October 18, 2016 Newsletter

Dear Friends,

Tangents:

On this day in 1977, New York Yankee Reggie Jackson hit three home runs to lead the Yankees to an 8-4 victory over the Los Angeles Dodgers in the deciding Game 6 of the World Series.

October
    -by Robert Frost

O hushed October morning mild,
Thy leaves have ripened to the fall;
Tomorrow’s wind, if it be wild,
Should waste them all.
The crows above the forest call;
Tomorrow they may form and go.
O hushed October morning mild,
Begin the hours of this day slow,
Make the day seem to us less brief.
Hearts not averse to being beguiled,
Beguile us in the way you know.
Release one leaf at break of day;
At noon release another leaf;
One from our trees, one far away.
Retard the sun with gentle mist;
Enchant the land with amethyst.
Slow, slow!
For the grapes’ sake, if they were all,
Whose leaves already are burnt with frost,
Whose clustered fruit must else be lost—
For the grapes’ sake along the wall.

PHOTOS OF THE DAY

A stroller walks along linden trees through early morning mist at the Georgengarten in Hannover, northern Germany, on Tuesday. Holger Hollemann/dpa/AP

Light filters through colored leaves as autumn weather arrives in Europe in Orvault, western France, on Tuesday. Stephane Mahe/Reuters

People riding water-powered jet boards perform in Yixing, Jiangsu province, China, on Monday. Reuters
Market Closes for October 18^th, 2016

International Markets

Bonds

Currencies

Commodities

Market Commentary:
Canada
By John Hyland
     (Bloomberg) — Canadian stocks rose with other global financial markets Tuesday, buoyed by positive earnings reports from some key multinational companies and signs that the U.S., the world’s largest economy, is strong enough to withstand a gradual pace of monetary tightening.
     The S&P/TSX Composite Index rose 1.1 percent to 14,752.25 at 4 p.m. in Toronto, its highest level this month. The index shrugged off last week’s declines amid better than expected results from Goldman Sachs Group Inc. and Johnson & Johnson. The Canadian equity benchmark is up 13 percent this year, making it the top performing developed equity market in the world, ahead of the U.K. and New Zealand.
     All but one of the 11 industries in the index edged higher, led by a 3.3 percent gain for raw-materials producers. Gold had its first back-to-back gains in almost a month as the dollar weakened amid interest rate speculation. Gold and silver are poised to climb by the time of the London Bullion Market Association Conference in October 2017, according to a survey of people attending this year’s gathering, which ends Tuesday. Barrick Gold Corp. and Goldcorp Inc. gained at least 2 percent to reach their highest level in two weeks. Silver Wheaton Corp. gained 3.9 percent, hitting a two week high.
     Energy producers, Canada’s second largest sector, climbed 0.9 percent to the highest level since June 2015, on a rise in oil. Crude edged above $50 where prices have been hovering since OPEC’s decision to cut output last month. The S&P/TSX Energy index is 26 percent higher this year.
     Financial services, which account for a third of the S&P/TSX Composite Index, gained 0.8 percent to the highest level since November 2014. The Royal Bank of Canada and Toronto-Dominion Bank climbed more than 0.8 percent, reaching record highs. Bank of Canada Governor Stephen Poloz may push back his prediction for the economy to reach full output next year and keep interest rates unchanged at an interest-rate decision Wednesday.
     Valeant gained 3.2 percent, rebounding from an earlier decline after the drug maker cut ties with a mail-order pharmacy that helped sell an antidepressant it had acquired and raised prices on. The company slumped 3.6 percent on Monday to the lowest level in more than two months, after Imprimis Pharmaceuticals Inc. announced it was making a cheaper lead poisoning treatment available.
     Canadian stock valuations remain 16 percent higher than their U.S. peers, with the S&P/TSX carrying a price-earnings ratio of 23.6 compared with 20.2 for the the S&P 500 Index, according to data compiled by Bloomberg.
     Amaya Inc., a Canadian online gambling company, ended merger discussions with London-based William Hill Plc, thwarting one of the biggest possible deals in the betting industry, after William Hill’s largest investor, Parvus Asset Management, opposed the union. Amaya shares declined 8.3 percent to the lowest level since June.

