January 27, 2014 Newsletter

Dear Friends,

Tangents:

As Carolann is out of the office this afternoon,  I will be writing the newsletter on her behalf.

Do you have a trip planned and are leaving in the next couple of days?  Airports are urging passengers to check victoriaairport.com for real-time arrivals and departures and follow-up with their respective airlines in the event of delays or cancellations due to the fog we have been getting over the past few days.  Heavy fog blanketing the Capital Region this morning is causing havoc at Victoria International Airport, causing several delays and cancellations. Early morning flights beginning at 6 a.m. were cancelled to Seattle, San Francisco, Vancouver, and Calgary. Flights to Kelowna and Toronto have been delayed several hours, according to the airport’s website.  Make sure to touch base with your airline prior to heading to the airport!

Photos of the day

Visitors walk through the medals plaza while the Olympic torch is tested before the start of the 2014 Winter Olympics in Olympic Park in Sochi, Russia. David J. Phillip/AP

People take a walk during a snowfall in Berlin. Tobias Schwarz/Reuters

Market Closes for January 27th, 2014

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Callie Bost

Jan. 27 (Bloomberg) — Canadian stocks declined a third day, with the benchmark index erasing a gain for the year, as financial shares retreated and commodities producers slumped with oil and metals prices.

Bank of Montreal sank 2.1 percent after F&C Asset Management Plc said it’s in talks to be bought by the Canadian lender. Horizon North Logistics Inc. plunged 12 percent after the oil services provider reported a drop in preliminary fourth- quarter earnings. Pacific Rubiales Energy Corp. lost 4.2 percent as the price of crude fell a second day.

The Standard & Poor’s/TSX Composite Index decreased 135.47 points, or 1 percent, to 13,582.29 at 4 p.m. in Toronto. The gauge closed at a three-week low after plunging 2.9 percent since Jan. 22, the biggest three-day slide since June. The index has fallen 0.3 percent this year after rising as much as 2.7 percent earlier in January.

“We’ve had strong markets for a while so we’re due for a checkback,” Jeff Young, chief investment officer at NexGen Financial Corp., said in a phone interview. The Toronto-based firm manages about C$900 million ($815 million). “Financials seem to be the big culprit here. The global markets certainly don’t help. The S&P/TSX is certainly impacted by global growth and more so by emerging markets growth than the U.S.”

Emerging-market stocks have had the worst start to a year since 2009 and currencies from Turkey to South Korea tumbled amid signs growth is slowing in China as the Federal Reserve prepared to review further stimulus cuts this week.

The MSCI Emerging Markets Index slid 1.8 percent, extending this year’s decline to 7 percent.

The Bloomberg Nanos Canadian Confidence Index fell for the second straight reading as optimism about the economy waned during a week where the nation’s currency depreciated to the lowest in more than four years. Consumers grew more pessimistic about their personal finances, the national economy and job security, survey data show.

The Canadian dollar depreciated to the lowest in 4 1/2 years against its U.S. counterpart on Jan. 22 after the Bank of Canada kept its benchmark interest rate unchanged and said the strength of the currency is hurting exporters.

Nine of 10 main industries in the index retreated at least 0.3 percent, on trading volume that was 4 percent above the 30- day average.

Financial stocks, which account for 34 percent of the benchmark index for Canadian equities, dropped 1.5 percent today for a third day of declines. The group of banks and insurers has fallen 3.3 percent this year after rallying 19 percent in 2013.

Bank of Nova Scotia sank 2.2 percent to C$61.69, a three- month low. Royal Bank of Canada lost 1.3 percent to C$69.38, the lowest since Dec. 18.

Bank of Montreal fell 2.1 percent to C$70.46, the lowest this year. Canada’s fourth-largest lender by assets offered about 697 million pounds ($1.2 billion) for F&C Asset Management, the London-based money manager said in a statement today.

Energy stocks declined 0.9 percent as a group as oil dropped for a second day. Pacific Rubiales plunged 4.2 percent to C$16.50, the lowest level since February 2010. TransGlobe Energy Corp. retreated 4.8 percent to C$8.82.

Horizon North plunged 12 percent to C$7.24, the lowest since September. The company reported that preliminary fourth- quarter earnings excluding some items dropped as much as 65 percent from the prior quarter. Revenue for the Calgary-based oil-and-gas service provider decreased as much as 40 percent in the same period.

Raw-materials producers in the benchmark index slid 1.3 percent as copper capped its longest slump in five months.

Turquoise Hill Resources Ltd. fell 2.3 percent to C$3.89.

The S&P/TSX Gold Index lost 2.5 percent, the biggest drop this year. China Gold International Resources Corp. tumbled 6.7 percent to C$3.07 and NovaGold Resources Inc. slipped 6.1 percent to C$3.21. B2Gold Corp. dropped 4.9 percent to C$2.54.

Hudson’s Bay Co. rose 1.2 percent to C$16.34, erasing an earlier drop of 3.9 percent. The retailer announced it will sell its Toronto location for C$650 million in a sale and leaseback transaction. Proceeds of the transaction will be used to reduce debt and invest in growth initiatives, Hudson’s Bay said.

USA

By Whitney Kisling and Lu Wang

Jan. 27 (Bloomberg) — U.S. stocks fell, following the worst week since 2012 for benchmark indexes, as concern over Federal Reserve plans to cut stimulus and an economic slowdown in China tempered gains in industrial shares.

Visa Inc., Microsoft Corp. and Goldman Sachs Group Inc. slumped more than 1.7 percent, leading declines among large companies. Google Inc. and Facebook Inc. paced losses in technology stocks. Caterpillar Inc. jumped 5.9 percent after announcing a stock buyback and forecasting earnings above analysts’ estimates amid demand for construction equipment.

