September 18 newsletter

Dear Friends,

Carolann will be back on Monday and will write you the newsletter. 

Tangents:

PHOTOS OF THE DAY

 Scotland’s national rugby union team wait in the cloisters of Gloucester Cathedral, England, ahead of the 2015 Rugby World Cup welcome ceremony. Action Images/Reuters

Workers prepare the spectator grandstand Wednesday near the new National Gallery (r.) ahead of the Singapore F1 night race. The race takes place starting Sept. 18. Edgar Su/Reuters

Market Closes for September 18, 2015

International Markets

Bonds

Currencies

Commodities

Predicting rain doesn’t count. Building arks does.

Warren Buffett

Market Commentary:

Canada

By Doug Alexander and Scott Deveau

     (Bloomberg) — Ontario’s provincial government said it aims to complete the initial public offering of Hydro One Ltd. shares by early November after filing documents in what is expected to be Canada’s largest IPO in 16 years.

     The amount and share price weren’t disclosed in Friday’s filing to Canada’s securities regulator. The province said in April that it planned to sell about 15 percent of Ontario’s largest electricity transmission and distribution system in an IPO of as much as C$2.25 billion ($1.7 billion).

     The market volatility that’s cooled the pace of IPOs in the past couple months shouldn’t affect demand for Hydro One, said Ed Clark, chairman of a council advising the government on asset sales. An environment of low interest rates makes stocks that offer steady yields an attractive investment, he said.

     “There’s no question that this, as a general matter, is in fact a favorable environment for yield stocks, which is what this is,” Clark told reporters at a briefing. “But what the world will be like in the end of October or early November, when we price it, we’ll have to see.”

     Marketing of Hydro One’s offering will begin in October and the IPO is expected to be completed by November, the province said. At least 25 percent of the IPO will be sold to retail investors and Hydro One will be listed on the Toronto Stock Exchange.

     The government reiterated it will remain the largest shareholder with a minimum 40 percent stake and that no other shareholder group can own more than 10 percent.

     With about 1.4 million customers and C$23.1 billion of assets, Hydro One has been estimated by the province to have an equity valuation of C$13.5 billion to C$15 billion. The money raised from the sale will go toward debt repayment, transit and infrastructure, the government said.

     The initial sale excludes Hydro One’s Brampton distribution network, which was sold to a group of municipally owned utilities that are merging as part of the government’s plan.

     Royal Bank of Canada and Bank of Nova Scotia are leading a group of 16 banks on the sale. The group includes Barclays Plc, Goldman Sachs Group Inc and Credit Suisse Group AG.

     An IPO of C$2.25 billion would be the largest since the C$2.49 billion initial stock sale by Manulife Financial Corp. in 1999.

US 

By Jeremy Herron

     (Bloomberg) — U.S. stocks tumbled as commodities from copper to oil sank, while Treasuries rallied a second day after the Federal Reserve’s warning on the global economic outlook rippled through markets.

     The Standard & Poor’s 500 Index continued its post-Fed slide, with energy producers leading declines. Oil and industrial metals got routed, while gold gained after Fed Chair Janet Yellen sounded caution over slowing growth in China.

     While Yellen said recent developments “may restrain economic activity somewhat,” she added that the implications “have not fundamentally altered” the Fed’s outlook for the economy. The central bank’s decision to delay raising interest rates kept in place a measure of uncertainty that has added to volatility in global equity markets.

     “There’s some concern that the Fed sees something we’re not seeing in the data,” said Eric Green, director of research and senior managing partner at Penn Capital, which oversees $4 billion in Philadelphia. “Some investors wanted them to rip the Band-Aid off and get the first one done. Then we wouldn’t have to obsess about it for the two weeks before each meeting.”

     The S&P 500 retreated 1.6 percent at 4 p.m. in New York, erasing its gain for the week. The gauge ended lower yesterday by 0.4 percent, erasing a gain of as much as 1.3 percent after Yellen indicated that global developments overshadowed signs of strength in America. 

     The expiration of some futures and options on stocks and indexes, known as quadruple witching, added to volume, with trading in S&P 500 stocks 60 percent above the 30-day average.

     “We’ve again added uncertainty as to when the hike is going to happen,” Mark Kepner, an equity trader at Themis Trading LLC in Chatham, New Jersey, said by phone. “We’re at the point where we’re almost looking at other countries as opposed to our own for signs of when the Fed will lift off.”

     Automakers and banks led declines in Europe, with the Stoxx Europe 600 Index dropping 1.8 percent to erase its gain for the week.

          U.S. two-year Treasuries extended their biggest one-day rally since 2009, while Pacific Investment Management Co. said policy makers may wait until next year before raising rates. JPMorgan Asset Management said the Fed’s statement was good for bonds and they still like debt due between seven and 10 years.

     Bonds gained from Australia to Germany, while Treasuries added to an advance from Thursday. The yield on 10-year German bunds, the euro region’s benchmark sovereign securities, dropped 12 basis points to 0.66 percent, set for its biggest decline since July 7, on prospects for further easing by the European Central Bank.

     Rates on similar-maturity Italian bonds fell 14 basis points to 1.76 percent, while those on Spain’s declined 15 basis points to 1.94 percent. The yield on U.S. 10-year Treasuries fell six basis points to 2.13 percent on Friday, after sliding 10 basis points the previous day.

     The dollar reversed losses against most of its major peers on Friday. The Bloomberg Dollar Spot Index added 0.7 percent after touching its lowest level since Aug. 25.

     The greenback rose 1.3 percent to $1.1293 per euro, after tumbling 1.3 percent to $1.1435 the previous day. The yen was little changed at 119.96 per dollar.

     Emerging-market stocks and currencies reversed earlier gains to end mixed. The MSCI Emerging Markets Index fell 0.1 percent, trimming this week’s advance to 3 percent. A Bloomberg gauge of 20 currencies fell 0.3 percent after eight days of gains. 

     The Fed decision gave gold bulls a boost, as the metal headed for its first weekly advance in a month. Bullion futures for December delivery gained 1.9 percent to $1,137.80 an ounce in New York, after touching $1,141.50, the highest since Sept. 2. Prices had a 3.1 percent gain this week.

     Oil dropped for a second day, with futures in New York tumbling 4.7 percent and 3.3 percent in London. West Texas Intermediate for October delivery dropped $2.22 to settle at $44.68 a barrel on the New York Mercantile Exchange, the biggest decrease since Sept. 1. Prices rose 5 cents this week.

     Brent for November settlement fell $1.61 to end the session at $47.47 a barrel on the London-based ICE Futures Europe exchange.

Have a wonderful weekend everyone.

Be magnificent!

Everything that is made beautiful and fair and lovely is made for the eye of one who sees.

Rumi

As ever,

Leyla

The most perfect political community is one in which the middle class is in control, and outnumbers both of the other classes.

Aristotle

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