August 25, 2015 Newsletter

Dear Friends,

Tangents:

On Aug. 25, 1944, Paris was liberated by Allied forces after four years of Nazi occupation.

1939: Wizard of Oz was released.

PHOTOS OF THE DAY

This undated file photo released Tuesday on a social media site used by Islamic State militants, which has been verified and is consistent with other AP reporting, shows smoke from the detonation of the 2,000-year-old temple of Baalshamin in Syria’s ancient caravan city of Palmyra. The temple was the latest victim in the Islamic State group’s campaign of destruction of historic sites across the territory it controls in Iraq and Syria. Arabic at bottom reads, ‘The moment of detonation of the pagan Baalshamin temple in the city of Palmyra.’ Islamic State social media account/AP

Environmental activists opposed to expansion of the Alberta Clipper tar sands pipeline protest outside the home of Secretary of State John Kerry in Washington Tuesday. Yuri Gripas/Reuters

Market Closes for August 25^th, 2015

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Eric Lam

     (Bloomberg) — Canadian stocks rebounded from the worst plunge in almost four years, snapping a six-day slide, as banks led an advance after Bank of Montreal’s earnings topped analysts’ estimates.

     Royal Bank of Canada and Toronto-Dominion Bank, the nation’s largest lenders, rallied at least 1.7 percent as financial-services stocks jumped 1.7 percent as a group. Bank of Montreal rose 2.4 percent. Energy shares rose as commodities prices surged, with crude climbing from a six-year low.

     Equities in Canada advanced as much as 3 percent at the open, the most since November 2011, before giving back about two-thirds of gains in the final hour of trading with U.S. equities sliding to a loss.

     Equities around the world rallied earlier after China’s central bank cut its benchmark interest rate for the fifth time since November in an effort to drive domestic growth. Some $2.7 trillion had been erased from the value of global stocks Monday.

     The Standard & Poor’s/TSX Composite Index rose 98.19 points, or 0.8 percent, to 13,150.93 at 4 p.m. in Toronto. The benchmark Canadian equity gauge has fallen 9.1 percent this month, headed for a fourth straight monthly decline, the longest such streak since September 2011.

     A volatility gauge for 60 of the largest, most liquid Canadian stocks slipped 3.2 percent after soaring 35 percent on Monday. Seven of 10 industry groups in the S&P/TSX advanced on trading volume 24 percent higher than the 30-day average today.

     The MSCI All-Country World Index of developed and developing markets slipped 0.1 percent, erasing an earlier gain of as much as 2.2 percent. The U.S. benchmark S&P 500 fell 1.4 percent in New York, reversing an earlier 2.9 percent increase after entering a correction yesterday. The Stoxx Europe 600 jumped 4.2 percent.

     The resource-rich Canadian benchmark equity gauge has been one of the worst-performing developed markets in the world this year amid a collapse in crude prices. China unexpectedly devalued the yuan on Aug. 11, further fueling concerns about global growth and the demand for commodities from oil to copper.

     Encana Corp. advanced 3.5 percent after agreeing to sell natural gas properties in northern Louisiana for $850 million to a venture run by GSO Capital Partners LP and GeoSouthern Haynesville LP in a bid to cut debt.

     Cenovus Energy Inc. rallied 3.6 percent and Suncor Energy Inc. added 2.1 percent to lead energy stocks higher. West Texas Intermediate oil gained 2.8 percent in New York, rebounding from the lowest settlement since February 2009 on Monday.

     Energy producers are the worst-performing industry in the S&P/TSX this year pacing declines with a 26 percent drop. Crude has slumped more than 35 percent from this year’s June peak amid concern global growth is slowing.

US

By Joseph Ciolli

     (Bloomberg) — Volatility continued to jolt financial markets after a rebound that took the Standard & Poor’s 500 Index up 2.9 percent melted away in the final hours of trading. The dollar its pared gains while Treasuries trimmed losses.

     The S&P 500 Index ended Tuesday down 1.4 percent as traders said trepidation over how China’s market will react to policy easing made holding on to stocks too risky for most investors. Before the rally disappeared, it appeared the appetite for risk in markets was returning following a selloff that erased $2.7 trillion from the value of global equities in a few days.

     Equities had climbed earlier in the day, with the Dow Jones Industrial Average regaining more than 440 points as China’s central bank cut its benchmark lending rate for the fifth time since November and lowered the amount of cash banks must set aside in reserves. Commodities rallied, with oil rebounding from a six-year low, while the yen and euro retreated.

