September 16 Newsletter

Dear Friends, 

Tangents: 

PHOTOS OF THE DAY

A migrant woman looks in a hand mirror as she waits to registrater after crossing the border from Austria in Freilassing, Germany, Wednesday.Dominic Ebenbichler/Reuters

A fisherman casts a net at a fish farm during a sudden downpour along a sea shore on the outskirts of Kochi, India, Wednesday. Sivaram V/Reuters

Market Closes for September 16, 2015

International Markets

Bonds

Currencies

Commodities

 Market Commentary:

Canada

By Eric Lam

     (Bloomberg) — Canada stocks rallied to the highest level since August, as commodities prices rebounded after oil surged to a two-week high while U.S. central bank officials began a two-day debate on the timing of higher interest rates.

     Energy and raw-materials producers jumped at least 3.8 percent to pace gains among Canadian equities. Oil futures rose 5.7 percent in New York as U.S. stockpiles declined 2.1 million barrels last week, according to a government report. The Bloomberg Commodities Index surged 1 percent for the first increase in four days.

     The Standard & Poor’s/TSX Composite Index jumped 301.07 points, or 2.2 percent, to 13,763.78 at 4 p.m. in Toronto, the biggest increase since Aug. 27. The benchmark equity gauge has pared losses in September to 0.7 percent, after four straight months of losses.

     Canadian stocks have rebounded 2.3 percent this week after slumping 4.2 percent in August for the worst performance in a year, amid a rout among global financial markets following China’s shock currency devaluation. China is Canada’s second- largest trading partner after the U.S.

     Canadian Natural Resources Ltd. gained 6.3 percent and Crescent Point Energy Corp. rose 5.7 percent as energy stocks jumped 4.2 percent, the most since Aug. 27.

     Goldcorp Inc. and Barrick Gold Corp., Canada’s biggest gold companies, surged at least 5.6 percent as raw-materials producers rallied 3.8 percent. Gold futures settled 1.5 percent higher in New York, the most in more than three weeks.

     The U.S. Federal Reserve begins two days of meetings in Washington Wednesday, with traders predicting about a 32 percent chance the central bank will raise interest rates. U.S. consumer prices dropped in August as cheaper gasoline helped keep inflation below the objective of the Fed.

     “The evidence continues to mount that slack in the economy is abating,” said Kevin Caron and Chad Morganlander, fund managers at Stifel Nicolaus & Co., in a note to clients. “As for inflation, the Fed sees the current weakness as largely temporary. The Fed should move on rates but look to control expectations for future rate hikes in our view.”

     Toronto-Dominion Bank and Royal Bank of Canada, the nation’s largest lenders, increased more than 1.8 percent to lead financial services stocks higher.

US 

By Stephen Kirkland and Jeremy Herron

     (Bloomberg) — Oil’s best rally in two weeks, sparked by a drop in American stockpiles, pushed U.S. stocks to a four-week high as Federal Reserve officials began a two-day meeting over interest-rate policy. Emerging-nation assets rallied as equity gains in China bolstered sentiment.

     The Standard & Poor’s 500 Index capped a second day of gains as energy producers drove its advance. Shares in developing markets climbed to the highest level this month and currencies from Russia to Brazil strengthened amid easing concern over market turmoil in China. Treasuries held Tuesday’s losses, while the dollar slumped.

     Traders put the chance of an increase in U.S. interest rates this week at 30 percent, up from as low as 26 percent on Monday but still well below the 50 percent odds before China roiled markets by devaluing the yuan last month. Crude, which has fallen more than 20 percent from this year’s peak amid concerns over a global glut, surged after the U.S. reported a 2.1 million-barrel decline in inventories as refineries bolstered operating rates.

     “What we’re seeing now is somewhat of a relief rally,” George Schultze, who oversees $200 million as founder and managing member of Schultze Asset Management in Purchase, New York, said by phone. “There’s a varied list of expectations but if you asked most people in early August they’d say it’s very likely the Fed would raise rates in mid-September, and I don’t think people will be surprised if they do.”

