June 28, 2016 Newsletter

Dear Friends,

Tangents:

Points of Progress:

FRANCE

To curb the creep of work into private life, a labor-reform bill now in motion includes an  amendment to ban sending email to workers after hours.  It specifically suggests that firms with 50 or more employees draft policies to limit the encroachment of duties wrought by digital technology.  Some charge that the measure does not do enough (adherence would be voluntary).  Others worry that the move would hurt France’s global competitiveness. –BBC

GREENSBORO, N.C.

Citizens won direct control over public spending  – at least a tiny slice of it – when the government of this midsize city became the first in the South (and one of a small but growing number around the world) to implement participatory budgeting.  “The city council agreed to allocate $100,000 for expenditures in each district through [PB],” reports Yes! Magazine.  “The additional cost of implementation…was split between the city and local advocates, who received much of their funding from community foundations.”  Sample result of the people power: The transit authority’s new software shows passengers where buses are in real time. –Yes!Magazine.

SANTIAGO, CHILE

A (mostly) renewable-powered urban rail system will be the world’s first.  The Metro de Santiago signed agreements with international solar-and wind-power concerns that will provide 60 percent  of the system’s electric power needs by 2018.  Among Latin American metro-transit systems Santiago’s is second only to Mexico City’s in size.  –Ecowatch, Energial REnovables (Spanish).

HELSINKI, FINLAND

Score another win for women in science.  Biochemical engineer Frances Arnold was awarded the prestigious $1.2 million Millennium Technology Prize for developing “directed evolution,” a method of producing useful enzymes from renewable resources.  Her work has revolutionized the production of industrial chemicals and even been used to make jet fuel from sugars.   The prize has been awarded every two years since 2004 by the Technology Academy Finland.  Dr. Arnold is based at the California Institute of Technology.

PHOTOS OF THE DAY

Demonstrators in Trafalgar Square, central London, take part in a protest on Tuesday, aimed at showing London’s solidarity with the European Union following the recent EU referendum. Dylan Martinez/Reuters

The SLS Five-Segment Solid Rocket Motor that will launch NASA’s Space Launch System and Orion spacecraft to deep space undergoes a static test fire at the Orbital ATK facility in Promontory, Utah, on Tuesday. Jim Urquhart/Reuters

Market Closes for June 28^th, 2016

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Eric Lam

     (Bloomberg) — Canadian stocks rose, bouncing back from the steepest two-day slide since February, as equity markets around the world rallied for the first time since the U.K.’s surprise vote to leave the European Union.

     The S&P/TSX Composite Index rose 1.1 percent to 13,842.69 at 4 p.m. in Toronto, after the benchmark posted a two-day retreat of 3.1 percent through Monday, the biggest since February as global markets churned in the wake of the U.K. referendum. The S&P/TSX remains negative in June, with a 1.6 percent loss for the month and on pace to halt a four-month rally.

     Energy producers and the nation’s largest lenders contributed the most to gains in the S&P/TSX as nine of 10 industries advanced. Royal Bank of Canada and Toronto-Dominion Bank increased more than 1.5 percent as lenders rebounded from the lowest level in more than two months. Industrial producers increased 1.6 percent, led by gains in the railroad operators. Only materials producers fell, led by gold miners as demand for haven assets faltered.

     Bombardier Inc. jumped 5 percent, the most in two months, after the struggling aircraft manufacturer finalized a firm order with Air Canada for 45 C Series jets. The sale is valued at $3.8 billion based on list prices.

     Suncor Energy Inc. and Canadian Natural Resources Ltd. rose at least 1.7 percent to lead energy stocks higher as all but two members of the S&P/TSX Energy Index advanced. Crude futures in New York rose 3.3 percent, after slumping 7.5 percent over the previous two sessions.

     Raw-materials producers are the only laggards in the broader index, slipping 0.6 percent as a group as gold retreated after its biggest two-day surge in seven years. Barrick Gold Corp. dropped 2.6 percent, after soaring 12 percent in the previous two sessions.

