July 6, 2015 Newsletter

Dear Friends, 

Tangents: 

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

PHOTOS OF THE DAY

Solar Impulse 2, a plane powered by the sun’s rays and piloted by Andre Borschberg, approaches Kalaeloa Airport near Honolulu, Friday. His 120-hour voyage from Nagoya, Japan broke the record for the world’s longest nonstop solo flight, his team said. Jean Revillard/AP

Cats eat at the Kis-Kis Cat Cafe in the Siberian city of Krasnoyarsk, Russia, Monday. A local animals rights group founded the shelter for dozen of homeless cats and combined it with the cafe, where visitors can communicate with animals for an hourly fee in addition to drinks, table games, books, and wifi. Ilya Naymushin/Reuters

Market Closes for July 6 , 2015

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Rebecca Penty

     (Bloomberg) — British Columbia is pledging to cap levies on Petroliam Nasional Bhd.’s natural gas export project as it expects to collect C$9 billion ($7.1 billion) from the venture by 2030.

     Canada’s westernmost province must compensate the Malaysian oil producer, known as Petronas, and its partners if it adds costs through changes to certain taxes or credits over the next 25 years, according to terms of an agreement signed May 20 that were released Monday.

     “The revenue opportunities are significant,” British Columbia Finance Minister Michael de Jong said in a briefing with reporters Monday.

     Petronas and its partners said last month that they will conditionally move ahead with the C$36 billion export terminal, among 19 proposed in British Columbia to ship liquefied natural gas to Asia. The agreement must be approved by the provincial legislature.

     Groups including the Pembina Institute, an environmental organization, have criticized the potential costs of the provincial government’s guarantees to Petronas. The government’s take is based on assumptions including a premium of $7 per million British thermal unit for LNG sold from Canada’s Pacific Coast over the Henry Hub U.S. benchmark gas price.

 US 

By Victoria Stilwell

     (Bloomberg) — From restaurants to real estate, service providers kept up their expansion in June as consumers helped the U.S. economy endure unsteady global demand.

     The Institute for Supply Management’s non-manufacturing index improved to 56 last month from 55.7 in May, the Tempe, Arizona-based group said Monday. A reading above 50 indicates expansion, and 15 of 18 industries reported growth.

     Sales and orders strengthened last month at service providers as persistent job and income growth encouraged households to spend. Further progress within the businesses that make up almost 90 percent of the economy points to a steady pickup in growth after an early-year pullback brought on by tepid capital investment and overseas markets.

     The report is “consistent with moderate growth in the overall economy — not exactly booming but not weak either,”said Scott Brown, chief economist at Raymond James Financial Inc. in St. Petersburg, Florida, who correctly forecast the index. “We’re seeing consumers in general feeling better, going out and spending money. We’re optimistic that that’s going to continue.”

     Arts and entertainment, real estate, and hotels and restaurants led the list of industries that reported expansion in June. Mining, which includes oil and gas well drilling, was among the three that contracted.

     Stocks slid, with the Standard & Poor’s 500 Index extending its steepest weekly drop since March, as Greece scrambled to avoid a cash crunch and energy shares tumbled with the price of oil. The S&P 500 fell 0.4 percent to 2,068.76 at the close in New York.

     The median estimate in a Bloomberg survey of 74 economists was 56.4, with estimates ranging from 54.8 to 58. The May reading was the lowest since April 2014. The ISM services survey covers an array of industries, including agriculture and construction.

     “We’re starting to see this slow, steady and incremental growth month over month,” Anthony Nieves, chairman of the survey, said on a conference call with reporters after the release.

     The new orders gauge increased to 58.3 in June from 57.9 the prior month, with 12 industries reporting growth in bookings. The business activity index, which parallels the ISM’s factory production gauge, climbed to 61.5 from 59.5 in May.

     A moderate pace of economic growth after a first-quarter setback is prompting service industries to temper the pace of hiring. The measure of employment dropped to 52.7, the lowest level since January, from 55.3 in May. Even with the decline in the gauge, 13 industries reported job growth.

     The ISM’s services index has exceeded the group’s manufacturing index for eight straight months as factories have battled the effects of a stronger dollar on exports and a slowdown in business investment in new equipment.

     “Although the non-manufacturing index has moderated since spring, the service sector has held up noticeably better than the manufacturing sector in the wake of the energy slowdown and stronger dollar,” Sarah House, an economist at Wells Fargo Securities LLC in Charlotte, North Carolina, wrote in a note to clients. “The service sector continues to propel the economy.”

     There are signs that manufacturing is starting stabilize. The ISM’s June factory index reached the highest level in five months.

     Homebuilders such as KB Home are optimistic that business will pick up alongside a strengthening recovery.

     “The national economy is continuing to improve with sustained job growth now occurring across the country,” Chief Executive Officer Jeffrey Mezger said on a June 19 conference call. “This improving employment and economic environment is in turn contributing to increased consumer confidence, which is currently at one of the highest levels reported since 2007.”

     Monday’s report adds to evidence that household spending may be firming after weakness earlier this year as consumers put paychecks from newly gained jobs to use.

     Household purchases increased 0.9 percent in May, the biggest advance since August 2009, after rising 0.1 percent in April, Commerce Department figures showed last month.

     Still, a tighter labor market that sparks wage growth will be needed to sustain such gains. While payrolls climbed by223,000 in June, average hourly pay was little changed and up 2 percent over the past 12 months, matching the pace that’s persisted throughout the recovery.

Have a wonderful evening everyone.

Be magnificent!

Each generation imagines itself to be more intelligent than the one that went before it,

and wiser than the one that comes after it.

George Orwell

As ever,

Leyla

“Choose a job you love, and you will never have to work a day in your life.

Confucius

Carolann Steinhoff, B.Sc., CFP®, CIM, CIWM

Senior Portfolio Manager &

Senior Vice-President

Queensbury Securities Inc.,

St. Andrew’s Square,

Suite 340A, 730 View St.,

Victoria, B.C. V8W 3Y7