June 20, 2013 Newsletter

Dear Friends,

Tangents:

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

Do you have family or friends coming to Victoria this summer and are looking for a different way to tour the city? Check out Victoria Hippo Tours.  This unique tour takes you around the city, traveling both on land and water. They have specially designed amphibious vehicles that carry 40 passengers and function as both a bus and boat. During the continuous 90 minute trip onboard the Hippo, you will see many of Victoria’s best attractions, while also getting a glimpse of local life. It is relaxing tour around the city before splashing into the Pacific Ocean for the second half of the journey.  This will be an experience like never before, on the bus that floats!

“You must be the change you wish to see in the world.” – Mahatma Gandhi

Photos of the Day –June 20^th, 2013

Children play at dusk on the outskirts of Bhubaneswar, India. Biswaranjan Rout/AP

A tree branch is silhouetted as smoke rises from the Doce Fire in Yavapai County, Arizona. More than 500 firefighters were battling the Doce Fire, which has burned through 7,000 acres (2,830 hectares) of chaparral, pine and juniper since Tuesday morning. Joshua Lott/Reuters

Market Closes for June 20^th, 2013

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Eric Lam

June 20 (Bloomberg) — Canadian stocks plunged to a two- month low, joining a global rout in equities and commodities, after the U.S. Federal Reserve said it may phase out stimulus and manufacturing in China contracted.

All 10 industries in the Standard & Poor’s/TSX Composite Index retreated, led by a 5.7 percent decline among raw- materials producers. OceanaGold Corp. lost 12 percent as gold plunged to a 2 1/2 year low. First Quantum Minerals Ltd. slid 6.4 percent as copper skidded to the weakest in seven weeks.

TransGlobe Energy Corp. fell 13 percent as oil retreated 2.9 percent.

The S&P/TSX lost 299.72 points, or 2.4 percent, to 11,968.57 at 4 p.m. in Toronto, as 94 percent of the gauge’s 237 members retreated. The index is down 3.7 percent this year.

Trading volume was 55 percent higher than the 30-day average.

“The reason why the market reaction today is noticeably strong is because people had set themselves up for a more dovish message than they received,” Michael O’Brien, fund manager with TD Asset Management Inc., said from Toronto. He helps manage C$204 billion ($197 billion) at the firm. “It’s a healthy shakeup in that we had a one-way trade in bonds, dividend-paying stocks and financial assets in general. The market is recalibrating, with the view of ’Maybe we shouldn’t have taken everything up together, maybe we’ll sort out the wheat from the chaff.’”

The MSCI All-Country World Index slipped 3.4 percent today, the most since September 2011. Asian stocks tumbled to the weakest in 21 months and European shares plunged 3 percent to a 19-month low. The S&P 500 plunged 2.5 percent for its worst decline since 2011.

Fed Chairman Ben S. Bernanke said yesterday the central bank may begin reducing its $85 billion in monthly bond purchases this year and end the program in 2014 should the U.S. economy continue to improve.

Canadian 10-year government bond yields have risen about 65 basis points since May 2 to 2.33 percent, driving investors away from high dividend-paying stocks. The S&P/TSX Telecommunications and Utilities indexes, which yield higher dividends than the broader index, have fallen at least 9 percent in the past month for the worst performance in the benchmark gauge. Utilities stocks have plunged 6.9 percent in the last two days to the lowest level in almost three years.

A Chinese manufacturing gauge released today by HSBC Holdings Plc and Markit Economics reached 48.3 this month, from 49.2 in May. A reading below 50 indicates contraction. China, the world’s biggest consumer of industrial metals and energy, is Canada’s second-largest trading partner behind the U.S.

The S&P GSCI Index, which tracks a basket of global commodities prices, slid 3.1 percent as gold sank below $1,300 an ounce for the first time since September 2010. Silver plunged 8.3 percent to settle at $19.823 an ounce in New York. In trading after the settlement, silver touched $19.56, the lowest since September 2010. Platinum slumped 4.2 percent and copper declined 2.5 percent. Crude for July delivery slid the most in seven months, losing 2.9 percent to settle at $95.40 a barrel.

Raw-materials producers extended their decline in June to 15 percent, falling to the lowest level since January 2009.

OceanaGold tumbled 12 percent to C$1.26 and Detour Gold Corp. plunged 16 percent to C$8.41 to pace losses among producers of the precious metal. Barrick Gold Corp., the world’s largest producer, sank 6.9 percent to C$17.27.

First Quantum, a copper and gold miner, sank 6.4 percent to C$15.48 for a two-month low. The company fired 500 workers after it was ordered to stop building a dam at its Sentinel copper project in Zambia due to rights issues.

Teck Resources Ltd., Canada’s largest diversified miner, lost 2.6 percent to C$22.51.

TransGlobe Energy slumped 13 percent to C$6.32 and Athabasca Oil Corp. declined 8.7 percent to C$6.61 as oil and gas stocks dropped 2.3 percent as a group.