     Canadian equities have fared relatively better compared with global markets this year, led by a resurgence in commodities prices. A gauge of raw-materials producers has jumped 47 percent while energy stocks jumped 14 percent.

     The S&P/TSX is neck-and-neck with New Zealand as the top- performing developed markets in the world in 2016, with the countries now the only two among 24 in positive territory, according to data compiled by Bloomberg. It’s a far cry from 2015, when the S&P/TSX was one of the worst markets in the world, slumping the most since the 2008 financial crisis.

     Canadian shares remain more expensive relative to their U.S. peers. The S&P/TSX now trades at 21.3 times earnings, about 13 percent higher than the valuation of the S&P 500 Index.

     Global markets rebounded as the S&P 500 Index increased 1.8 percent, recovering from the lowest close since March on Monday. First-quarter U.S. economic growth rose at a 1.1 percent annualized rate, exceeding previous estimates of 0.8 percent on improved trade and business investment. EU leaders are gathering for a two-day European Council summit to discuss Britain’s exit.

US

By Dani Burger and Bailey Lipschultz

     (Bloomberg) — U.S. stocks surged the most in nearly four months, rising for the first time since Britain voted to leave the European Union amid optimism that policy makers are committed to limit the fallout from the U.K.’s exit.

     Tuesday’s turnaround gathered pace late in the day, with the Dow Jones Industrial Average adding more than 260 points. Banks had the strongest rally in six weeks, following their worst back-to-back sessions in almost five years. Facebook Inc., Apple Inc. and Microsoft Corp. rose at least 1.6 percent to boost the technology group, while energy producers climbed the most in 2 1/2 months as crude prices jumped.

     The S&P 500 Index advanced 1.8 percent to 2,036.09 at 4 p.m. in New York, the most since March 1 amid a rebound from the steepest two-day drop since August. Gains accelerated in afternoon trading as the index pushed above its average price during past 200 days. The rally topped out near the 100-day moving average. The Dow added 269.48 points, or 1.6 percent, to 17,409.72. The Nasdaq Composite Index increased 2.1 percent.

     “It’s a case of confidence, when the market goes higher it brings confidence,” said Richard Sichel, chief investment officer at Philadelphia Trust Co., which oversees $2 billion. “Getting through most of the day and the market holding onto those gains, that pulls in other investors who may have been watching and just waiting to step up.”

     The U.K.’s decision last week triggered a rush toward safe havens as global equities lost about $3.6 trillion in market value and the S&P 500 tumbled 5.3 percent to erase its 2016 advance. The CBOE Volatility Index tumbled 21 percent Tuesday, the most since 2011, though the measure of market turbulence known as the VIX is still on the way to its biggest monthly climb since a record jump last August.

     After the market closed, Nike Inc. sank 6.9 percent as of 4:52 p.m. as its future orders, a proxy for demand, missed estimates. The disappointment renewed concerns that the world’s largest sports brand has entered a period of slowing growth.

     European Central Bank President Mario Draghi added to speculation of a more coordinated effort by policy makers to mitigate the Brexit repercussions, calling for global policy alignment in a speech at the ECB Forum in Sintra, Portugal. Draghi said there is a “common responsibility” to address the world’s economic weaknesses.                          

     The rally Tuesday brings a measure of relief after two days of sharp declines spurred by concerns that Britain’s EU exit would further burden an already sluggish global economy. Investors have pushed back bets on Federal Reserve interest-rate increases, pricing in just a 10 percent chance for higher borrowing costs by February 2017, down from 52 percent before the vote outcome. Odds for a rate cut by November are nearly 14 percent.

     EU leaders gathered for a two-day European Council summit to discuss Britain’s exit. Germany, France and Italy prodded the U.K. government to start the process, saying they want to move forward and limit market risks. Britain’s Chancellor of the Exchequer George Osborne sought to reassure investors on Monday, saying that contingency plans were in place to shore up the economy amid ongoing volatility, but that Brexit won’t be “plain sailing” — something that Cameron reiterated in Parliament.