     “We just saw a crazy evaporation of gains after being up the majority of the day,” said Stephen Carl, principal and head equity trader at Williams Capital Group LP. “People are nervous about the potential volatility that could erupt or resurface in the market. They’re not sure what’s going to happen overseas, and that uncertainty is winning out.”

     China’s unexpected devaluation of the yuan on Aug. 11 sparked the biggest rout in U.S. stocks in nearly four years on concern that the slowdown in the world’s second-largest economy is worse than anticipated. A pull back in Chinese equities torpedoed emerging-market assets and sank commodities from oil to metals. Also looming over the markets is the Federal Reserve, which is contemplating the first increase in interest rates since 2006.

     The Dow slid 1.3 percent to 15,666.44 by 4 p.m. in New York, down 4 percent from its highest point. The peak-to-trough retreat exceeded Monday’s loss. The S&P 500 closed at 1,867.61.

     “There’s still some technical damage that needs to be corrected,” said Terry Morris, a senior equity manager who helps oversee about $2.8 billion at Wyomissing, Pennsylvania-based National Penn Investors Trust Co. “There’s still some selling that needs to take place. We’re not just going to slingshot back up.”

     More than $2 trillion has been erased from American equity values since last Wednesday, breaking a calm in a stock market that before this week had gone almost four years without a 10 percent loss. After a day of wild swings, the S&P 500 lost 3.9 percent Monday. That capped a 7 percent two-day retreat, the most since December 2008, sending the index into its first correction since 2011.                       

     A gauge of options prices on U.S. equities dropped 9.1 percent today, paring an earlier drop of 31 percent. The Chicago Board Options Exchange Volatility Index, or VIX, retreated 12 percent after surging as much as 90 percent finishing to its highest level since October 2011 on Monday.

     Other markets rallied in the wake of China’s policy moves, with European shares clawing back most of their biggest decline since the 2008 financial crisis. The Stoxx Europe 600 Index jumped 4.2 percent, the most since 2011, as German equities rallied after entering a bear market and the U.K.’s FTSE 100 Index climbed from its lowest level since 2012.

     The MSCI Emerging Markets Index climbed 2.2 percent after closing Monday at the lowest since July 2009, with benchmarks from Taiwan to Turkey and South Africa advancing at least 3 percent.

     Half of the 30 largest equity markets in developing economies have fallen 20 percent or more from their peaks, surpassing the threshold for a bear market. China and Russia have led the pack, tumbling more than 30 percent each. The remainder are either in a correction, or on the brink of one.

     Mark Mobius says investors should hold off from buying developing-nation shares as the rebound will be short-lived amid widening price swings.

     “We have a little bit to go before we see stabilization, but volatility will remain,” Mobius, chairman of the emerging- markets group at Franklin Templeton Investments, said in an interview with Bloomberg TV. “We are sitting on cash.”

     The dollar pared back some of its advance as U.S. stocks erased their advances. Some of its biggest gains came against the Swiss franc, the euro and the yen — all currencies that investors consider havens in times of market turmoil. The dollar ended the Tuesday session up 0.4 percent to 118.83 yen, after earlier rallying as much as 1.7 percent.

     Tepid demand at a U.S. bond auction helped Treasuries to their first decline in a week, with yields on 10-year debt up seven basis points, or 0.07 percentage point, to 2.07 percent. The notes pared declines as stocks retreated, with the gyrations in equity markets the past week stoking a flight into government debt.

     The Bloomberg Commodity Index rose 0.5 percent from a 16- year low as copper climbed 2.3 percent from a six-year low. Gold futures slid for a second day in New York as the early gains in equities hurt demand for haven assets.

     West Texas Intermediate crude added 2.8 percent to $39.31 a barrel and Brent futures advanced 1.2 percent to $43.21. The oil market is healthier than Monday’s drop to six-year lows suggests, according to banks including Morgan Stanley and Standard Chartered Plc.

Have a wonderful evening everyone.

Be magnificent!

Nature’s law dictates that, in order to survive, bees must work together.

As a result, they instinctively possess a sense of social responsibility.

They have no constitution, no law, no police, no religion or moral training but,

because of their nature, the whole colony survives.

We human beings have a constitution, laws and a police force.

We have religion, remarkable intelligence, and hearts with a great capacity to love.

We have many extraordinary qualities but, in actual practice,

I think we are behind those small insects.

In some ways, I feel that we are poorer than the bees.

His Holiness the XIVth Dalai Lama.

As ever,

Carolann

And when we lead, we are most led.

              -Lord Byron, 1788-1824

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