuating valuations placed on their holdings,” Warren Buffett, chairman and chief executive officer of Berkshire Hathaway Inc., said in his annual letter to investors last week.

All 10 main groups in the S&P 500 retreated at least 0.2 percent today. Utility and consumer-discretionary stocks fell the most, losing 0.9 percent.

Industrial shares slid 0.7 percent as a group. General Electric lost 1.4 percent to $25.12 and 3M dropped 1.9 percent to $132.21.

Banks and other financial firms tumbled 0.9 percent. American Express sank 1.4 percent to $89.97 while Visa had the steepest slide in the Dow, dropping 2 percent to $221.44.

Yandex, whose market share in Russia is twice that of Google Inc.’s, plunged 14 percent to $32.23. The shares have lost 25 percent this year, compared with a gain of 0.7 percent for a gauge of technology stocks listed on the S&P 500. The Russian ETF dropped 6.9 percent to $22.76, the lowest since August 2009.

Ford Motor Co. slid 1.2 percent to $15.20 after the carmaker said February light-vehicle sales fell 6.1 percent. Analysts had estimated a drop of 5.3 percent.

Airline stocks declined after a report from industry data tracker MasFlight estimated that cancellations caused by severe winter weather from Dec. 1 through Feb. 28 may have cost carriers as much as $500 million. American Airlines Group Inc. tumbled 2.3 percent to $36.10 and Delta Air Lines Inc. dropped 1.9 percent to $32.59.

Newmont Mining Corp. advanced 1.6 percent to $23.63 after gold jumped to a four-month high in New York as investors bought the metal as a haven.

Reynolds American gained 4.8 percent to $53.29 after the Financial Times reported the company hired an investment bank to explore a deal for its rival in cigarette sales. Lorillard jumped 9.3 percent to $53.61.

Have a fabulous evening everyone!

Be magnificent!

“A gentle word, a kind look, a good-natured smile can work wonders and accomplish miracles.”

William Hazlitt

As ever,

Amanda Parnham

Assistant to Carolann Steinhoff

Queensbury Securities Inc.

St. Andrew’s Square

Suite 340A, 730 View St.,

Victoria, B.C. V8X 3Y7