October 8, 2015 Newsletter

Dear Friends,

Tangents:

On this day in 1871, the Great Chicago Fire started, leaving four square miles of the Windy City in ruins, including its business district. The blaze killed between 200 and 300 people, left 100,00 homeless and caused an estimated $200 million in damages.

Very positive article in the Financial Times yesterday (which I only had time to read last night) on Justin Trudeau’s rise as the contender for our next Prime Minister.  You can find it under FT BIG READ. CANADA: Against a backdrop of falling oil prices, a weakened economy  and controversy over religious headwear, the country is set to vote in a close election that could  end the Conservatives’ nine-year hold on power.  “With only days to go before the federal elections on October 19, he has replaced Mr. Mulcair, 60, as the top choice of Canadians looking to turn aside Mr. Harper, 56.  Mr. Trudeau’s late surge is particularly important.…In an increasingly tight race Mr. Trudeau’s Liberals are now favoured by 32.5 per cent of the electorate, against32.3 per cent for the Conservatives and only 25 per cent  for the NDP, which has seen its support drop by 12 percentage points since August, according to threehundredeight.com, a poll aggregator…..[Trudeau] pronounced himself ready to govern, pointing to a brains trust of advisers that includes Larry Summers, the former US Treasury Secretary, White House economic adviser and FT columnist, plus David Dodge, the former Bank of Canada governor…”

I find it unfortunate that comprehensive, cogent political press commentary concerning Canada can only be found outside of our own Conservatively biased national press.

PHOTOS OF THE DAY

Liberal Leader Justin Trudeau reacts after nailing in a wall frame during a campaign event at a trade school Thursday, in Vaughan, Ontario, Canada. Paul Chiasson/The Canadian Press/AP

The aurora borealis, or the northern lights, occur over Derwentwater, near Keswick, England, Thursday. The northern lights are the result of collisions between gaseous particles in the Earth’s atmosphere with charged particles released from the sun. Owen Humphreys/PA/AP

Market Closes for October 8^th, 2015

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Kate Garber and Eric Lam

     (Bloomberg) — Canadian stocks rose for a fifth day, the longest streak in two months, as energy producers jumped after the price of crude surged above $50 a barrel for the first time since July.

     Equities advanced 0.8 percent as energy stocks closed at the highest since July 17. Oil has rebounded after slumping to a six-year low in August on speculation that a global supply glut is easing. Equities from Europe to the U.S. also advanced as speculation the Federal Reserve will keep rates lower for longer weakened the U.S. dollar and bolstered commodities.

     The Standard & Poor’s/TSX Composite Index rose 110.31 points to 13,978.66 at 4 p.m. in Toronto. The benchmark Canadian equity gauge has surged 5.6 percent in five days, the longest streak since Aug. 5. It’s still down by 4.5 percent for the year.

     Eight of 10 main groups in the index rose Thursday, led by a 2.2 percent increase in energy producers. Even after a five- day rally, the group remains the second-worst performer in the benchmark index this year, down 13 percent.

     Encana Corp. gained 6.5 percent. The producer of natural gas and crude said it will sell assets in Colorado for $900 million lower its debt. Encana hopes to bolster its balance sheet after a 45 percent dip in oil prices in the past year.

     Suncor Energy Inc. climbed 4.8 percent and Penn West Petroleum Ltd. surged 26 percent as 50 of 59 stocks in the S&P/TSX Energy Index advanced. West Texas Intermediate jumped 3.4 percent in New York, settling at $49.43 a barrel after touching as high as $50.07.

     Demand for crude will climb more this year than previously projected amid cheaper fuel prices, OPEC Secretary-General Abdalla Salem El-Badri said yesterday in a statement to the International Monetary Fund.

     Concordia Healthcare Corp. sank 11 percent, closing at the lowest since December. The drugmaker has tumbled 24 percent in five days as the wider industry faces greater political scrutiny over drug pricing.

US

By Joseph Ciolli, Lu Wang and Dani Burger

     (Bloomberg) — U.S stocks rose as Federal Reserve minutes reflected caution over raising interest rates even as the economy improves, further boosting commodity producers.

     The minutes kept expectations for higher rates pushed into next year, weakening the dollar and boosting energy, raw- material and industrial companies amid speculation that a weaker U.S. currency will lift their profits. Those three industry groups rallied at least 1.4 percent Thursday. Alcoa Inc. fell in late trading after unofficially kicking off the earnings season with results that missed analysts’ forecasts.

     The Standard & Poor’s 500 Index added 0.9 percent to 2,013.43 at 4 p.m. in New York, rising above a level where recent rallies had stalled. The Dow Jones Industrial Average gained 138.46 points, or 0.8 percent, to 17,050.75. The Nasdaq Composite Index climbed 0.4 percent, erasing an earlier drop of as much as 1.1 percent. About 7.3 billion shares traded hands on U.S. exchanges, in line with the three-month average.

     “They rehashed that people are waiting for clarity on the outlook of the economy,” said Stephen Carl, principal and head equity trader at Williams Capital Group LP. “Investors are potentially looking at it as dovish, like more time is being bought by the Fed. We have to see what exactly transpires in the weeks ahead.”

