August 11, 2015 Newsletter

Dear Friends,

Tangents:

ON this day in:
1934 – first federal prisoners land on Alcatraz.
1965 – Watts riots begin.
2014 – Robin Williams dies at 63 years of age.
1928 –  Virginia Woolf wrote this in her Diary:

At Charleston we had tea from bright blue cups under the pink light of the giant hollyhock.  We were all a little drugged with the country; a little bucolic I thought.  It was lovely enough – made me envious of its country peace; the trees all standing securely  – why did my eye catch the trees?  The look of things has a great power over me.  Even now, I have to watch myself instinctively ‘What’s the phrase for that?’  and try to make more and more vivid the roughness of the air current and the tremor of the rook’s wing slicing as if the air were full of ridges and ripples and roughnesses.  They rise and sink, up and down, as if the exercise rubbed and braced them like swimmers in rough water.  But what a little I can get down into my pen of what is so vivid to my eyes, and not only to my eyes; also to some nervous fibre, or fanlike membrane in my species.

PHOTOS OF THE DAY

Singers from Opera Australia, dressed in costumes, gather around a banquet table on the forecourt of the Sydney Opera House during a promotional event celebrating the art company’s 60th birthday, Tuesday. The event also marked Opera Australia’s 2016 season launch. David Gray/Reuters

Dairy farmer Mike Gorton walks on his Lower Harebarrow farm in Macclesfield, north west England, Tuesday. British farmers warned they were facing financial ruin with falls in the price of milk forcing many out of work and spurring others to blockade distribution centers and walk cows through supermarkets. Farming unions from across the country were meeting in London to urge the government to provide more help for an industry that has seen a 25 percent year-on-year drop in the amount farmers are paid for milk. Andrew Yates/Reuters

Hot air balloons take off during the 19th FAI Hot Air Balloon European Championship in Debrecen, Hungary, Tuesday. Hundred and two contestants from twenty-three countries participate in the event until Aug. 18. Zsolt Czegledi/MTI/AP

A gardener waters plants as part of a floral display at the ‘Flowertime’ event on Brussels’ Grand Place, Belgium, Tuesday. The event, which will open to visitors between August 13 and 16, has an Italian baroque theme this year. Francois Lenoir/Reuters

Market Closes for August 11^th, 2015

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Eric Lam

     (Bloomberg) — Canadian stocks fell, a session after raw- materials producers had their strongest gains this year, as China’s currency devaluation prompted a selloff in commodities.

     Miners declined amid speculation that resources demand will slow amid signs of decelerating growth in China, the world’s biggest consumer of energy and metals. Equities pared declines in the final 90 minutes of trading, as a rout in energy producers eased even as crude settled at the lowest level in six years.

     The Standard & Poor’s/TSX Composite Index fell 51.72 points, or 0.4 percent, to 14,414.67 at 4 p.m. in Toronto, trimming a drop of 1.4 percent. The gauge surged 1.1 percent Monday.

     China devalued the yuan by the most in two decades in an effort to support its exporters. The central bank cut its daily reference rate by 1.9 percent. China is Canada’s second-largest trading partner after the U.S.

     The Bloomberg Commodity Index, which tracks a basket of prices for raw materials including gold, natural gas and crude, sank 1.6 percent a day after rising the most since February. The index had fallen to a 13-year low last week, dragging down companies that comprise about one-third of Canada’s stock market. Prices have tumbled 13 percent this year.

     Oil sank as OPEC raised output by 100,700 barrels a day to 31.5 million last month, the most since 2012, due to a recovery in Iranian production, exacerbating a supply glut. Oil has dropped more than 25 percent since this year’s peak in June.

     First Quantum Minerals Ltd. sank 7.8 percent and Teck Resources Ltd. tumbled 6.9 percent as all six main metals on the London Metal Exchange retreated, led by aluminum and copper at six-year lows.

     B2Gold Corp. jumped 10 percent and Eldorado Gold Corp. increased 5.5 percent. Gold, which is often bought as an alternative to currencies, rose 0.3 percent in New York.

     Aecon Group Inc. jumped 9.3 percent, the most in almost four years, after posting a surprise profit in the second quarter and revenue that topped  analysts’ estimates.

US

By Oliver Renick

     (Bloomberg) — U.S. stocks slid, following equities’ biggest gain since May, as China’s currency devaluation sparked concern across global markets that the world’s second-largest economy is headed for a deeper slowdown.

     Companies that rely heavily on exports to China, including auto and luxury goods makers, retreated. General Motors Co. and Tiffany & Co. lost more than 2.1 percent. Apple Inc. sank 5.2 percent. Commodity producers from Freeport-McMoRan Inc. to Dow Chemical Co. fell at least 2.9 percent amid concerns about China’s growth. Google Inc. advanced 4.1 percent after saying it will reorganize into a holding company called Alphabet Inc.

     The Standard & Poor’s 500 Index declined 1 percent to 2,084.07 at 4 p.m. in New York, holding above its average price during the past 200 days. The Dow Jones Industrial Average slumped 212.33 points, or 1.2 percent, to 17,402.84, its worst drop in a month. The Nasdaq Composite Index decreased 1.3 percent. About 7.1 billion shares traded hands on U.S. exchanges, 9 percent above the three-month average.

     “The driving forces today continue to be macro-oriented with China the most important,” said Tom Wright, the New York- based director of equities at JMP Securities. “We spend a lot of time obsessing over Greece or Puerto Rico, but China is a much bigger economy and a much bigger problem to the global economy and devaluing the currency is shaking people up.”

