June 2, 2016 Newsletter

Dear Friends,

Tangents:

On June 2, 1953, Queen Elizabeth II of Britain was crowned in Westminster Abbey, 16 months after the death of her father, King George VI.

James Lees-Milne, Diary, A Mingled Measure, describes the coronation of HM Queen Elizabeth II, 1953:

The weather was damnable.  It rained all day.  The moment the procession started it positively poured, and the troops were soaked.  Yet the procession was magnificent.  The colour and pageantry cannot be described.  Uniforms superb and resplendent.  The most popular figure Queen Salote of Tonga, a vast, brown, smiling bundle with a tall red knitting needle in her hat:  knitting needle having begun as a plume of feathers.  Despite the rain she refused to have the hood of her open carriage drawn, and the people were delighted.  They roared applause.  Extraordinary how the public will take someone in its bosom, especially someone not very exalted who is putting up a good show.  Al along the route they adored her.  Beside her squatted little man in black and a top hat – her husband.  Noël Coward, when asked who he was, said, “Her dinner.” –from The Book of Days.

Also on this day,

1692: Salem witch trials began

1740: Marquis de Sade was born.

PHOTOS OF THE DAY

The ‘Frecce Tricolori’ Italian Air Force acrobatic squad fly over the Vittoriano monument of the Unknown Soldier in Rome on Thursday during the Republic Day parade celebrating the anniversary of the birth of the Italian Republic in 1946. Gregorio Borgia/AP

A resident brings French baguettes to his mother’s flooded house after heavy rainfall in Chalette-sur-Loing Montargis, France, on Wednesday.Christian Hartmann/Reuters

A boy cycles past a wall of mobile phones displayed outside an electronics store in downtown Tokyo on Thursday. The store owner started the display ten years ago. It continues to draw attention from passers by. Shuji Kajiyama/AP

Market Closes for June 2^nd, 2016

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Eric Lam

     (Bloomberg) — Canadian stocks rose, with the S&P/TSX Composite Index reaching the highest level since August, as oil prices rebounded after a decline in U.S. crude supply offset OPEC producers failing to agree on a new output ceiling.

     The S&P/TSX rose 0.5 percent, to 14,136.99 at 4 p.m. in Toronto after fluctuating in the morning. The index is up 8.7 percent this year, the second most after New Zealand among developed-market nations tracked by Bloomberg. Trading volume on Wednesday was 32 percent lower than the 30-day average.

     The rally has maintained Canadian shares’ more expensive valuation relative to their U.S. peers. The S&P/TSX now trades at 21.6 times earnings, about 11 percent higher than the 19.5 times valuation of the S&P 500.

     Global equities ended little changed amid the swings in crude prices and concerns about global growth. European Central Bank President Mario Draghi said the full effect of the central bank’s stimulus measures have yet to spur growth, a day after manufacturing data from Japan to the euro zone disappointed. U.S. jobless claims dropped a third week, pushing the Federal Reserve closer to a potential interest-rate increase.

     In Canada, energy producers rose 1 percent to rebound from earlier declines. Oil recovered to close above $49 a barrel in New York, as U.S. stockpiles dropped the third time in four weeks. Brent crude settled at the highest in seven months. A meeting of the Organisation of Petroleum Exporting Countries in Vienna failed to produce a supply accord, leaving production unfettered amid a global supply glut.

     Teck Resources Ltd. and Goldcorp Inc. increased more than 1.1 percent, pacing gains with raw-material producers.

     Concordia Healthcare Corp. tumbled 9.3 percent, the most in two months and the biggest drop in the S&P/TSX today. The stock had surged as much as 11 percent earlier after StreetInsider.com reported today Blackstone Group LP is near an agreement to buy the drugmaker. The shares then plunged, with shares briefly being halted, after the Wall Street Journal reported Blackstone and Carlyle Group were said to walk away from a deal. Health- care stocks were the only group to retreat out of 10 in the S&P/TSX.

     The rally in Canadian equities, fueled by a rebound in commodities prices and financials, sputtered earlier this week amid renewed concerns weak global growth will constrain demand for basic materials, while the prospect of higher U.S. interest rates has sent the dollar higher.

     Federal Reserve Chair Janet Yellen’s comments on May 27 pointed to a likely interest-rate increase in coming months that is dependent on economic improvement. Traders have now priced in a 55 percent chance for an increase in July, according to data compiled by Bloomberg.

US

By Dani Burger

     (Bloomberg) — U.S. stocks rose, with the S&P 500 reaching a seven-month high, amid signs of steady job gains that indicated the economy is strong enough for higher interest rates as early as this summer.

     Equities extended a climb in the final hour of trading as health-care shares rallied to erase losses for the year, while retailers beaten down in May rebounded. Johnson & Johnson paced gains after agreeing to buy closely held Vogue International for about $3.3 billion. Signet Jewelers Ltd. tumbled 6.6 percent after negative comments in a newsletter, and Oracle Corp. sank the most this year after allegations of improper accounting practices.

     The S&P 500 gained 0.3 percent to 2,105.26 at 4 p.m. in New York, the highest since Nov. 3, after erasing earlier losses of as much as 0.5 percent. The gauge closed above 2,100 for the first time since April 20. The Dow Jones Industrial Average added 48.89 points, or 0.3 percent, to 17,838.56. The Nasdaq Composite Index climbed 0.4 percent, extending an advance to seven days, the longest since February 2015. About 6.4 billion shares traded hands on U.S. exchanges, 11 percent below the three-month average.

