October 13, 2015 Newsletter

Dear Friends,

Tangents:

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

PHOTOS OF THE DAY

Workers are silhouetted, along with the Eiffel Tower, as they construct scaffolding on the Place de la Concorde as the sun sets on an autumn day in Paris Tuesday. Philippe Wojazer/Reuters

Visitors photograph fall foliage in the Public Garden Tuesday in Boston. Michael Dwyer/AP

Market Closes for October 13^th, 2015

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Eric Lam

     (Bloomberg) — Disappointing data from China battered Canadian stocks, weighing again on a market that’s suffered one of the biggest hits among global equities as commodity prices slump.

     Stocks fell after reaching a seven-week high last week as imports into China tumbled for an 11th month, rekindling concern that a slowdown in the world’s second-largest economy will spread. Energy and raw-materials producers have declined with prices from copper to oil and gold, giving Canadian equities the third-worst performance among developed markets this year.

     The Standard & Poor’s/TSX Composite Index fell 119.63 points, or 0.9 percent, to 13,844.73 at 4 p.m. in Toronto, the most in two weeks, as Canadian markets re-opened after the Thanksgiving holiday. The benchmark Canadian equity gauge is down 5.4 percent for the year, the poorest showing among 24 countries except for Singapore and Greece.

     Declines over the past two days have cut short an eight-day rally from the lowest level since 2013. Canadian stocks climbed 4.7 percent last week, the most since December, as commodities and emerging markets rebounded amid a drop in the dollar.

     Equity strategists forecast Canadian stocks will resume their recovery. Brian Belski, chief investment strategist at BMO Capital Markets, estimates the S&P/TSX will close 2015 at 15,600 — a 13 percent jump from current levels.

     “The ‘Eeyore complex’ is alive and well in Canada, likely setting the stage for a surprising contrarian rally,” Belski said in an Oct. 1 note to clients. “Bearish sentiment toward Canada reached extreme levels in the quarter. We believe much of the bad news is now priced in and Canada should become increasingly correlated to a strengthening U.S. economy.”

     Despite the declines, prices for Canadian stocks remain expensive relative to global peers. The MSCI All-Country World Index, a measure of developed and developing markets, currently trades at about 17.1 times earnings after halting a nine-day advance. The index’s valuation dropped to as low as about 16 at the end of September, the lowest since October 2014. By contrast, the price-to-earnings ratio of the S&P/TSX sits at 20.1, after falling to as low as 18.9 in September.

     Copper fell for the first time in three sessions today as Chinese imports slid. China is Canada’s second-largest trading partner after the U.S. First Quantum Minerals Ltd. slumped 10 percent and Teck Resources Ltd. retreated 9.4 percent to lead mining companies lower. Copper for delivery in three months lost 0.8 percent in London as nickel, lead and zinc also fell. While copper has rebounded since late September, prices are still near a six-year low.

     Kicking Horse Energy Inc. soared 45 percent, the most since December 2010, after PKN Orlen SA, Poland’s biggest oil company, agreed to buy the Canadian energy producer in a C$356 million deal to increase its Canada production.

US

By Jeremy Herron and Kate Garber

     (Bloomberg) — Weak import data from China rekindled concern that a slowdown there will spread, pulling emerging- market stocks down from a two-month high and weighing on industrial metals. U.S. stocks dropped from the highest level since August as Treasuries rallied.

     The Standard & Poor’s 500 Index fell after rising in nine of the past 10 sessions, while the Dow Jones Industrial Average couldn’t extend its longest rally of the year. Miners led the MSCI All-Country World Index to its first drop in 10 days, with emerging-market equities tumbling 1.5 percent. The dollar advanced, while copper led metals lower and crude slipped.

     U.S. stocks struggled to continue their two-week rebound from the first correction in four years, with investors awaiting corporate results to gauge the health of the economy. Data that showed the 11th straight monthly decline in Chinese imports rekindled concern that demand for metals from the world’s second-largest economy will fall, sending equities in resource- rich nations lower.