The Standard & Poor’s 500 Index slipped 0.5 percent to 1,781.56 at 4 p.m. in New York after tumbling 2.6 percent last week. The Dow Jones Industrial Average lost 41.23 points, or 0.3 percent, to 15,837.88. Both gauges closed at the lowest levels since mid-December. About 8 billion shares changed hands on U.S. exchanges, 30 percent more than the three-month average.

“I don’t think the emerging market story has played out yet,” Wayne Lin, a portfolio manager at Baltimore-based Legg Mason Inc., which oversees $680 billion, said in a phone interview. “The big question is, is it the beginning of another macro event, or is it just people worried about losing their profits and selling off? People are evaluating whether or not markets are as safe and steady as they have been.”

The S&P 500 sank the most since June 2012 last week as a sell-off in developing-nation currencies spurred concern global markets will become more volatile. The decline pushed the index below its average price in the past 50 days for the first time since October. The threshold is currently about 1,813. The S&P 500 today extended its 2014 retreat to 3.6 percent. The Dow is down 4.5 percent for the year.

Emerging-market stocks are off to the worst start to a year since 2009 and currencies from Turkey to South Korea have tumbled amid signs growth is slowing in China and as the Fed prepares to review further stimulus cuts this week.

The central bank, which starts a two-day meeting tomorrow, decided at its December gathering to begin cutting its monthly bond purchases by $10 billion to $75 billion.

The meeting is the last for Chairman Ben S. Bernanke, as Janet Yellen takes over starting Feb. 1. The Fed stimulus has helped fuel a five-year bull market that has pushed the S&P 500 higher by 165 percent.

Fed officials have been scrutinizing economic data to determine the timing and pace of any reductions to their stimulus. A Commerce Department report today showed that sales of new homes in the U.S. fell more than forecast in December, ending the industry’s best year since 2008 on a sour note.

Eight companies in the S&P 500 were scheduled to report their financial results today. Of the 125 companies in the benchmark that posted earnings so far this season, 74 percent have beaten analysts’ estimates for profit and 68 percent have exceeded projections for sales, according to data compiled by Bloomberg.

Companies in the S&P 500 probably increased their earnings per share by 6.6 percent in the fourth quarter of 2013 and their revenue by 2.6 percent, analysts’ estimates compiled by Bloomberg show.

The Chicago Board Options Exchange Volatility Index slid 4 percent to 17.42 today, retreating from the highest level since October. The gauge of S&P 500 options known as the VIX surged 46 percent last week, its biggest gain since May 2010.

“The market is volatile and it just feels like a lot of scared buyers are out there,” Sandy Villere III, a New Orleans- based fund manager at Villere & Co., said in a phone interview.

His firm oversees $3.2 billion. “We don’t see a major pullback. Earnings are largely pretty good and the U.S. is generally healthy.”

Villere said his firm is considering buying some technology, industry and retailer shares after raising cash to a maximum 15 percent at some of the funds at the end of last year.

Seven out of 10 S&P 500 industry groups declined today as technology and health-care companies fell the most, sliding at least 0.8 percent as a group. A gauge of industrial shares added 0.2 percent for the best performance.

Visa, the world’s biggest bank-card network, declined 2.3 percent to $216.22. Microsoft, the largest software developer, slipped 2.1 percent to $36.03. Goldman Sachs lost 1.8 percent to $164.69.

Liberty Global Plc slipped 2.2 percent to $81.42 after the company controlled by billionaire John Malone agreed to take over Dutch broadband provider Ziggo NV for 4.9 billion euros ($6.7 billion). Liberty will combine Ziggo’s 2.7 million customers with its UPC cable unit as it competes with Dutch carrier Royal KPN NV.

The Nasdaq-100 Index declined 0.9 percent, trimming a loss of 1.7 percent earlier. Google slipped 2 percent to $1,101.23 while Facebook, the world’s largest social network, dropped 1.7 percent to $53.55. Both companies are scheduled to report results later this week.

Xerox Corp. dropped 5.6 percent to $10.61. The photocopier pioneer was cut to market perform from outperform at BMO Capital Markets by equity analyst Keith Bachman, who said the stock’s valuation already reflected the company’s improved services and technology mix.

Apple Inc., the most-valuable company in the world, climbed 0.8 percent to $550.50 in regular trading before the company reported fiscal first-quarter results. The shares sank 6.3 percent in extended trading at 4:35 p.m. in New York after the company’s second-quarter revenue forecast of $42 billion to $44 billion trailed the average analyst estimate of $46.10 billion.

Caterpillar rallied 5.9 percent to $91.29 after saying it will spend $10 billion buying back shares. The company also reported earnings of $1.54 a share, exceeding the average analyst estimate of $1.27, data compiled by Bloomberg show.

Construction equipment demand is helping Caterpillar to limit the damage from the slump in orders from mining companies that followed a decline in commodity prices.

Merck & Co. advanced 1.1 percent to $52.53. The second- largest U.S. pharmaceuticals company was raised to overweight, an equivalent of buy, from underweight by Morgan Stanley on expectations that cancer drugs will help Merck boost sales.

Have a wonderful evening everyone.

Be magnificent!

“The main purpose of life is to live rightly, think rightly, act rightly. The soul must languish when we give all our thought to the body.”
Mahatma Gandhi

As ever,

Amanda Bourke

Assistant to Carolann Steinhoff

Queensbury Securities Inc.

St. Andrew’s Square

Suite 340A, 730 View St.,

Victoria, B.C. V8X 3Y7