US
By Rita Nazareth, Lananh Nguyen and Lukanyo Mnyanda
     (Bloomberg) — Stocks rallied around the world, while the dollar fell amid speculation the Federal Reserve will stick to a gradual tightening of monetary policy.
     Equities jumped the most in almost four weeks as investors parsed earnings reports and energy shares rebounded. The greenback extended its retreat from a seven-month high as data showed consumer prices excluding food and fuel costs in the U.S. rose less than forecast. Oil rallied, closing above $50 a barrel in New York as investors mulled the likelihood of OPEC following through with the production cuts agreed on last month.
     Speculation is mounting that the Fed will boost interest rates in December but take a slow path when it comes to further increases amid mixed signals from the U.S. economy. While the cost of living rose at the fastest pace in five months in September, the increase in prices excluding volatile food and fuel costs trailed estimates, data Tuesday showed. Fed Chair Janet Yellen laid out arguments last week for remaining accommodative without excluding a 2016 hike, a move that would see U.S. policy further diverge from the approaches taken by central bankers from Japan to Europe.
     “With underlying inflation underwhelming, it’s catalyzed more profit-taking on the buck’s recent outperformance,” said Joe Manimbo, an analyst with Western Union Business Solutions, a unit of Western Union Co., in Washington. Yellen’s remarks last week underscored the likelihood of a “lethargic pace” of rate increases, he said.
     The MSCI All-Country World Index rose 0.9 percent as of 4:15 p.m. in New York, bringing its advance this year to 3.5 percent.
     The S&P 500 Index climbed 0.6 percent to 2,139.60, rising from a one-month low. Goldman Sachs Group Inc. gained 2.2 percent after posting a 47 percent increase in earnings, while Netflix Inc. surged 19 percent after reporting a jump in subscribers that alleviated concern about slowing growth. International Business Machines Corp. slipped the most since June after saying that profit margins shrank for the fourth quarter in a row.
     “We’ve been selling off for the better part of a week at this point, and earnings have been good enough to get us into this bounce,” said Michael Antonelli, an institutional equity sales trader and managing director at Robert W. Baird & Co. in Milwaukee.
     While only 57 S&P 500 members have reported so far, 84 percent have posted earnings that exceeded analysts’ estimates, with expectations on sales beaten for 68 percent of companies, according to data compiled by Bloomberg.
     Banks in the Stoxx Europe 600 Index rallied ahead of the European Central Bank’s meeting on Thursday, with the regional benchmark adding 1.5 percent. Glencore Plc and Fresnillo Plc paced an advance in miners. Benchmark gauges in Hong Kong, India and the Philippines led gains in emerging-market equities.
     Index futures foreshadowed more gains in Asian equities, with index futures on Japan’s Nikkei 225 Stock Average up 0.6 percent in Chicago. Contracts on stock gauges in Australia, South Korea and China rose at least 0.1 percent.
     The Bloomberg Dollar Spot Index, which tracks the U.S. currency against 10 major counterparts, fell 0.2 percent. The gauge touched its highest level since March last week.
     The dollar has weakened this year as ructions in global markets and uneven economic data deterred the Fed from tightening policy further.The losses had narrowed in recent weeks on odds the central bank is getting closer to a hike, prompting hedge funds and money managers to boost net bullish bets on the greenback. Futures pricing indicates a gradual pace of rate increases, with traders seeing a 63 percent odds of a move by December, down from 68 percent a week ago.
     “The market has clearly come to a stronger view that they’ll raise rates in December, but that has very little influence on where rates are perceived to go in the longer term,” said Adam Cole, head of global foreign-exchange strategy at Royal Bank of Canada in London.
     The pound advanced versus the dollar as signs of quickening inflation suggested the Bank of England may have limited scope to ease monetary policy further.
     West Texas Intermediate oil for November delivery advanced 0.7 percent Tuesday to settle at $50.29 a barrel on the New York Mercantile Exchange. Brent for December settlement climbed 16 cents to $51.68 a barrel on the London-based ICE Futures Europe exchange, leaving the global benchmark at a $1.06 premium to December WTI.
     Speculators have bolstered bullish oil bets since the OPEC accord was reached on Sept. 28 in Algiers, but fractures have emerged within the group that threaten to derail a final agreement on quotas, expected in Vienna on Nov. 30. U.S. crude inventories probably rose last week, reviving concern about oversupply, according to analysts surveyed by Bloomberg.
     “We’re waiting for new headlines,” said Rob Haworth, a senior investment strategist in Seattle at U.S. Bank Wealth Management, which oversees $133 billion of assets. “Maybe API, but for sure the EIA data will be market moving,” he said, referring to industry and government stockpiles data.
     “We’re looking for a rise in production and it will be interesting to see if production gains,” Haworth said.
     Industrial metals rebounded from their lowest point in almost four weeks as a surge in new credit in China pointed to stabilization in the economy of the world’s biggest commodities buyer. Nickel and tin climbed more than 1 percent.
     Treasuries gained after the weaker-than-expected core inflation reading. Yields on five-year notes fell to the lowest level in two weeks and a gauge of the U.S. yield curve steepened, with the gap between five- and 30-year rates near the widest since June, as shorter maturities outperformed longer- dated debt.
     The U.S. five-year bond yield declined three basis points, or 0.03 percentage point, to 1.23 percent, touching its lowest intraday level since Oct. 5, according to Bloomberg Bond Trader data. 
     Benchmark 10-year note yields fell three basis points as well, to 1.74 percent, while the gap between five- and 30-year debt expanded to about 1.28 percentage points. The 10-year break-even rate, a gauge of inflation expectations that measures the difference between yields on 10-year notes and similar- maturity Treasury Inflation Protected Securities, was about 1.68 percentage points.
     “CPI came out a little lower than expected on the core, which forces the curve to steepen,” said Charles Comiskey, head of Treasury trading in New York at Bank of Nova Scotia, one of 23 primary dealers that trade with the central bank. “The lower inflation report pushed the Fed back a little bit.”

Have a wonderful evening everyone.

Be magnificent!

Man has lost his inner perspective, he measures his greatness by his size
and not by his vital attachment to the infinite; he judges his activity by his own movement
and not by the serenity of perfection, not by the peace that exists in the starry vault,
in the rhythmic dance of incessant creation.
Rabindranath Tagore

As ever,

Carolann

The only real prison is fear, and the only real freedom
is freedom from fear.
                               -Aung San Suu Kyi, b. 1945.

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