May 2, 2016 Newsletter

Dear Friends,

Tangents:

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

PHOTOS OF THE DAY

A participant takes part in the annual Jack In The Green parade involving hundreds of costumed revellers joining a four hour procession culminating in the traditional ‘slaying’ of a Jack character to ‘unleash the spirit of summer’ on the May Day week end, in Hastings, southern Britain on Monday.Toby Melville/Reuters

A bus passes by a canola field in Sehnde near Hannover, northern Germany, on Monday morning. Julian Stratenschulte/AP

Market Closes for May 2^nd, 2016

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Eric Lam

     (Bloomberg) — Canadian stocks fell in the first trading session of May, after capping a third monthly gain, as commodities producers declined with oil and Bank of Nova Scotia slipped after reporting a C$275 million restructuring charge.

     The benchmark S&P/TSX Composite Index sank 0.6 percent to 13,865.63 at 4 p.m. in Toronto. The gauge increased 3.4 percent in April, matching the longest monthly winning streak since August 2014. The S&P/TSX is one of the best-performing developed markets in the world this year, up 6.6 percent as it rebounds from last year’s worst annual decline since 2008.

     Suncor Energy Inc. and Cenovus Energy Inc. fell at least 3.1 percent to lead energy producers lower as the group declined 2 percent. Four of 10 industries in the S&P/TSX retreated on trading volume in line with the 30-day average. Raw-materials, financial services and health-care companies also decreased, while consumer staples and utilities rose more than 0.8 percent.

     Goldcorp Inc. dropped 3.2 percent as raw-materials producers tumbled 1.6 percent. Gold was little changed in New York while copper prices sagged for the first time in three sessions as growth in U.S. manufacturing cooled in April. A gauge of S&P/TSX gold producers slumped 1.9 percent to snap a four-day rally of 15 percent.

     Crude futures settled below $45 a barrel in New York, extending a slide from Friday. Exports from Iraq approached a record in April, shipping 3.36 million barrels a day in the month to add to a worldwide supply glut, according to an oil ministry spokesman. The figures don’t include sales by the Kurdistan Regional Government.

     The resource-dominant S&P/TSX remains closely linked to moves in commodities prices, with a 17 percent rally in the benchmark equity gauge from a Jan. 20 low aligning with a rebound in crude from the lowest levels since 2003. Raw- materials and energy producers are the two top-performing industries in Canada so far this year, up more than 11 percent.

     The Canadian benchmark now trades at 21.5 times earnings, about 11 percent higher than the 19.3 times earnings valuation of the Standard & Poor’s 500 Index, according to data compiled by Bloomberg.

     Scotiabank lost 1 percent after reporting it will take a charge of 22 cents a share in its fiscal second quarter, to cover the cost of job cuts and other productivity enhancements as it shifts toward digital banking. The lender is scheduled to report results May 31.

     Manitoba Telecom Services Inc. climbed a record 15 percent to the highest since 2008, after agreeing to sell itself to BCE Inc. in a C$3.1 billion cash and stock deal. Manitoba Telecom traded at a lower value than the C$40 a share acquisition price. As a follow-on to the deal, BCE will also transfer one-third of Manitoba Telecom’s wireless subscribers to competitor Telus Corp. BCE fell 0.3 percent while Telus gained 0.2 percent.

     Valeant Pharmaceuticals International Inc. lost 2.3 percent, paring earlier declines of as much as 13 percent, for a third drop in the last four sessions. Warren Buffett criticized Valeant at Berkshire Hathaway Inc.’s annual meeting, calling the drugmaker’s business model “enormously flawed.”

US

By Jeremy Herron and Joseph Ciolli

     (Bloomberg) — U.S. shares rose the most in two weeks and the dollar weakened to the lowest in almost a year as traders lowered expectations for higher interest rates as manufacturing slowed last month. Emerging-market assets retreated with crude.

     The S&P 500 advanced as consumer and financial shares paced gains amid corporate results. The euro topped $1.15 for the first time since August, while gold pared an advance after climbing above $1,300 an ounce for the first time since January 2015. Oil fell below $45 a barrel in New York, after a 20 percent surge in April. Brazil’s real led losses among its major peers. The Treasury 10-year yield rose to 1.85 percent.

