June 20th, 2011 Newsletter
Dear Friends, as another day draws to a close here is the Newsletter June 20th, 2011
“When you are sorrowful look again in your heart, and you shall see that in truth you are weeping for that which has been your delight”. ~Kahlil Gibran
And in Today’s Canadian Birthdays… Anne Murray 1945-
Singer Anne Murray was born on this day at Springhill, Nova Scotia in 1945. Murray has sold over 24 million records; her major hits include Love Song [Grammy 1974], You Needed Me [Grammy 1978], Could I Have This Dance [Grammy 1980], A Little Good News [Grammy 1983]; as well as Snowbird, You Won’t See Me, He Thinks I Still Care, Shadows In the Moonlight, Danny’s Song, You Won”t See Me, and What Would It Take; has won numerous Juno and American Music Awards; lives in Toronto and just released new self-titled album, Anne Murray;
Photo’s of the day:
An aerial view of the 49th Paris Air Show at Le Bourget airport, near Paris. The Paris Air Show runs from June 20-26. Pascal Rossignol/Reuters
Venus Williams of the US reaches to hit a return to Akgul Amanmuradova of Uzbekistan at the Wimbledon tennis championships in London. Eddie Keogh/Reuters
Market Commentary:
Canada
By Matt Walcoff
The Canadian dollar fluctuated versus its U.S. counterpart as oil, Canada’s biggest export, erased losses and stocks rose after a European leader eased concern that Greece won’t get aid it needs to avoid a default.
Canada’s currency earlier fell to almost the lowest level in three months versus the U.S. dollar as investors took refuge in the greenback on speculation European governments won’t succeed in preventing a Greek default, damping demand for higher-yielding assets. The Canadian dollar rose against its Australian and New Zealand counterparts.
“Overall risk aversion will still play out, and we’re very much watching the European situation,” said John Curran, a senior vice president in Toronto at CanadianForex Ltd., an online foreign-exchange dealer. “Anything that comes out in that regard will have an effect on the Canadian dollar.”
Canada’s currency, sometimes called the loonie for the image of the bird on the C$1 coin, depreciated as much as 0.6 percent to 98.50 cents per U.S. dollar before trading little changed at 97.98 cents at 5 p.m. in Toronto. It closed on June 17 at 97.94 cents, after touching 98.99 cents the day before, the weakest level since March 17. One Canadian dollar purchases $1.0204 U.S. cents.
It gained 0.3 percent versus the Australian dollar to C$1.0370 and appreciated 0.3 percent to 79.38 cents per New Zealand dollar. Canada’s dollar dropped 0.3 percent against the Mexican peso to 12.1121.
The loonie erased its loss versus the U.S. dollar after Luxembourg Prime Minister Jean-Claude Juncker said he’s received assurances that Greece will do all that’s needed to win aid from the European Union and the International Monetary Fund.
Crude, Stocks
Crude oil for July delivery traded at $93.46 a barrel in New York, up 0.5 percent, after earlier dropping as much as 2 percent. The Standard & Poor’s 500 Index rose 0.5 percent after earlier falling 0.3 percent.
Canadian government bonds fell, pushing the yield on the benchmark 10-year note up two basis points to 2.96 percent. The price of the 3.25 percent security due in June 2021 dropped 18 cents to C$102.44.
The euro region’s top economic policy makers, on the eve of a confidence vote that threatens to topple Greek Prime Minister George Papandreou’s government, pushed the Mediterranean nation to pass laws to cut its deficit and sell state assets. They left open whether Greece will get the full 12 billion euros ($17.1 billion) promised for July as part of last year’s 110 billion-euro lifeline. Decisions on the payout and a three-year follow-up package were put off until early next month.
Juncker Gets Assurance
Juncker, who heads the euro-area finance ministers group, told reporters in Luxembourg that Papandreou assured him the Greek government will do everything necessary to ensure delivery of financial aid.
Canadian Finance Minister Jim Flaherty said today he sees the possibility of Europe’s sovereign-debt crisis spreading.
“There is a real danger of contagion stemming from the situation in Europe, and we know that delay causes more difficulties, makes the situation more expensive and creates more strife,” Flaherty said in a speech to an insurance conference in Toronto.
The Canadian dollar will trade in a seasonal range between 95 cents and parity versus the U.S. dollar, said Firas Askari, head currency trader in Toronto at Bank of Montreal’s BMO Capital unit.
Euro ‘the Catalyst’
“How the euro will hold up is the catalyst for all major pairs, until it’s resolved one way or another,” he said, referring to the Greek crisis.
The Canadian dollar sank to the lowest level in three months last week versus its U.S. counterpart as weaker-than- forecast data signaled the American economy is slowing, and crude, Canada’s biggest export, dropped the most in a month. Canada ships about three-quarter of its exports to the U.S.
The loonie tumbled on June 16 as the Federal Reserve Bank of Philadelphia’s general economic index unexpectedly fell in June to minus 7.7, the lowest level since July 2009, from 3.9 in May. Readings less than zero signal contraction. The data followed the New York Fed’s Empire State Index a day earlier, which showed manufacturing in its region also fell this month.
Sales of existing homes in the U.S. probably dropped in May to the lowest level of the year, an annual rate of 4.8 million, according to the median forecast in a Bloomberg News survey of economists before a report tomorrow by the National Association of Realtors.
Canadian retail sales increased 0.4 percent in April after stalling the previous month, according to the median forecast in a separate Bloomberg survey before Statistics Canada reports the data tomorrow. The leading indicators index rose 0.5 percent last month, compared with a gain of 0.8 percent in April, economists estimated before another report by the statistics agency tomorrow.
US
By Rita Nazareth
U.S. equities climbed for a third day, while the euro erased losses and European stocks pared declines, amid European assurances that a solution will be found to spare Greece from default. Treasuries reversed gains.