     “The bears would like the market to go down, but sentiment is too negative already,” Andrew Brenner, head of international fixed income at National Alliance Capital Markets in New York, said by phone. “The bulls would like the market to go up, but there are too many things on the horizon, which is why we’re going sideways. You have a lot of major stuff coming up in the market with investor sentiment extremely negative, and it doesn’t seem to go down.”

     Investors have turned watchful amid a panoply of events, including meetings of the European Central Bank and Organization of Petroleum Exporting Countries in Vienna today, while the government’s monthly payrolls report is due tomorrow. June will also see the U.K. vote on whether to remain in the European Union and a possible interest-rate increase by the Federal Reserve. The benchmark index closed with a move of less than 0.5 percent for a fifth day, the longest stretch since November.

     Data today signaled sustained firming in the labor market, with filings for unemployment benefits declining for a third consecutive week. An earlier report showed companies added 173,000 workers to payrolls in May, in line with economists’ forecasts.

     A late-May flourish fed by optimism that the U.S. economy can shoulder higher rates helped the S&P 500 cap its longest stretch of monthly gains since 2014. The index has made little headway since then, hovering near levels that proved difficult to maintain in previous rallies, while investors await more indications on the vitality of U.S. growth. The benchmark has rebounded 15 percent from its 22-month low in February, closing today 1.2 percent away from a record hit last year.

     Friday’s payrolls release looms large, with the potential for a solid report to further solidify expectations for higher borrowing costs by July. Economists surveyed by Bloomberg forecast employers added 160,000 jobs in May, the same as in April, with the unemployment rate slipping to 4.9 percent.

     Data signaling a stronger American manufacturing on Wednesday was overshadowed by evidence of sluggish global growth. Traders are now pricing in a 53 percent chance the Fed will increase rates in July, while betting there’s a 22 percent probability the central bank will act this month, down from 34 percent last week.

     “There’s so much for which to wait and watch for,” said Daniel Weston, chief investment officer of Aimed Capital in Munich. His firm oversees $30 million. “I don’t think there will be any black swans coming this month, but people will be very wary and take a bit of a defensive view while they wait for things to unfold.”

     The CBOE Volatility Index fell 4 percent to 13.63, after a two-day climb. The measure of market turbulence known as the VIX dropped 9.6 percent in May, just its second monthly decline in the past seven.

     Health-care shares were the strongest performers Thursday among the S&P 500’s 10 main industries, surging 1.3 percent. The group erased 2016 losses of as much as 12 percent, and extended their longest rally in 15 months. Energy producers slipped the most, followed by technology stocks and utilities. A Goldman Sachs Group Inc. basket of the most shorted shares in the Russell 3000 Index climbed for the eighth time in nine days, rising 7.7 percent during the period.                          

     Aetna Inc. added 4.1 percent, the most in six months. The health insurer plans to sell bonds in as many as eight parts to finance the cash portion of its $37 billion purchase of Humana Inc., which rallied 5.6 percent. The Nasdaq Biotechnology Index increased 1.9 percent to the highest since April 22.

     Consumer discretionary companies advanced, lifted by a bevy of stocks that were hammered last month. L Brands Inc. jumped 4.3 percent after May sales exceeded estimates. The Victoria’s Secret parent tumbled 12 percent in May, the worst month since January 2014 amid concern spurred by weakening department-store sales. Macy’s climbed 4 percent, the most since January, after falling 16 percent last month.

     Exxon Mobil Corp. fell 0.8 percent to pace energy’s slide, even as crude rose to a seven-month high, shrugging off OPEC’s failure to agree on a new output ceiling. Diamond Offshore Drilling Inc. lost 4 percent, falling for the fourth time in five days. Refiner Tesoro Corp. rose 1.8 percent after data showed gasoline and distillate stockpiles dropped more than forecast.

     Oracle dropped 4 percent after a former senior finance manager claimed in a whistle-blower lawsuit she was instructed to add millions of dollars in accruals to cloud service financial reports. Oracle said it’s confident all its accounting is proper and correct. Apple Inc. decreased 0.8 percent after Goldman Sachs cut its price target on the iPhone maker’s shares, citing lower growth expectations for the smartphone industry. The stock fell for a fourth day, the longest losing streak in a month.

     Among shares moving on corporate news, Ciena Corp. rallied 13 percent, the best one-day gain in two years, as quarterly results exceeded estimates and the current period’s revenue outlook beat some analysts’ forecasts.

     Sarepta Therapeutics Inc. plunged 27 percent, after regulators increased patients’ access to experimental drugs such as its unapproved therapy for a deadly muscle disease, which investors took as a signal that the product may not be cleared.

     Conn’s Inc. tumbled 26 percent to the lowest since 2011 after the electronics and appliances retailer unexpectedly posted a quarterly loss and the company named a new chief financial officer.
 

Have a wonderful evening everyone.

Be magnificent!

I do not know of any religion apart from human activity.

It provides a moral basis to all other activities which they would otherwise lack,

Reducing life to a maze of “sound and fury signifying nothing.”

Mahatma Gandhi

As ever,
 

Carolann

In all things, one receives only in accordance with what one has given.

                                                      –Honoré de Balzac, 1799-1850

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