July 7, 2016 Newsletter

Dear Friends,

Tangents:

Today is Fiesta de San Fermin in Pamplona.   Think A Farewell to Arms. 

Stanzas for a Sierra Morning

               By Robert Hass 

Looking for wildflowers, the white yarrow

With its deep roots for this dry place

And fireweed which likes disturbed ground.

There were lots of them, bright white yarrow

And the fireweed w was the brilliant magenta

Some women put on their lips for summer evenings.

The water of the creek ran clear over creekstones

And a pair of dove-white plovers fished the rills

A sandbar made in one of the turnings of the creek.

You couldn’t have bought the sky’s blue.

Not in the silk markets of Samarkand.  Not

In any market between Xian and Venice.

Which doesn’t mean that it doesn’t exist.

Isn’t that, after all, what a stanza is for.

So that after a night of listening, unwillingly.

To yourself think, you can walk, slightly hungover,

Through some morning market, sipping tea,

An eye out for that scrap of immaculate azure.

PHOTOS OF THE DAYThe icon of San Fermín is paraded through the streets on the saint’s day at the San Fermín festival in Pamplona, northern Spain, Thursday.Vincent West/Reuters

An employee of Japan’s internet commerce and mobile games provider DeNA Co, rides on the company’s Robot Shuttle, a driver-less, self driving bus, during its demonstration in Tokyo, Thursday. Toru Hanai/Reuters

Market Closes for July 7, 2016

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Eric Lam

     (Bloomberg) — Canada stocks fell the most in almost two weeks as energy producers joined a decline in gold miners, erasing gains with oil after U.S. inventories dropped less than expected.

     The S&P/TSX Composite Index fell 0.7 percent to 14,134.46 at 4 p.m. in Toronto. The benchmark trails New Zealand as the world’s top-performing developed market in 2016, according to data compiled by Bloomberg, with a gain of 8.6 percent. Trading volume was 6 percent lower than the 30-day average.

     Raw-materials producers tumbled 2.3 percent as a group, snapping a five-day rally to retreat from the highest level in almost two years. Gold slipped 0.4 percent in New York after climbing to the highest in two years Wednesday. Barrick Gold Corp. dropped 3.2 percent, the steepest in six weeks.

     Canadian Natural Resources Ltd. and Suncor Energy Inc. retreated at least 1 percent as energy producers tumbled 1.3 percent. Crude fell 4.8 percent to the lowest level in almost two months as government data showed U.S. supplies declined by 2.2 million barrels last week, short of analysts’ expectations for a 2.5 million barrel drop.

     Paramount Resources Ltd. jumped 8.5 percent to the highest level since November after agreeing to sell shale assets in Alberta’s Montney region to Seven Generations Energy Ltd. in a C$1.9 billion deal in cash and debt. Seven Generations added 7.1 percent to a record and a fourth day of gains.

     Fairfax Financial Holdings Ltd. slipped 2.1 percent after agreeing to buy Zurich Insurance Co.’s South African and Botswana operations. Terms were not disclosed. The deal is expected to close by the end of the fourth quarter of 2016.

     Canadian equities have swung between gains and losses since the Brexit vote two weeks ago as investors sought havens from the market volatility. Raw-materials producers remain the top- performing industry in Canada this year with a 57 percent increase, the best such performance for the group in at least 30 years, according to data compiled by Bloomberg. Energy stocks have rallied 17 percent.

     Health-care shares are down nearly 70 percent in 2016, the worst in the S&P/TSX, dragged lower Valeant Pharmaceuticals International Inc.’s 78 percent plunge. Valeant advanced 2.7 percent Thursday for a second day of gains and a three-week high. Shares jumped Wednesday after Walgreens Boots Alliance Inc. said in its quarterly earnings call it’s satisfied with its partnership with the drugmaker.

US

By Anna-Louise Jackson and Bailey Lipschultz

     (Bloomberg) — U.S. stocks slipped as a crude-oil selloff dragged energy shares lower, while investors remained on edge before a monthly report that may reveal whether the labor market is maintaining momentum amid a gloomy outlook for global growth.

     Equities erased an early advance Thursday after oil wiped out gains, with the commodity tumbling after a weekly report showed stockpiles fell less than expected. Energy producers reversed a 1 percent climb while Chevron Corp. lost 1.5 percent. Phone companies and utilities slumped at least 1.6 percent, the biggest losers on the day. Despite all the day’s fluctuations, stocks finished little changed amid anticipation of the key jobs data.

     The S&P 500 Indexretreated 0.1 percent to 2,097.90 at 4 p.m. in New York, after lurching between gains and losses of as much as 0.5 percent in either direction. The Dow Jones Industrial Average fell 22.74 points, or 0.1 percent, to 17,895.88, after erasing a 66-point climb. The Nasdaq Composite Index rose 0.4 percent, supported by gains in Intel Corp, Apple Inc. and Costco Wholesale Corp. About 6.7 billion shares traded hands on U.S. exchanges, 7 percent below the three-month average.

     “The markets are gyrating, but I think this is just the post-Brexit environment and we’re looking for where the new equilibrium levels are and we haven’t found them yet,” said Kevin Caron, a Florham Park, New Jersey-based market strategist and portfolio manager who helps oversee $180 billion at Stifel Nicolaus & Co. “This is a theme that may stay with us for a while. Stock markets aren’t cheap, by definition the bond market isn’t cheap, and globally the economy is struggling.”