     Global equities advanced on the first day of May, following a week that saw risk assets fall from favor amid speculation central banks from Asia to Europe won’t rush to add to unprecedented stimulus. The Federal Reserve struck a more hawkish tone with its policy statement even as signs mount that the rate of U.S. growth continues to slow. A weakening dollar helped boost commodities prices to the best month since 2010.

     “We can hold the strength, but there’s still a lack of conviction in the market,” said Bill Schultz, who oversees $1.2 billion as chief investment officer at McQueen, Ball & Associates Inc. in Bethlehem, Pennsylvania. “Earnings have been spotty at best, and outlooks have given investors some pause about the future. At the same time, there are no signs pointing to a dramatic pullback.”

     U.S. manufacturing expanded at a slower pace than forecast in April as factories continued to grapple with lax global demand and fallout from a weakened energy industry. China released an official manufacturing gauge over the weekend that added to evidence its economy is stabilizing, while manufacturing in the euro zone expanded at a faster pace than initially estimated in April. Markets shut for holidays included those of China, Hong Kong and the U.K.

     The S&P 500 advanced 0.8 percent at 4 p.m. in New York, for its best gain since April 13. Amazon.com Inc. rose to a four- month high after earnings last week led to its biggest one-day gain in nine months. Wells Fargo & Co. and JPMorgan Chase & Co. climbed at least 1.1 percent. Halliburton Co. rallied 3.3 percent and Baker Hughes Inc. fell 1.6 percent after ditching their $28 billion merger. Apple Inc. extended its longest losing streak since 1998.

     A rebound that lifted S&P 500 as much as 15 percent from its February low faltered last week amid lackluster earnings and few signs of a pickup in economic growth. The gauge reached a four-month high on April 20, within 1.3 percent of the record set last May.

     Corporate results so far haven’t convinced investors that profits will rebound from what’s shaping up to be a fourth straight quarterly decline. Apple, Microsoft Corp. and Alphabet Inc. all forecast sales in coming periods below analyst estimates, sinking large-cap technology shares even as Facebook Inc. and Amazon.com Inc. have surpassed forecasts. Not all has been bad, as banks used cost cuts to top predictions. Financial shares advanced 0.9 percent Monday.

     The MSCI Emerging Markets Index fell 0.5 percent, following two weeks of losses that pared its April gains. South Korea’s Kospi Index dropped for a fourth day and Indonesia Jakarta Composite Index slid to a three-week low, tracking losses in Japanese equities.

     The yen has strengthened 13 percent this year, the best performance among Group-of-10 currencies. The euro advanced 0.6 percent to $1.1517, the highest since Aug. 25.

     The Bloomberg Dollar Spot Index, which tracks the greenback against 10 major peers, headed for its lowest close in almost a year. It slumped 2 percent last week as the BOJ’s inaction coincided with Fed Chair Janet Yellen reiterating she’s in no rush to cool the U.S. economy by raising borrowing costs.

     “So long as the Fed signals that they are being cautious in raising rates, real yields in the U.S. will decline, leading the dollar weaker,” said Hiromichi Shirakawa, the Swiss lender’s chief Japan economist and a former BOJ official. “The currency market is in a rather dangerous zone.”

     Gold futures climbed as much as 1.1 percent to $1,304.30 an ounce, the highest since January 2015, before settling at $1,295.80.

     Brent oil retreated 1.7 percent, following a 22 percent surge in April, as near-record Iraqi output added barrels to a worldwide supply glut. Gold climbed for a sixth day, the longest streak since March 2015. Brent crude fell to $46.53 a barrel.

     The London Metal Exchange is shut Monday.

     Treasury 10-year yields rose 2 basis points to 1.86 percent as trading resumed in New York after being closed for the London morning. The yield dropped five basis points last week. Puerto Rico, a U.S. territory, said Sunday that it will default on a $422 million bond payment for its Government Development Bank.

     Canadian government bonds ended their worst month in a year as investors switched bets to central bank interest-rate increases from cuts on signs of economic strength and a crude- oil rally.

     German’s 10-year bond yield fell one basis points to 0.27 percent, after three weeks of increases that pushed it to as high as 0.31 percent on April 27, the most in more than a month.

Have a wonderful evening everyone.

Be magnificent!

“Very little is needed to make a happy life; it is all within yourself, in your way of thinking.” Marcus Aurelius

As ever,

Karen

“The purpose of our lives is to be happy.” Dalai Lama

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