June 16, 2016 Newsletter

Dear Friends,

Tangents:

On June 16, 1815, Thomas Creevey wrote from Brussels in his Journal:

Friday morning, half-past two – The girls just returned from a ball at the Duke of Richmond’s.  A battle has taken place today [at Charleroi on 15 June] between Bonaparte and the Prussians; to what extent is not known, however, to be in favour of the French.  Our troops are all moving from this place at present.  Lord Wellington was at the ball tonight as composed as ever.

PHOTOS OF THE DAY

A woman walks on the installation ‘The Floating Piers,’ by Bulgarian-born artist Christo Vladimirov Yavachev, known as Christo, on Lake Iseo in northern Italy on Thursday. Stefano Rellandini/Reuters

Robot ‘Pepper,’ a humanoid robot designed to welcome and take care of visitors and patients, holds the hand of a newborn baby at AZ Damiaan hospital in Ostend, Belgium, on Thursday. Francois Lenoir/Reuters

Market Closes for June 16^th, 2016

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Anna-Louise Jackson

     (Bloomberg) — Canadian stocks slid for the sixth time in seven days, erasing Wednesday’s gain as commodity producers followed crude-oil and metals prices lower.

     The S&P/TSX Composite Index fell 0.3 percent to 13,882.41 at 4 p.m in Toronto, paring an earlier 0.8 percent retreat as U.S. stocks rebounded amid diminished odds Britain will elect to leave the European Union. Seven of the gauge’s 10 main industries declined. Gold prices slumped after touching a nearly two-year high, dragging down raw-materials companies which erased an earlier 2 percent advance. The benchmark has slumped 3.4 percent since hitting a 10-month high on June 7.

     The S&P 500 Index wiped out all of a 1 percent drop, while futures on the Euro Stoxx 50 gained amid a steady intraday easing in bookmaker odds for the U.K. exiting the EU. Campaigning for the Brexit referendum was suspended by both sides after Labour Party lawmaker Jo Cox was murdered as she met constituents in her district.

     Shares of health-care companies led the decline in Canada’s market, falling 3.4 percent to the lowest since December 2010. Valeant Pharmaceuticals International Inc. tumbled again, losing 5.1 percent to bring its two-day decline to 6.2 percent.

     After rising as much as 2.1 percent earlier in the day to briefly touch a 16-month high, raw-materials stocks tumbled along with gold prices to close 1.4 percent lower. OceanaGold Corp. soared to an all-time high before closing 0.9 percent lower. Kinross Gold Corp. and Alamos Gold Inc. both tumbled at least 4.1 percent, the most in about four weeks.

     As oil prices slumped, so did energy stocks with the group sinking 0.8 percent. Cenovus Energy Inc. lost 3.6 percent to a two-month low, while Surge Energy Inc. and Baytex Energy Corp. both fell at least 5.5 percent. West Texas Intermediate crude futures declined 3.8 percent in New York, capping the commodity’s longest losing streak since February, as concerns mounted that the world economy is losing strength.

     Financials snapped a six-day selloff, rising 0.2 percent led by a rally of 1.3 percent for Dream Office Real Estate Investment Trust. Meanwhile, phone companies added to a three- day rally of 1.9 percent as Roger Communications Inc. jumped 1.6 percent, the most since February.

US

By Joseph Ciolli and Anna-Louise Jackson

     (Bloomberg) — U.S. stocks rebounded, with the S&P 500 Index halting its longest losing streak since February, amid shifting speculation on whether Britain will remain in the European Union.

     Equities recovered from a 1 percent selloff as both sides suspended campaigning on whether Britain should leave the EU after Labour Party lawmaker Jo Cox was murdered while she met constituents in her electoral district. She was in favor of remaining in the EU, fueling speculation voters will be more likely to choose remain in next week’s referendum. Phone companies and utilities led the rally, while energy producers were mired in the longest retreat in almost 10 months as crude continued to fall.

     The S&P 500 rose 0.3 percent to 2,077.99 at 4 p.m. in New York, ending a five-day, 2.3 percent retreat. The gauge also climbed back above its average price during the past 50 days. It was the fifth time this year the benchmark has erased a 1 percent intraday drop to finish higher. The Dow Jones Industrial Average surged 92.93 points, or 0.5 percent, to 17,733.10, after wiping out a 168-point slide. The Nasdaq Composite Index added 0.2 percent.

     “Recent polls have shown Brexit is too close to call, or leaning in the direction of leaving,” said Mark Luschini, chief investment strategist at Philadelphia-based Janney Montgomery Scott LLC, which manages $54 billion. “That campaign cooling a bit could provide relief to investors that think further campaigning will help drive votes in the direction of a Brexit. How sticky of a sentiment that will be is yet to be determined.”