     The S&P 500 rose 0.9 percent by 4 p.m. in New York after rallying 1.3 percent on Tuesday to the highest level since August. Energy shares led gains with a 2.8 percent surge, as Chesapeake Energy Corp. jumped 14 percent.

     Beverage companies rallied with SABMiller Plc said to be open to discussing a potential offer from larger rival Anheuser- Busch InBev NV in a deal that would bring together the world’s two biggest beermakers. Anheuser-Busch, the maker of Budweiser, climbed 6.8 percent in New York.

     Molson Coors Brewing Co. jumped 14 percent for the biggest gain in the S&P 500, while optimism over the deal sent Altria Group Inc. up 2.3 percent as it owns 27 percent of SABMiller.

     Stocks have been gaining since data Tuesday indicated resilience among American consumers, a sign of confidence in the world’s largest economy and a boost to the case for a liftoff in rates. The gauge has rallied about 6.8 percent since reaching a 2015 low last month and is down 3.1 percent this year.

     Goldman Sachs Group Inc. said financial markets are vulnerable because nobody can agree on what the Fed will do. More than half of the 111 analysts surveyed by Bloomberg predict no change on Thursday, while 50 say the key U.S. rate will be increased by 0.25 percentage point. Four see a 1/8 percentage- point increase.

     Gina Martin Adams, equity strategist at Wells Fargo Securities LLC, said a rate hike could be a positive catalyst for stocks.

     “For one reason and for one reason alone, it removes the uncertainty which has been plaguing the market for much of this year,” she said in an interview on Bloomberg Radio.

     Oil rose for a second day on news of last week’s drop in stockpiles. West Texas Intermediate crude has fluctuated since slumping below $40 a barrel last month as concern that China’s growth was slowing fueled volatility in markets.

     WTI jumped 5.7 percent to settle at $47.13 a barrel while Brent gained 4.2 percent to $49.75.

     Industrial metals also rose, with copper capping a second day of gains as the stock market rebound signaled improving demand in China, the world’s top metals consumer. Aluminum, nickel, zinc, tin and lead also advanced.

     The MSCI Emerging Markets Index surged 2 percent to close at its highest level since Aug. 20. Benchmark gauges in South Africa and South Korea climbed at least 2 percent.

     The Shanghai Composite Index jumped 4.9 percent amid speculation China’s scrapping of quotas on overseas borrowing by approved companies will help stem capital flight and lower borrowing costs. Hong Kong’s Hang Seng China Enterprises Index rose 2.1 percent.

     “In emerging markets, China is at least as important a factor as the Fed,” Maarten-Jan Bakkum, a senior emerging- markets strategist at NN Investment Partners in The Hague, said by e-mail. “So if the Chinese market rises, investors are willing to believe that this can offset some of the Fed risk.”

     A gauge of 20 developing-nation currencies advanced for a seventh day, the longest string of gains since early 2014. 

     The dollar and euro weakened against most of their major peers on sluggish data from both the U.S. and euro zone. Prices paid by American households declined 0.1 percent in August, the first decrease since January, while in the euro area they slowed almost to a standstill.

     The Bloomberg Dollar Spot Index, a gauge of the greenback versus 10 major peers, slipped 0.4 percent after the measure that tracks the greenback against 10 of its major peers climbed 0.3 percent on Tuesday.

     Yields on 10-year Treasury notes rose one basis point, or0.01 percentage point, to 2.30 percent, after climbing 10 basis points on Tuesday. Yields on two-year notes, regarded as being more policy sensitive, also added one basis point, to 0.82 percent after surging eight basis points last session to the highest level since April 2011.

Have a wonderful evening everyone.

Be magnificent!

Arrange whatever pieces come your way.

Virginia Woolf

As ever,

Leyla

I know that two and two make four – and should be glad to prove it too if I could – though I must say if by any sort of process I could convert 2 and 2 into five it would give me much greater pleasure.

Lord Byron

Carolann Steinhoff, B.Sc., CFP®, CIM, CIWM

Senior Portfolio Manager &

Senior Vice-President

Queensbury Securities Inc.,

St. Andrew’s Square,

Suite 340A, 730 View St.,

Victoria, B.C. V8W 3Y7