     “We’ve had a very, very strong run the first 10 days of October,” said Eric Green, director of research and senior managing partner at Penn Capital, which oversees $4 billion in Philadelphia. “Some backing and filling is probably appropriate here. It can’t go straight up.”

     The S&P 500 fell 0.7 percent at 4 p.m. in New York, halting a four-day rally. The Dow average lost 0.3 percent after seven straight advances. The broader gauge has rallied 7.3 percent from an August low, though investors are looking to corporate earnings for the next catalyst higher.

     Johnson & Johnson fell 0.5 percent after reporting its results, while biotechnology shares in the S&P 500 lost 1.9 percent for the biggest loss among 24 groups.

     Intel Corp. added 0.8 percent at 4:25 p.m. in New York after forecasting fourth-quarter sales that may exceed analysts’ predictions. JPMorgan Chase & Co. slipped 0.9 percent after reporting results.

     “The big concern is not rising interest rates anymore, it’s slowing growth and corporate profits,” saidPatrick Spencer, equities vice chairman at Robert W. Baird & Co. in London. “Earnings are starting this week and some of the biggest banks are reporting, so that is going to set the scene.”

     The MSCI All-Country World Index fell 0.9 percent, halting a rally that added 8.3 percent over nine days. The Stoxx Europe 600 Index dropped 0.9 percent, for its first two-day decline in two weeks. 

     The Bloomberg Dollar Spot Index rose 0.2 percent, while the pound touched the weakest level versus the euro since February as Britain’s inflation rate unexpectedly turned negative for the second time since 1960 in September. The yen strengthened 0.3 percent to 119.74 per dollar, the euro advanced 0.2 percent to $1.1385.

     The Australian dollar weakened 1.4 percent to 72.60 U.S. cents, halting the longest rally in more than six years. New Zealand’s dollar dropped for the first time in 11 days. China is the biggest trading partner for both commodity-driven countries.

     Treasuries advanced following China’s import data, with the yield on the benchmark 10-year note falling four basis points to 2.04 percent. The market was closed on Monday for a U.S. federal holiday.

     “Further disappointing Chinese data weighed on Asian equities, supporting Treasuries,” said Nick Stamenkovic, a fixed-income strategist at broker RIA Capital Markets in Edinburgh. “I doubt 10-year Treasury yields will exceed 2.3 percent by year-end given ongoing fears that weaker emerging- market growth will spill over to developed economies.”

     The yield on German 10-year bunds added one basis point to 0.59 percent, after falling four basis points on Monday. Yields on similar-maturity Italian bonds fell one basis points to 1.66 percent.

     The Bloomberg Commodity Index dropped 0.1 percent. West Texas Intermediate crude slipped to a one-week low, falling 0.9 percent to settle at $46.66 a barrel after tumbling 5.1 percent on Monday, the most in six weeks.

     Global demand for oil is growing while non-OPEC countries are producing less, according to Abdalla Salem El-Badri, the secretary-general of Organization of Petroleum Exporting Countries. The 12-member group said it pumped 31.57 million barrels a day last month, the most since 2012, according to its monthly market report.

     Copper dropped from the highest level in three weeks, declining 1.2 percent to $2.3875 a pound in New York. Gold futures rose 0.1 percent to $1,165.40 an ounce. Silver futures advanced for a third straight session amid signs of tightening supply.

     The MSCI Emerging Markets Index retreated from a two-month high, sliding 1.5 percent. Currencies from Indonesia, Malaysia and Taiwan weakened versus the dollar as a gauge of exchange rates for 20 developing nations declining for a second day, losing 0.8 percent.

     The Hang Seng China Enterprises Index fell from a seven- week high in Hong Kong, losing 1 percent. The Shanghai Composite Index added 0.2 percent, as technology and consumer companies rallied. 

Have a great evening everyone.

Be magnificent!

“Always bear in mind that your own resolution to succeed is more important than any other.” Abraham Lincoln

As ever,

Karen

“Kindness in words creates confidence. Kindness in thinking creates profoundness. Kindness in giving creates love.” Lao Tzu

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