May 6, 2015 Newsletter

Dear Friends,

Tangents:

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

PHOTOS OF THE DAY

People watch a shadow play performance at Changgyeonggung Palace in Seoul, South Korea, Wednesday. Thomas Peter/Reuters

The Villarrica Volcano is seen Tuesday night in Pucon town, Chile. Cristobal Saavedra/Reuters

Market Closes for May 6^th, 2015

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Jennifer Kaplan

     (Bloomberg) — Canadian stocks fell to a one-month low as energy shares plunged after election results in Alberta raised concern over the possibility of higher corporate taxes in the province.

     The New Democratic Party, led by Rachel Notley, ended a 44- year Progressive Conservative dynasty by winning a majority of districts in elections Tuesday, according to Elections Alberta. The NDP promises to boost corporate taxes, review the government’s take of energy revenue, scale back advocacy for pipelines and phase out coal power more quickly.

     The Standard & Poor’s/TSX Composite Index fell 150.05 points, or 1 percent, to 15,023.89 at 4 p.m. in Toronto, the lowest level since April 1. The loss trimmed the benchmark Canadian equity gauge’s advance in 2015 to 2.7 percent.

     Energy companies dropped 2.5 percent, the most of 10 groups in the S&P/TSX Composite Index and biggest loss for the industry since Feb. 4. RMP Energy Inc. sank 11 percent. Suncor Energy Inc., Canada’s biggest oil producer by market value, tumbled 3.4 percent and Canadian Natural Resources Ltd. fell 2.9 percent.

     “It’s completely devastating” for energy companies and investors, Rafi Tahmazian, who helps manage C$1 billion ($831 million) in energy funds at Canoe Financial LP in Calgary, said on Tuesday. “The perception from the market based on their comments is they’re extremely dangerous.”

     Materials companies in the index slid 1.3 percent, as seven of 10 industries in the S&P/TSX retreated.

     Barrick Gold Corp. slumped 3.8 percent and Iamgold Corp. fell 6.9 percent as the price of the metal for the first time this week. Federal Reserve Chair Janet Yellen said bond yields could see a sharp jump after the central bank raises interest rates, crimping demand for gold as an alternative investment.

     Enbridge Inc. lost 2.7 percent, the most in three months, after reporting results that missed analysts’ estimates. Canada’s largest pipeline company posted a first-quarter loss on adjustments to contracts meant to guard against swings in currencies, oil prices and interest rates.

     Pacific Rubiales Energy Corp. rose 12 percent, to a Jan. 2 high. Alfa SAB, already the largest shareholder in Pacific Rubiales, joined Harbour Energy Ltd. in a takeover offer of about C$2.1 billion for the Colombian company to expand into the oil industry.

US

 By Jeremy Herron

     (Bloomberg) — The dollar sank and U.S. stocks fell to a one-month low after data on jobs and productivity added to concern economic growth is not robust enough to withstand higher interest rates. A rout in global bonds resumed, while oil advanced on supplies data.

     The Standard & Poor’s 500 Index fell 0.5 percent at 4 p.m. in New York. The guage earlier slid below its 100-day moving average before paring declines by half in the final hour of trading. The Bloomberg Dollar Spot Index lost 0.7 percent. The yield on 10-year Treasuries continued to climb with European bond rates in a global bond rout that has erased more than $430 billion in value since the start of last week. Oil pared an earlier rally past $62 a barrel.

     Productivity in the U.S. fell in the first quarter, while a private payrolls report showed companies in April added the fewest number of workers in more than a year. Economic data have been missing estimates by the most in more than six years, stoking concerns growth is slowing as the Fed considers raising borrowing costs. Federal Reserve Chair Janet Yellen said equity- market valuations are “quite high,” while long-term interest rates are low and could jump when the central bank raises its benchmark.

     The data “has people nervous, and after yesterday’s selloff there are a lot of weak hands in the market,” Robert Pavlik, who helps oversee $9 billion as chief investment strategist at Boston Private Wealth, said by phone. “People are worried about what Friday’s report is going to bring. They’re not fully committed — they’re just trying to ride the wave, and that’s caused some selling pressure to develop.”