Manulife Financial Corp., Canada’s largest insurer, gained 1.5 percent to C$16.80, its highest close since July 2011. Tom Mackinnon, analyst with BMO Capital Markets, yesterday raised the stock to outperform, the equivalent of a buy, from market perform, equal to a hold, with a target price of C$19 a share.

US

By Inyoung Hwang and Emma O’Brien

June 21 (Bloomberg) — Stocks tumbled, pushing the benchmark index of global equities down the most in 19 months, as bonds fell around the world after the Federal Reserve said it may phase out stimulus and China’s cash crunch worsened. Gold led commodities lower as the dollar rallied.

The MSCI All-Country World Index lost 3.5 percent and the Standard & Poor’s 500 Index sank 2.5 percent in New York, both gauges biggest declines since November 2011. Asian stock futures retreated, signaling markets in the region will extend the rout today. Yields on 10-year Treasuries touched the highest level since August 2011, as rates surged from New Zealand to Germany.

The S&P GSCI gauge of raw materials slid 3.1 percent, as gold sank below $1,300 an ounce for the first time since 2010.

Chairman Ben S. Bernanke said June 19 that the Fed may start reducing bond purchases that have fueled gains in markets globally, and end the program in 2014 should risks to the U.S. economy continue to abate. The Fed will cut its $85 billion in monthly purchases by $20 billion at its September meeting, according to economists surveyed by Bloomberg. Data from China yesterday indicated manufacturing is shrinking at a faster pace and the benchmark money-market rate climbed to a record.

“It’s a knee-jerk downward reaction because everyone is afraid that if you’re taking the punch bowl away that must be bad for markets,” Philip Orlando, the New York-based chief equity strategist at Federated Investors, which has about $380 billion in assets under management, said by phone. “The market is choosing to ignore the good news embedded in the Fed’s comments. All it’s looking at is the reduction of the accommodation.”

Futures on Japan’s Nikkei 225 Stock Average due in September slipped 2.7 percent to 12,805 in Chicago, while contracts fell 0.5 percent to 12,970 by 3 a.m. in Osaka after closing at 13,030 yesterday.

Hang Seng Index futures in Hong Kong dropped 1 percent, while contracts on Australia’s S&P/ASX 200 Index lost 1.7 percent, after declining 2.6 percent yesterday. Futures on the Hang Seng China Enterprises Index of mainland Chinese stocks traded in Hong Kong slid 0.7 percent. S&P 500 futures rose 0.1 percent by 7:04 a.m. in Tokyo.

About 9.4 billion shares changed hands yesterday in the U.S., the highest volume of the year, according to data compiled by Bloomberg.

The S&P 500 extended June 19’s 1.4 percent slump and fell to the lowest level since May 1 as all 10 of its main industry groups retreated at least 2.2 percent. The benchmark index extended its decline from its last record reached May 21 to 4.9 percent, trimming its 2013 advance to 11 percent and its rally from its bear-market low in 2009 to 135 percent. The Chicago Board Options Exchange Volatility Index, the benchmark gauge of U.S. options prices known as the VIX, surged 23 percent to 20.49 to exceed 20 for the first time this year.

Exxon Mobil Corp. fell 2.1 percent, bringing its market capitalization to about $396 billion and leaving no company in the world valued at more than $400 billion for the first time since April, according to data compiled by Bloomberg.

An S&P index of homebuilders sank 7.1 percent, the most in a year, even after sales of previously owned U.S. homes climbed more than forecast in May to the highest level since November 2009. Purchases of existing houses in the U.S. increased 4.2 percent to an annualized rate of 5.18 million from 4.97 million in April, National Association of Realtors figures showed. The median forecast in a Bloomberg survey of economists called for a rate of 5 million.

Another report showed the index of U.S. leading indicators rose less than projected in May, a sign the world’s largest economy may take time to accelerate. The Conference Board’s gauge of the outlook for the next three to six months increased 0.1 percent after a revised 0.8 percent gain in April that was higher than initially reported. The median forecast of economists was for a rise of 0.2 percent.

More Americans than forecast filed applications for unemployment benefits last week, with claims climbing by 18,000 to 354,000 in the week ended June 15 from a revised 336,000 the prior period, the Labor Department reported. The median forecast of 46 economists surveyed by Bloomberg called for an increase to 340,000.

Bernanke’s remarks prompted economists to predict a faster reduction in bond purchases. The first cut will come at the Sept. 17-18 policy meeting, according to 44 percent of economists in a Bloomberg survey. In a June 4-5 survey, 27 percent of economists forecast tapering would start in September.

Speculation that the Fed will begin withdrawing its stimulus measures stoked trading in an exchange-traded note tracking U.S. volatility. About 136 billion shares changed hands on the iPath S&P 500 VIX Short-Term Futures ETN, up from 87 million June 19, according to data compiled by Bloomberg.