The Standard & Poor’s 500 Index increased 0.5 percent to 1,278.36 at 4 p.m. in New York and the Stoxx Europe 600 Index lost 0.5 percent, recovering more than half of a 1.1 percent slide. The 10-year Treasury note yield was up one basis point at 2.95 after sinking as much as six points. The S&P GSCI Index of commodities fell for a fourth day, with wheat, heating oil and coffee leading declines. The euro was little changed at $1.4301 after earlier sinking as much as 0.8 percent.
The 17-nation shared euro currency also erased its decline versus the yen as Luxembourg’s Jean-Claude Juncker said Italy was not in danger from the debt crisis. Juncker said Greek Prime Minister George Papandreou had assured him the government would do everything to ensure financial aid from the European Union and International Monetary Fund before the Greek parliament resumes debating a motion of confidence in the government.
“We may be past the point of maximum pessimism,” said Madelynn Matlock, who helps oversee $14.8 billion at Huntington Asset Advisors in Cincinnati. “Looking at the consequences of not funding Greece, they will do it,” she said. “The goal is making sure that the global financial system stays operating. The market is a whole lot cheaper than it was. Still, we’re going to have ups and downs on a daily basis. It’s not going to be calm and smooth sailing for the next several months.”
Greece Negotiations
Earlier losses in stocks and the euro were triggered by European officials’ failure to agree on a Greek loan payout. Euro-area finance ministers who met yesterday in Luxembourg put off a decision on whether Greece will get the full 12 billion euros ($17 billion) promised for July and pushed for the nation to press ahead with budget cuts. Prime Minister Papandreou faces a confidence vote this week.
Assurances by Luxembourg’s Juncker, who leads the group of euro-area finance ministers, helped reverse the market declines. Juncker said private investors will be “present” in any second rescue package for Greece, though he said he doesn’t know if they’ll be “enthusiastic.”
The IMF is focused on getting Greece’s first bailout program on track, Acting Managing Director John Lipsky told reporters in Luxembourg today. Greece hasn’t approached the agency to ask for additional aid, he said.
Third Straight Gain
The S&P 500 rose for a third straight day after snapping a streak of six weekly losses on June 17. The index is down 6.3 percent from an almost three-year high at the end of April, trimming its 2011 gain to less than 2 percent, as lower-than- forecast data on jobs growth and manufacturing spurred concern the economic expansion is slowing.
Caterpillar Inc. (CAT) rose 2.3 percent for the top gain in the Dow Jones Industrial Average after being raised to “strong buy” at Raymond James & Associates. DuPont Co. and Microsoft Corp. (MSFT) also climbed more than 0.8 percent to help lead gains in 25 of 30 Dow stocks.
Goldman Sachs Group Inc. reduced its second-quarter growth forecast for the world’s largest economy to 2 percent from 3 percent. Reports this week will probably show home sales dropped in May to the lowest level of the year, while orders placed with factories increased, according to economists surveyed by Bloomberg.
Falling Commodities
The S&P GSCI index of 24 commodities fell 0.3 percent for a fourth straight decline, the longest selloff since May 6, as wheat, heating oil and coffee fell at least 1.7 percent. New York-traded oil rose 25 cents, or 0.3 percent, to settle at $93.26 a barrel after sliding as much as 2 percent earlier. Copper fell 0.5 percent.
Bank shares were the biggest drag of 19 industry groups in Europe’s Stoxx 600, with Banca Popolare di Milano Scrl plunging 7.4 percent and Banca Monte dei Paschi di Siena SpA tumbling 2.6 percent.
The Swiss franc strengthened against its 16 major peers. The Australian dollar fell versus all of its biggest counterparts, losing 0.5 percent against the U.S. currency.
The U.S. currency rose against higher yielding counterparts such as the Australian and New Zealand dollars as strategists speculated that the Federal Reserve won’t signal a third round of quantitative easing after a meeting on June 22. The Federal Open Market Committee has kept its benchmark rate unchanged between zero and 0.25 percent since December 2008.
Greek 10-year bonds slid, driving the yield up 40 basis points to 17.34 percent. The extra yield, or spread, investors demand to hold the securities instead of benchmark German bunds increased 40 basis points to 1,438 basis points.
Italian-German Spread
The Italian-German spread widened three basis points after Moody’s put Italy’s Aa2 rating on review for a downgrade June 17, citing economic growth challenges, risks associated with efforts to reduce debt and the potential for higher borrowing costs.
The Markit iTraxx SovX Western Europe Index of credit- default swaps erased earlier gains, dropping 1.3 basis point to a mid-price of 221.
The MSCI Emerging Markets Index slid 0.4 percent, falling for a fourth day. The Bombay Stock Exchange Sensitive Index sank 2 percent after a report that the government sought to tax gains on investments routed through Mauritius. Turkey’s ISE National 100 Index lost 1.2 percent after regulators increased provisions that lenders must make against some consumer loans. Russia’s Micex Index slipped 1.2 percent on lower oil.
The MSCI Asia Pacific Index slid 0.4 percent as energy and raw-material producers led losses. BHP Billiton Ltd., Australia’s biggest oil producer, sank 1.4 percent in Sydney. Sun Hung Kai Properties Ltd., the world’s biggest developer by market value, lost 2 percent in Hong Kong after Walter Kwok, a former chairman, said the city’s property prices may fall as much as 15 percent by the end of the year.
Japanese power companies advanced after the government said it may allow atomic reactors to restart following the worst nuclear accident in 25 years.
Be magnificent!
“The ultimate measure of a man is not where he stands in moments of comfort and convenience, but where he stands at times of challenge and controversy.” -Martin Luther King
As always,
Summer, for Carolann