     Investors are keen to get a look at the government’s latest reading on employment growth to see if May’s weak report was an anomaly. The addition of just 38,000 jobs that month abruptly pushed out investors’ expectations for future interest-rate increases, and minutes released yesterday from the Federal Reserve’s June meeting showed policy makers want more proof the economy hasn’t lost momentum after the disappointing data.

     A report yesterday showed stronger-than-predicted expansion in services industries, boosting optimism the U.S. economy can weather any fallout from the U.K.’s decision to leave the European Union.

     Economists surveyed by Bloomberg expect a recovery, with a 180,000 increase in jobs last month. A report today showed companies added 172,000 workers to private payrolls in June while another measure showed filings for unemployment benefits unexpectedly declined last week to the lowest level since mid- April, signaling labor market stability amid a shaky global economy.

     The S&P 500 has rebounded almost 5 percent since June 27, erasing the majority of a selloff that followed the Brexit vote. The index rallied last week by the most since November on optimism that central banks will loosen monetary policy to counter aftershocks from the U.K.’s referendum result. The CBOE Volatility Index fell 1.3 percent Thursday to 14.76, an almost one-month low.

     “The remarkable snap-back in the market is largely a function of central banks around the world that are not going to raise rates for a good long time so that makes risk assets more attractive,” said Katie Nixon, chief investment officer of wealth management at Northern Trust Corp. “The risk-on rally is off to the races with the central banks either sitting on their hands or contemplating further action.”

     Traders are pricing in almost no chance for higher borrowing costs this month, compared to a 55 percent probability a month ago, just before the May jobs report. Odds for a move are now 42 percent or less until at least the end of 2017. Investors and policy makers will continue to scrutinize data to assess the vitality of growth as another earnings season approaches.

     Alcoa Inc. unofficially launches the second-quarter reporting period next week, with analysts predicting a profit decline of 5.4 percent compared to a year ago for companies in the S&P 500. That would mark a fifth-straight quarterly drop, the longest streak since 2009.

     “There is that balancing act for the Fed in that they are quite right to be vigilant and observant of the U.K.’s position, but at the same time the direct impact on the U.S. economy is probably going to be quite small,” said Daniel Murray, head of research at EFG Asset Management in London. “Markets are looking to nonfarm payrolls tomorrow as the first solid data point following the last Fed meeting to give guidance.”                       

     In Thursday’s trading, five of the S&P 500’s 10 main industries declined, with utilities dropping 1.8 percent from an all-time high. Phone companies slumped 1.6 percent, falling for a third day after reaching the highest level since 2001. Energy producers lost 1.1 percent as West Texas Intermediate crude futures slid 4.8 percent. Consumer discretionary, raw-material, technology and industrial shares rose at least 0.2 percent.

     Utilities suffered the steepest drop in seven weeks, with nine of the 28 members in the S&P 500’s group falling at least 2 percent. Exelon Corp. and Duke Energy Corp. lost more than 2.2 percent.

     Chevron and Exxon Mobil Corp. posted their worst declines since the day of the Brexit results two weeks ago to send the energy group lower. Crude supplies fell 2.22 million barrels in the week ended July 1, Energy Information Administration data show. Analysts surveyed by Bloomberg had forecast the EIA would report a 2.5 million decline.

     After yesterday’s rally led by biotechnology companies, health-care stocks slipped 0.2 percent as managed-care companies weighed. Humana Inc. dropped 9.6 percent, its biggest slide since 2012. People familiar with the matter said Aetna Inc. is preparing to meet with top regulators as it seeks to win antitrust approval for its $37 billion takeover of Humana. Aetna lost 4 percent. Anthem Inc. fell 2 percent after Connecticut’s attorney general expressed concern with its proposed merger with Cigna Inc.

     Viacom Inc. led media companies higher, rising 3.9 percent to also help lift the consumer discretionary group. Billionaire John Malone said the shares are undervalued because of the turmoil over the battle for control for the company. Time Warner Inc. and Comcast Corp. gained more than 1.7 percent.

     Semiconductors rallied, with Micron Technology Inc. gaining 4.1 percent and Skyworks Solutions Inc. increasing 2.9 percent.Analysts cited positive trends for flash-memory chips as a reason for hard-drive maker Western Digital Corp.’s better-than- forecast preliminary quarterly results.

     Among shares moving on corporate news, WhiteWave Foods Co. surged as much as 20 percent after Danone agreed to buy the maker of Silk soy milk for about $10 billion.

     PepsiCo. Inc. rose 1.5 percent to a record after its quarterly profit beat analysts’ estimates and the company boosted its full-year forecast, helped by rising sales of snacks and soft drinks in North America.
 

Have a wonderful evening everyone.

Be magnificent!

Between me and the smallest animal,

the difference is only in manifestation,

but as a  principle he is the same as I am,

he is my brother, he has the same soul as I have.

Swami Vivekananda

As ever,

Carolann

Man’s mind, once stretched by a new idea,

never regains its original dimensions.

       -Oliver Wendell Holmes, 1809-1894.

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