The stock sell off pushed the MSCI all-country gauge down more than 7 percent from a five-year high reached May 21, the day before Bernanke raised the possibility of reducing stimulus should U.S. economic indicators improve. About $2.4 trillion was erased from global equity values over that stretch, with indexes in Hong Kong and Japan sliding more than 20 percent into bear markets.

Yields on 10-year Treasury notes rose six basis points, or 0.06 percentage point, to 2.42 percent, after touching 2.47 percent earlier in the day. Thirty-year U.S. bond yields jumped 11 basis points to 3.52 percent, the highest level since August 2011, and two-year rates increased two basis points to 0.33 percent. Germany’s 10-year bund yield climbed 11 basis points to 1.67 percent, a four-month high.

Australia’s 10-year yield rose as much as 23 basis points yesterday to 3.65 percent, a level unseen since March 15, and New Zealand’s 10-year rate surged 30 basis points to 4.09 percent.

Volatility in Treasuries as measured by the Bank of America Merrill Lynch MOVE Index was at 86.89 June 19, the most since June 2012.

The Fed may be unable to calm the volatility that it triggered in global financial markets after signaling an eventual cut in its monetary stimulus, according to Bill Gross, manager of the world’s biggest bond fund.

“I doubt they can put Humpty Dumpty back together again,” Pacific Investment Management Co.’s founder Gross said in a radio interview on “Bloomberg Surveillance” with Tom Keene and Mike McKee.  Vice Chairman “Janet Yellen’s task was to damp volatility, to lower that term premium, to calm markets, and they did that. But now there is significant unrest.”

Investor confidence in U.S. corporate credit plunged.

The Markit CDX North American Investment Grade Index, a credit-default swaps benchmark that investors use to hedge against losses or to speculate on creditworthiness, increased 5.7 basis points to a mid-price of 91.4 basis points in New York, after climbing 3.9 basis points June 19, according to prices compiled by Bloomberg. That’s the biggest two-day jump on a closing basis since the measure rose 8.8 in the period ended May 14, 2012, excluding rolls into new series of the benchmark.

The dollar strengthened against all 16 major peers except the Swiss franc and the pound. The yen weakened to 97.33 per dollar, after falling 0.9 percent against the greenback yesterday. Japan’s currency lost 0.1 percent to 128.74 per euro.

The Australian dollar was little changed at 92.06 U.S. cents. It touched 91.64 yesterday, the weakest level since September 2010, and tumbled 1.1 percent. New Zealand’s dollar was also steady at 77.64 cents after declining 1.8 percent yesterday.

The JPMorgan Global FX Volatility Index increased to as high as 11.51 percent, the most in a year. The average over the past 12 months has been 8.66 percent.

The Stoxx Europe 600 Index slid 3 percent, the most since November 2011, and closed at its lowest level of the year.

Germany’s DAX Index tumbled 3.3 percent for its biggest decline in more than 12 months. The MSCI Emerging Markets Index slid 4 percent, the most since Sept. 22, 2011.

“We expect another round of correction in the period ahead, across the board, be it in emerging market currencies or emerging market fixed income,” a team led by Benoit Anne, head of strategy at Societe Generale SA in London, wrote in a report yesterday. “We are positioned quite defensively.”

The preliminary reading of 48.3 for a Chinese purchasing managers’ index released yesterday by HSBC Holdings Plc and Markit Economics compared with the 49.1 median estimate in a Bloomberg News survey of 15 economists. China’s seven-day repurchase rate, a gauge of interbank funding availability, rose to the highest since at least 2006. The central bank has refrained from using reverse-repos to inject funds into the interbank market since Feb. 7.

All 24 commodities tracked by the S&P GSCI Index retreated.

Gold for immediate delivery lost 5.2 percent to $1,280.69 an ounce, the lowest price since September 2010. Gold futures were down 6.4 percent in New York. Holdings in the SPDR Gold Trust, the world’s largest exchange-traded product backed by bullion, fell below 1,000 metric tons for the first time in four years. Silver plunged 8.2 percent to $19.6607 an ounce, the lowest level since September 2010, and palladium declined 4.4 percent, retreating for a sixth day in its longest slump in almost a year.

Copper for delivery in three months retreated 2.7 percent to $6,770 a metric ton on the London Metal Exchange. Nickel dropped 3.5 percent to $13,700 a ton, the lowest price since May 2009.

West Texas Intermediate crude fell for a third day, slipping 0.4 percent to $95.03 a barrel after settling down 2.9 percent in New York at $95.40, its biggest decline in seven months. The volume of all futures traded yesterday was 45 percent above the 100-day average.

Have  a wonderful evening everyone!

Be magnificent!

Amanda Bourke

Assistant to Carolann Steinhoff

Queensbury Securities Inc.

St. Andrew’s Square

Suite 340A, 730 View St.,

Victoria, B.C. V8X 3Y7