     Policy makers agreed that developments between meetings had not “materially” altered their economic outlook, according to the September meeting minutes. “Nonetheless, the committee decided that it was prudent to wait for additional information confirming that the economic outlook had not deteriorated.”

     The Fed noted that domestic economic conditions had continued to improve, though concerns over China and its potential spillover to other economies “were likely to depress U.S. net exports” and cause further strengthening of the dollar, which could damp inflation in the U.S.

     The Fed’s decision on September 17 to not raise interest rates jolted investors, as the central bank cited global market turmoil and a slowdown in China as reasons for standing pat. Equities slid in seven of eight sessions after the meeting, with the S&P 500 losing 5.7 percent.                  
     The odds of a rate increase this year have fallen to less than 39 percent since the Fed meeting and a weak-than-expected September jobs report, compared with a 63 percent chance just before the central bankers gathered last month. Probability of liftoff in January is 46 percent, down from 51 percent before the minutes were released today.

     “The market’s resiliency near the highs over last few days help set it up for this kind of initial response,” said Frank Cappelleri, a market technician at Instinet LLC in New York. “This is first time the S&P has touched 2000 since Fed announced on 9/17. It got the same kind of pop after the news was announced, but it didn’t make for any upside follow through. A lot of people will be looking to see if we can hold things better this time around.”

     The Chicago Board Options Exchange Volatility Index fell 5.3 percent Thursday to 17.42. The measure of market turbulence known as the VIX is down for an eighth session, the longest streak since July 2013.

     Commodity producers and industrial shares have had their strongest rallies in years while the dollar has slumped since the weaker-than-forecast September jobs report set back expectations for higher rates. The Bloomberg Dollar Spot Index sank to a three-week low. Industrials benefit from the weaker currency when their overseas earnings are converted back to dollars, while commodities denominated in a lower U.S. currency are more attractive.

     Alcoa’s results reported after the markets closed suffered under the weight of a global aluminum glut, missing analysts’ estimates after the price of the metal fell for a fourth straight quarter. Shares of the largest U.S. aluminum company dropped 4.2 percent as of 5:04 p.m.

     A report today showed filings for unemployment benefits declined last week to the lowest level since mid-July, extending a run of applications near decade lows that shows dismissals remain in check. Managers are reluctant to trim staffing levels because domestic demand is holding up in the face of diminished global growth expectations.

     Corporate profits will be another barometer on the economy’s health. Analysts project earnings for S&P 500 members dropped 6.9 percent in the third quarter. Companies releasing results next week include Johnson & Johnson, Intel Corp. and JPMorgan Chase & Co.

     “This particular earnings season will be a period for most companies to really start talking about next year,” said Eric Schoenstein, Portland, Oregon-based co-manager of the $4.9 billion Jensen Quality Growth Fund. That could be a way to provide some direction. We need some transparency to clear up the confusion around where the economy is headed, where companies are headed.”

     All of the S&P 500’s 10 main industries rose Thursday, with energy adding to its longest rally in six years, while materials haven’t had a longer winning streak since December 2013. Both have climbed for eight straight days. Industrials gained for the fourth time in five sessions, posting the strongest advance over the period since 2011, up 7 percent.                         

     The benchmark’s energy group is up 16 percent during its run-up since Sept. 28, with Chesapeake Energy Corp., Marathon Oil Corp. and Transocean Ltd. rising more than 35 percent over the time frame. Marathon Oil and Anadarko Petroleum Corp. gained at least 4.6 percent Thursday, while Chevron Corp. added 2 percent for its seventh advance in eight days. Oil surged above $50 a barrel for the first time since July on speculation that demand is picking up.

     Boeing Co. and Honeywell International Inc. rallied more than 1.4 percent, while railroad Union Pacific Corp. added 2 percent to a two-month high to pace industrials’ advance. Among raw-materials shares, Freeport-McMoRan Inc. increased 3.5 percent to stretch its rally to an eighth day, the longest in three months. The copper producer is up 51 percent over the period.

     Biotechnology shares retreated for the third time in four days, though the group pared their losses as equities rallied after the Fed minutes. The Nasdaq Biotechnology Index slipped 0.3 percent, after earlier falling 3.5 percent.

     Among companies moving on corporate news, EMC Corp. rose 4.7 percent to a two-month high. Dell Inc. is in talks to combine with EMC, people with knowledge of the matter said, in a deal that would help the companies cater to more customers and cope with a slowdown in demand for computers and storage equipment.

     Netflix Inc. jumped 6.3 percent, the most in more than a month. The world’s dominant paid online video service is raising the price of its most popular streaming subscription by $1 a month to $9.99 for new customers in the U.S., Canada and parts of Latin America following a similar move in Europe this year.

     EBay Inc. fell 6 percent, its biggest drop in more than two years. The online marketplace’s September same-store sales growth was 1.1 percent, the lowest since February 2011 and down from August’s 3.4 percent, according to ChannelAdvisor.
 

Have  a wonderful evening everyone.

Be magnificent!

The main purpose of life is to live rightly, think rightly, act rightly.

The soul must languish when we give all our thought to the body.

Mahatma Gandhi

As ever,

Carolann

It takes a genius to whine appealingly.

        -F. Scott Fitzgerald, 1896-1940

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