October 2, 2015 Newsletter

Dear Friends,

Tangents:

On this day,  in 1950, the comic strip “Peanuts” debuted.

Mahatma Gandi was born in 1869.

Author Graham Greene was born in 1904.

Sting was born in 1951.Redwood national Park was established in 1968.

PHOTOS OF THE DAY

Guests stand at the entrance of the venue for Dior fashion house Spring/Summer 2016 women’s ready-to-wear collection show in the Cour Carre at the Louvre Museum during Paris Fashion Week Friday. Charles Platiau/Reuters

A Red deer stag barks, with a female seen behind, in the morning sun in Richmond Park in west London Friday. The Royal Park has had Red and Fallow deer since 1529. The rutting or breeding season begins in early autumn amongst the herd of more than six hundred animals. Toby Melville/Reuters

Market Closes for October 2^nd, 2015

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Eric Lam

     (Bloomberg) — Canadian stocks rebounded from a 1.2 percent slide sparked by a disappointing U.S. jobs report as gold producers surged with the metal on speculation the Federal Reserve will keep rates lower for longer.

     Equities in Canada rose 0.7 percent, joining a rebound in global markets as a weakening dollar sparked a rally in commodities. A gauge of developed and developing markets rose 1.2 percent, reversing earlier losses. Banks and financial services providers tumbled as the rate on 10-year bonds retreated.

     The Standard & Poor’s/TSX Composite Index rose 97.85 points to 13,339.74 at 4 pm. in Toronto, after reaching an October 2013 low on Monday. The gauge tumbled 8.6 percent in the quarter that ended Wednesday and has slumped 14 percent from an April peak.

     The U.S. jobs report heightened concern that slowing global growth and recent financial-market turmoil is seeping into the American economy. The data pushed back expectations for the first interest-rate increase from the Federal Reserve in almost a decade until at least March.

     “The continued validity or helpfulness of zero rates is in question, yet we still aren’t getting great growth so it’s challenging,” said Jason Brady, a fund manager at Thornburg Investment Management Inc. based in Santa Fe, New Mexico. His firm manages about $60 billion.

     Gold stocks rallied 7.6 percent to the highest since Aug. 28 as the price of the metal surged 2.1 percent in New York. Goldcorp Inc. soared 6.3 percent and Agnico Eagle Mines Ltd. jumped 12 percent as all 21 members in the S&P/TSX Gold Index advanced. Teck Resources Ltd. surged 11 percent as copper futures advanced.

     Encana Corp. jumped 7.6 percent and Crescent Point Energy Corp. gained 6.9 percent. Oil surged after U.S. explorers reduced the number of rigs drilling for oil to a five-year low.

     Banks led a 1.2 percent retreat in financials stocks. Royal Bank of Canada lost 2.2 percent as a gauge of the nation’s largest lenders retreated 2.1 percent.

     National Bank of Canada slumped 5.3 percent, the most since December 2009, after the lender said it will take a C$64 million restructuring charge in the fourth quarter and sell about 7 million shares to raise C$300 million. The lender will cut as many as 400 jobs, or 2.3 percent of its workforce, as it seeks to cut costs, according to a person familiar with the plan.

     Canadian equities are among the worst-performing markets in the developed world this year with a 8.8 percent slide, led by declines among raw-materials and energy producers of at least 23 percent.

US

By Dani Burger and Anna-Louise Jackson

     (Bloomberg) — The Standard & Poor’s 500 Index posted its longest winning streak since July amid a rally led by energy and raw-material companies, as investors reassessed the economic impact from a weaker-than-expected jobs report.

     The Dow Jones Industrial Average wiped out a 258-point drop as Pfizer Inc. and Chevron Corp. climbed more than 3.8 percent, while Caterpillar Inc. added 2 percent. The profitability of those companies benefits from a weaker dollar, which slid today as investors pushed out expectations for higher interest rates. Commodity shares, also sensitive to moves in the dollar, were higher as Freeport-McMoRan Inc. and Dow Chemical Co. gained more than 3.4 percent.

     The S&P 500 Index rose 1.4 percent to 1,951.36 at 4 p.m. in New York, wiping out an earlier drop of as much as 1.6 percent in its biggest intraday rebound since October 2011. The Dow climbed 200.36 points, or 1.2 percent, to 16,472.37. The gauge spanned 459 points from its session high to low. The Nasdaq Composite Index increased 1.7 percent. About 8.3 billion shares traded hands on U.S. exchanges, 14 percent above the three-month average.

     “While it was a big disappointment, I don’t think it changes the overall picture,” said Kate Warne, an investment strategist at Edward Jones in St. Louis. “I wouldn’t peg one jobs report, even with previous revisions, as stemming improvements out there. But it’s obviously going to take longer, and the choppier path and more erratic data is likely to occur as the economy works through the rough patch.”                       