     Ten-year yields rose five basis points to 2.23 percent, the highest since March 6. The 10-year rate has gained 37 basis points since April 17. Thirty-year bond yields rose seven basis points to 2.98 percent, the highest level since December.

     “We saw this in the case of the taper tantrum in 2013, where there was a very sharp upward movement in rates,” Yellen said in Washington, in reference to the episode in the middle of that year, when then-Chairman Ben S. Bernanke suggested that the Fed could start tapering its bond purchases in the next few meetings.

     “To say that when the Fed starts to tighten you could see a sharp jump in long rates, that’s something we haven’t heard from Yellen before, so the market is a little surprised by that comment and it’s being reflected in prices and yields here, particularly at the long end of the market,” Donald Ellenberger, who oversees about $10 billion as head of multi- sector strategies at Federated Investors in Pittsburgh.

     The dollar dropped against most of its 16 major counterparts, extending losses that pushed the Bloomberg dollar gauge to its steepest slide since 2011 in April, as market tension rises before Friday’s government jobs report.

     While data showed the economy expanded at a 0.2 percent annualized rate in the first quarter, the Fed called the weakness “transitory,” opening the door for a possible rate increase this year.

     The S&P 500 trades at 17.6 times forecast earnings of its members, compared with an average multiple of 14.5 in the past five years. The index has fallen 1.8 percent from an April 24 record amid a retreat in risk appetite. Some of the year’s most popular market bets backfired last month, as the dollar and European bonds slid, while energy prices rebounded.

     The Dow Jones Industrial Average fell 0.5 percent Tuesday, briefly erasing its gain for the year before paring declines in late trading. The gauge is 0.1 percent higher in 2015.

     Stocks have declined even as quarterly earnings come in better than expected. About 72 percent of the 408 S&P 500 companies that have reported earnings this season have beaten analysts’ projections.

     “It just shows you’re on some sort of soft patch in the U.S. — it may be enough for the Fed to rethink the timing,” Charles St-Arnaud, senior economist at Nomura Holdings Inc., said by phone from London. “The consensus trades so far this year — which were being long bonds, long dollar — that seems to be gradually unwinding.” A long position is a bet an asset will increase in value.

     The Stoxx Europe 600 fell 0.6 percent as investors assessed corporate results and watched for developments in Greek debt talks. Shares pared an advance after the U.S. data.

     Tumbling Greek shares led European stocks to their lowest level in two months on Tuesday on concern that bailout negotiations will fail to secure funding in time to prevent the nation defaulting.

     The MSCI Emerging Markets Index dropped 0.9 percent. Russia’s ruble and the Malaysian ringgit strengthened as gains crude prices buoyed earnings prospects for the oil-exporting nations.

     The Shanghai Composite slid 1.6 percent to a two-week low and the Hang Seng China Enterprises Index of mainland companies listed in Hong Kong slipped 0.6 percent.

     The Bloomberg Commodity Index, a measure of 22 raw materials, slipped 0.2 percent after two days of gains.

     Raw-material prices have rebounded since reaching a 12-year low in March as crude rallied, the dollar fell and speculation increased that China may add to stimulus.

     The Bloomberg commodities gauge has still plunged more than 50 percent from its record in 2008, after a decade-long bull market encouraged farmers, miners and oil producers to ramp up supplies.

     Oil futures reached $62.58 a barrel, the highest since December, before paring advances. West Texas Intermediate climbed 0.9 percent to settle at $60.93 in New York.

     Crude supplies slipped 3.88 million barrels last week, according to the Energy Information Administration. A gain was expected in a Bloomberg survey of analysts. Refineries operated at the highest rate in four months as imports slipped to a one- year low.

Have a wonderful evening everyone.

Be magnificent!
 

                “Without hard work, nothing grows but weeds.” Gordon B. Hinckley

As ever,

Karen

“I’ve learned that you shouldn’t go through life with a catcher’s mitt on both hands; you need to be able to throw something back.” Maya Angelou

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