     Traders noted the rebound in equities coincided with a deterioration in chances Britons would elect to leave the EU as tracked by Oddschecker’s survey of bookmakers’ implied probability. Those odds slipped below 38 after surpassing 44 hours earlier. Others said a rebound in markets was unsurprising given how fast stocks fell at the open, with the S&P 500 going as low as 2,050.37, roughly where it began a 1.4 percent rally on May 24.

     The CBOE Volatility Index fell 3.8 percent to 19.37, after jumping almost 14 percent. The measure of market turbulence known as the VIX slipped for a third day after reaching on Monday its highest since Feb. 23. About 7.4 billion shares traded hands on U.S. exchanges, 6 percent above the three-month average.

     Investors also shrugged off mounting anxiety over the growth outlook after the Federal Reserve yesterday scaled back its projections for interest-rate increases. Policy makers indicated the economy remains mixed, and also cited Britain’s June 23 EU referendum as a factor in the decision to stand pat. Chair Janet Yellen pointed to more permanent forces that could hold down rates for longer, namely slow productivity growth and aging societies.

     The Bank of Japan refrained from expanding monetary stimulus ahead of a domestic election and the U.K.’s June 23 Brexit vote, while the Swiss National Bank and Bank of England also kept rates unchanged.

     Equities found a reprieve in a retreat spurred as investors weighed the potential fallout from the U.K. referendum, with a series of polls in recent days indicating more Britons favor leaving the EU. Sentiment has soured from just a week ago, when the S&P 500 rose to within 0.6 percent of a record on optimism that a mix of low rates and moderate economic growth would continue to support higher stock prices. The gauge had rallied as much as 16 percent from a 22-month low in February.

     “I wouldn’t be surprised if everything was just put on hold for a while,” said Tim Ghriskey, who oversees $1.5 billion as managing director and chief investment officer at Solaris Asset Management. “The possibility of a delay in the Brexit vote is probably letting the market seemingly lift a little bit and retrace most of today’s losses.”

     Central banks have sounded the alarm over a potential Brexit, with chiefs of the Fed, Bank of Japan, Bank of Canada and Swiss National Bank all citing next week’s vote as a potential disruption to the global economy. Yellen said yesterday the decision could have consequences for financial markets, and “in turn for the U.S. economic outlook.” Traders have cut back their bets on a Fed rate increase, pricing in only a 6 percent chance of a July boost and less than 40 percent odds of one as late as February 2017.                          

     While policy makers still aren’t seeing enough momentum in the economy to warrant higher borrowing costs, a report today showed the cost of living in the U.S. excluding food and fuel rose in May, propelled by rising rents. Separately, jobless claims increased more than expected last week, reflecting a jump in California that otherwise masked steady progress in the labor market. Another gauge showed confidence among homebuilders climbed to a five-month high in June.

     “There’s been a subtle shift in terms of what the market is rewarding — from previously having rewarded low rates and more liquidity to now being seen to reward an increase in rates because of the implications for confidence and economic activity,” said Daniel Murray, the London-based head of research at EFG Asset Management. “The Fed has done quite a quick turn. Clearly the uncertainty over Brexit is rising. Markets are trying to digest all of this.”

     In Thursday’s trading, phone companies and utilities — the two groups with the most generous dividend yields — were the strongest performers among the S&P 500’s 10 main industries. Energy companies pared their drop to 0.2 percent from more than2 percent, even as West Texas Intermediate crude futures fell 3.8 percent to cap the longest selloff since February.

     Consumer staples gained as the dollar retreated, amid speculation the lower currency will help the profitability of their businesses overseas. Hormel Foods Corp. added 2.3 percent, while Tyson Foods Inc. and Campbell Soup Co. increased more than 1.5 percent.

     Merck & Co. was one of the biggest boosters to the benchmark index and the best in the Dow, rising 2.5 percent. The shares had their strongest day in two months after positive trial results for its Keytruda lung cancer treatment.

     Pioneer Natural Resources Co. sank 6.1 percent, the worst in the S&P 500 and its biggest loss since January. Investors panned its $435 million deal to buy drilling rights from Devon Energy Corp., as Pioneer is financing the purchase with new stock that will dilute the value of their holdings.

Have a wonderful evening everyone.

Be magnificent!

The supreme consideration is man.

Mahatma Gandhi

As ever,

Carolann

People need dreams, there’s as much nourishment in ‘em as food.

                                                     -Dorothy Gilman, 1923-2012

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