     “People are calming down and looking at it more rationally,” said John Conlon, chief equity strategist at People’s United Wealth Management, which oversees $5.5 billion. “It’s a combination of that plus the fact that by now you’ve seen the investors that were betting that Brexit wasn’t going to happen finally unwinding those bets.”

     Aside from the Brexit drama, a report today showed the U.S. economy expanded more than previously projected in the first quarter as improved performance in trade and business investment more than made up for weaker consumer spending. Separate data showed consumer confidence rose to the highest since October as Americans became somewhat more optimistic about the economy.

     In Tuesday’s trading, energy, financial and technology shares were the strongest among the S&P 500’s 10 main industries, increasing at least 2 percent. Health-care and consumer discretionary companies added more than 1.9 percent. A Goldman Sachs Group Inc. basket of the most shorted shares in the Russell 3000 Index jumped 2.5 percent, the most in more than two months. About 8.4 billion shares traded hands on U.S. exchanges, 16 percent above the three-month average.                          

     Banks in the S&P 500 increased 3.2 percent, the steepest since May 18, after falling 10 percent in two sessions. JPMorgan Chase & Co. and Wells Fargo & Co. added more than 2.4 percent. Comerica Inc. and Regions Financial Corp. were among the biggest gainers in the group, climbing at least 4 percent after back-to- back losses of more than 16 percent.

     Biotechnology shares led the rally in health-care, with Gilead Sciences Inc. jumping 4.8 percent, the most in almost five months. Regulators approved Gilead’s hepatitis C drug for all forms of the viral disease. Celgene Crop. rose 2.2 percent, while Regeneron Pharmaceuticals Inc. and Biogen Inc. climbed at least 1.5 percent. The Nasdaq Biotechnology Index jumped 3.8 percent, the most in 11 weeks.

     In the broader health-care group, Johnson & Johnson rose 1.4 percent in its fourth gain in five days, climbing to an all- time high. Allergan Plc and Medtronic Plc added at least 2.1 percent.                          

     Microsoft rose 2.1 percent to boost tech companies in the benchmark, clawing back a portion of a 6.7 percent drop in the prior two sessions as the software giant bounced from an eight- month low. Facebook surged 3.4 percent, its best gain in two months. Seagate Technology Plc and Micron Technology Inc. posted the strongest advances, rising at least 6.2 percent. The Philadelphia Stock Exchange Semiconductor Index added the most since May 20.

     Oil and gas companies marked their best session since April 12 as West Texas Intermediate crude futures jumped 3.3 percent. Exxon Mobil Corp. rallied 2.3 percent, the strongest since March 7, while Marathon Petroleum Corp. advanced 8.4 percent, its biggest one-day climb since February 2012.

     Dow Chemical Co. and merger partner DuPont Co. lost 2 percent after Dow said it plans to eliminate about 2,500 jobs and shut plants in North Carolina and Japan as it slims down after taking full control of its Dow Corning Corp. silicone venture. The company announced the Corning deal in December at the same time it unveiled an agreement to merge with DuPont, a $56.4 billion combination that’s under antitrust scrutiny.

     Among other shares moving on corporate news, Xencor Inc. soared 32 percent, the most since December 2013, to help boost the Russell 2000 Index. The company announced a deal with Novartis AG to collaborate on developing cancer therapies. Novartis added 3 percent, the most in a month.

Have a wonderful evening everyone.

Be magnificent!

What then do I mean by the ideal of a universal religion?

I do not mean a universal philosophy, or a universal mythology or a universal ritual,

but I mean that this world must go on, wheel within wheel.

What can we do?

We can make it run smoothly, we can lessen friction, we can grease the wheels , as it were.

By what?

By recognizing variation.

Just as we have recognized unity, by our very nature so we must also recognize variation.

We must learn that truth may be expressed in a thousand ways, and each one yet be true.

We must learn that the same thing can be viewed from a hundred different standpoints,

and yet be the same thing.

Swami Vivekananda

As ever,

Carolann

I’ve never been poor, only broke.  Being poor is a frame of mind. 

Being broke is only a temporary situation.

                                                    -Michael Todd, 1909-1958

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