     China devalued the yuan by 1.9 percent, the most in two decades, after data this month showed a plunge in exports, weaker-than-estimated manufacturing and a slowdown credit growth. The surprise move rippled through global markets, sparking selloffs in emerging-market currencies, commodities, and auto and luxury stocks with exposure to China.

     A rally in commodities from oil to copper helped the S&P 500 jump 1.3 percent Monday. Those trades largely reversed today on concern demand from China, the world’s biggest consumer of energy and metals, will slow and yuan weakness will erode the buying power of Chinese consumers. Similar worries about the country’s growth helped send the benchmark index down as much as 4 percent last month from its May record.

     Raw-material companies in the S&P 500 retreated 1.9 percent after the biggest year-to-date gain yesterday. Miner Freeport- McMoRan plunged 12 percent, the most since 2012 and eclipsing Monday’s 11 percent climb. Alcoa Inc. sank 6 percent after a 7.1 percent jump yesterday.

     Joy Global Inc. and Caterpillar Inc. lost at least 2.6 percent as industrial shares slid 1.2 percent. Caterpillar, one of the largest producers of mining trucks, may be hurt by weak demand following low mining-equipment shipments in the second quarter, according to a Bloomberg Intelligence report. Railroads CSX Corp. and Norfolk Southern Corp. fell more than 1.9 percent.                        

     Micron Technology Inc. paced a tumble among technology shares, losing 5 percent. Sales from China comprised 41 percent of the chipmaker’s fiscal 2014 revenue, according to data compiled by Bloomberg. Apple sank 5.2 percent, its biggest drop since January 2014 after yesterday marking its strongest gain in six months. Apple reported that 27 percent of its sales in the June-ended quarter came from China.

     Symantec Corp. decreased 6.9 percent to its lowest in more than a year after the security software maker agreed to sell its Veritas data-storage unit for $8 billion to Carlyle Group LP. Credit Suisse Holdings USA Inc. downgraded the shares to neutral from outperform, citing “destruction” of value from the tax liability on the deal relative to a previously proposed spinoff.

     Yum! Brands Inc. and Wynn Resorts Ltd. slumped at least 4.3 percent to pace a 1 percent slide in consumer discretionary shares. Yum derived 53 percent of its second-quarter revenue from China, while 59 percent of Wynn’s quarterly sales came from its operations in Macau, according to their reports.

     Auto-parts makers Delphi Automotive Plc and BorgWarner Inc. declined more than 3.7 percent, tracking GM’s biggest slide in a month as China auto sales slumped to a 17-month low.

     Banks in the S&P 500 had their worst day in a month as yields on U.S. 10-Year Treasuries dropped the most since July 6, and investors speculated that low interest rates will continue to hobble lenders’ earnings. Citigroup Inc. and Comerica Inc. fell more than 1.8 percent, while Bank of America Corp. slipped 1.4 percent.

     Energy shares pared a decline of as much as 2.3 percent to end little changed, despite West Texas Intermediate crude sinking to its lowest since March 2009. Consol Energy Inc. lost 3 percent and Chesapeake Energy Corp. fell 4.9 percent. Those losses were largely offset by gains of more than 2.1 percent for Valero Energy Corp. and Range Resources Corp, while Marathon Petroleum Corp. added 4.9 percent.

     A Bloomberg index of U.S. airlines gained 1.8 percent amid oil’s decline, and advanced for a second day. Spirit Airlines Inc., American Airlines Group Inc. and Delta Air Lines Inc. each added at least 1.6 percent.

     The Chicago Board Options Exchange Volatility Index climbed 12 percent Tuesday to 13.71. The gauge, known as the VIX, rose 10 percent last week after posting its biggest monthly drop since February.

     The unexpected move by China’s policy makers bolstered speculation the Federal Reserve may have to delay raising rates, as the threat of a slowdown in China could harm global growth, while lower commodity prices damp inflation. The probability of a rate increase in September slipped to 44 percent from 54 percent Monday, according to futures trading data compiled by Bloomberg.

     U.S. economic data today showed worker productivity struggled to gain traction in the second quarter. Less efficiency limits how quickly the economy can grow without spurring inflation, adding another variable for policy makers to consider in deciding when to raise rates. A separate report showed inventories at wholesalers jumped the most since April 2014.

     Cisco Systems Inc. and News Corp. are among companies posting quarterly updates this week as earnings season nears its conclusion. Of the S&P 500 members that have already reported, 74 percent beat profit estimates and 48 percent topped sales projections. Analysts now project a more modest drop in second- quarter earnings, calling for a 2.1 percent fall instead of a 6.4 percent decline a month earlier.

Have a wonderful evening everyone.

Be magnificent!

Every day a man must solve the problem

of widening the field of his life and adjusting his burdens.

These are too complex and numerous for him to carry himself,

but he knows that by being methodical he can lighten the load.

When the burdens are too complicated and difficult to manage, he must understand the reason:

he has not found a system that will put everything in place and distribute the weight he carries more evenly.

the search for this system is actually the search for the whole, for synthesis;

it is our effort to create harmony, thanks to an interior adaptation,

in the heterogeneous complex of exterior material.

Rabindranath Tagore

As ever,

Carolann

We should be too big to take offense and too noble to give it.

                                          -Abraham Lincoln, 1809-1865

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