     Data today showed employers added a lower-than-projected 142,000 workers to payrolls in September. The jobless rate held at a seven-year-low 5.1 percent as people left the labor force, wages stagnated and revisions cut the job count in prior months.

     The weak report vindicates the Federal Reserve’s decision to delay an interest-rate increase last month. Cooling overseas markets, a stronger dollar and lower oil prices that are hampering exports and manufacturing raise the risk that employers will hesitate before taking on more staff.

     Fed officials have previously suggested the economy is strong enough for higher rates this year, despite their hesitation to raise borrowing costs last month amid global market turmoil and weakness in China. Traders now are pricing in about a 34 percent chance the central bank will raise rates this year, down from about 45 percent prior to the jobs report. Odds they will be higher in January fell to 40 percent from 52 percent earlier.

     “The rate increase definitely got pushed back as a result, and that takes away a continued strengthening of the dollar,” said Walter “Bucky” Hellwig, who helps manage $17 billion as a senior vice president at BB&T Wealth Management in Birmingham, Alabama. “Weak dollar beneficiaries are starting to rise.” The weaker dollar boosts American multinational companies’ profits when their overseas earnings are converted back to the U.S. currency.

     St. Louis Fed President James Bullard said in a speech today that the central bank would still provide “considerable” accommodation to guard against “pitfalls and risks.” Separately, Fed Vice Chairman Stanley Fischer said he doesn’t see immediate risks of financial bubbles in the U.S., while raising concerns that the central bank’s policy tool kit is limited and untested.

     A reading on August factory orders today also fell more than forecast, while an increase in July was revised lower. A measure of manufacturing released yesterday showed activity barely grew in September as a broader swath of industries suffered from the effects of a strong dollar and faltering overseas markets.

     “We’re seeing some weakness in some of the manufacturing numbers earlier in the week,” said Joseph Betlej, who helps oversee $33 billion as vice president of Advantus Capital Management. “That was causing me some concern. Seeing the confirmation with payroll is a disappointment. I think it’s really going to cause people to second guess the strength of the economy.”

     Stock gains over the last four days were a respite for markets rattled by worries that China’s slowdown will stunt global growth and amid mixed messages on Fed policy. The S&P 500 just posted its worst quarter since 2011 while market turbulence has soared, with a measure of volatility surging to its biggest monthly gain ever in August. The equity benchmark closed Friday down 8.4 percent from a record set in May.

     The Chicago Board Options Exchange Volatility Index fell 7.1 percent to 20.94, erasing an earlier 8.5 percent jump. The gauge of market turbulence known as the VIX closed 11.4 percent lower for the week, after a 34 percent climb last quarter.

     Energy, raw-materials and health-care shares rallied the most among the S&P 500’s 10 main groups, rising more than 2 percent. Financials were little changed, after slumping more than 3 percent, as banks pared their retreat.

     In addition to the weaker dollar, energy companies got a lift after U.S. explorers reduced the number of rigs drilling for oil to a five-year low, signaling further drops in production. The group jumped 4 percent, the most in a month. Diamond Offshore Drilling Inc. and Transocean Ltd. jumped more than 8.2 percent, the most since August.

     It was the fourth day of gains for raw-material companies, their longest stretch in more than two months. Newmont Mining Corp. climbed 7.8 percent amid gold’s best rally in six weeks. Martin Marietta Materials Inc. increased 4.1 percent to bring its three-day advance to 9.9 percent, the strongest since February.

     Biotechnology shares rallied for a third day, after the Nasdaq Biotechnology Index on Wednesday halted its longest losing streak in nearly seven years. The gains pushed health- care companies higher, as Mylan NV and Vertex Pharmaceuticals Inc. rallied at least 5.4 percent. Pfizer climbed 3.9 percent, the most in 17 months, to rise 7.3 percent since Monday’s close.

     Banks slipped as investors bet that falling bond yields mean low interest rates will continue to crimp profits. Bank of America Corp. and Fifth Third Bancorp lost at least 1 percent, trimming earlier declines of more than 4 percent. The KBW Bank Index sank 0.6 percent, with 21 of 24 members sinking, after losing as much as 4.5 percent.

Have a wonderful weekend everyone.

Be magnificent!

The purity of life is the highest and most authentic art to follow.

Mahatma Gandhi

As ever,

Carolann

A closed mind is a dying mind.

      -Edna Ferber, 1885-1968

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

Portfolio Manager &

Senior Vice-President

Queensbury Securities Inc.,

St. Andrew’s Square,

Suite 340A, 730 View St.,

Victoria, B.C. V8W 3Y7