June 8, 2015 Newsletter

Dear Friends,

Tangents:

Just back from a fascinating trip through Croatia, Bosnia and Slovenia.  One of the most surprising discoveries is the excellent quality of Croatian wines, especially the reds, especially from Istria, sometimes called the “new Tsuscany”.  It is gratifying to see how prosperous things appear to be.  I  asked one young man with whom I spoke in Slovenia who was a young boy during the war, if there were concerns that things could go awry again, especially with the rumblings in Macedonia these days.  He told me most Slavs are more worried about Putin than anything else….understandably I guess.

On this day in 1949, George Orwell published his classic 1984.

PHOTOS OF THE DAY

More than 173,000 pots of plants and herbs form a flower carpet in front of the city hall in Antwerp, Belgium. To celebrate the 450th anniversary of the Antwerp City Hall, artist Anne-Mie Van Kerckhoven selected 31 different species to create a design of large geometric figures in bright colors. Van Kerckhoven found inspiration in the Renaissance floor of the Plantin-Moretus museum and in a map of the city by the river Scheldt, which dates from 1575, and includes the river bend. The carpet measures 196 by 98 feet. Geert Vanden Wijngaert/AP

Kunekune piglets breastfeed from their mother in Strasswalchen, Salzburg, Austria. The kunekune pig, originally kept by Maori people in New Zealand, is a friendly hairy pig born in a variety of colors. It is one of the smallest domesticated breeds of pig in the world. Kerstin Joensson/AP

Market Closes for June 8^th, 2015

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Eric Lam

     (Bloomberg) — Canadian stocks fell a third day, reaching the lowest level since March, as energy producers retreated with the price of crude amid speculation a global surplus will persist.

     Sherritt International Corp. lost 2.1 percent as workers at its nickel project in Madagascar may go on strike. Sandvine Corp. plunged 9.1 percent after providing a second-quarter revenue forecast short of analysts’ estimates. Enbridge Inc. and Suncor Energy Inc. slipped at least 2.6 percent to pace declines among energy shares.

     The Standard & Poor’s/TSX Composite Index lost 213.83 points, or 1.4 percent, to 14,743.33 at 4 p.m. in Toronto, the lowest since March 13. The benchmark Canadian equity gauge has tumbled 2.7 percent in three days, paring Canada’s advance for the year to 0.8 percent.

     “There’s some fear of when the Fed will raise rates, after the numbers from the jobs report on Friday,” said Ian Nakamoto, director of research at MacDougall MacDougall & MacTier Inc. His firm manages about C$5.3 billion ($4.27 billion). “The Europe situation, that will be to the last minute. And there seems to be a knock-on effect with the banks, people are wondering how much exposure they have to the energy sector.”

     Toronto-Dominion Bank tumbled 1.6 percent and Royal Bank of Canada dropped 1.2 percent as financial-services companies retreated 1.2 percent as a group. All 10 industries in the S&P/TSX retreated.

     Potash Corp. of Saskatchewan Inc., the fertilizer producer, lost 2 percent and First Quantum Minerals Ltd. retreated 2.1 percent as raw-materials producers retreated 0.8 percent.

     China imports plunged 18 percent in May, the most in three months, while exports fell for a third straight month, underscoring weakening growth in the Chinese economy. The country is Canada’s second-largest trading partner after the U.S.

     Canadian National Railway Co. and Canadian Pacific Railway Ltd. lost at least 2.2 percent to send industrial shares lower.

     Enbridge retreated 3.6 percent and TransCanada Corp. lost 1.9 percent as energy producers declined 2.5 percent. West Texas Intermediate oil retreated 1.7 percent to $58.14 a barrel in New York, after posting the first weekly decline since March last week.

     Investors are turning their attention to the risk of Iranian shipments adding to global supply after the Organization of Petroleum Exporting Countries decided to maintain its output target.

US

By Oliver Renick

     (Bloomberg) — The Standard & Poor’s 500 Index fell to a two-month low amid declines in airline and semiconductor shares, as investors considered the timing of an interest-rate increase and the outlook for Greece’s debt talks.

     Airlines retreated on concerns about capacity growth, while chipmakers slid for a sixth straight day. Intel Corp. decreased 1.7 percent. EBay Inc. sank after its PayPal unit trimmed its 2015 free-cash flow view. Wynn Resorts Ltd. lost 6.2 percent to weigh on consumer discretionary shares. Sealed Air Corp. added 1.2 percent after Jefferies LLC said the company may buy back more than $1 billion in shares.

     The S&P 500 Index dropped 0.7 percent to 2,079.28 at 4 p.m. in New York, the lowest since April 7, and below its average price during the last 100 days. The Dow Jones Industrial Average lost 82.91 points, or 0.5 percent, to 17,766.55. The Dow also closed at a two-month low and erased its 2015 gain. The Nasdaq Composite Index declined 0.9 percent.

     “Investors want to see stronger growth and they are still trying to figure out when the Fed is likely to move and that’s a good three months away,” said Peter Dixon, an economist at Commerzbank AG in London. “Equities have had such a good run until recently that people are taking a bit of risk off the table and standing on the sidelines deciding how to play this.”

     Reports on consumer sentiment and retail sales are due this week, both of which are forecast to show an improving economy. Jobs data Friday showed the strongest hiring in five months and the biggest wage gains in two years, bolstering bets the Federal Reserve will raise interest rates this year.

     Investors are also looking for signs of progress in negotiations between Greece and its international creditors. With talks resuming in Brussels on Monday, Prime Minister Alexis Tsipras faced a united front from Group of Seven leaders calling for movement to end the impasse and avert the risk of wider economic reverberations.

     The S&P 500 posted back-to-back weekly declines for the first time since March as investors weigh equity valuations amid the potential Fed rate increase this year.

     Consumer expectations for inflation rebounded in May, according to a Fed Bank of New York survey, as officials look for evidence that price pressures are firming.

     In the quarter after the last 12 tightening cycles began, price-earnings ratios on the benchmark index contracted by an average of 7.2 percent. It’s something else to worry about as the Fed prepares to lift rates in an economy that is still far from booming.                           

     Should policy makers move before January, they would be doing so in a year when U.S. profits are forecast by analysts to increase 1.4 percent. That represents the weakest growth at the start of a tightening cycle since 1980.

     “People talk about how equities have done well six months after tightening but the Fed has never been at zero for this long,” said Andrew Brenner, the head of international fixed income for National Alliance Capital Markets. “It’s inevitable an equity correction is coming.”

     The Chicago Board Options Exchange Volatility Index gained 7.6 percent to 15.29, its highest close in more than two months. The gauge, known as the VIX, marked a second consecutive weekly advance Friday. About 5.6 billion shares traded hands on U.S.exchanges Monday, about 13 percent below the three-month average.

     Nine of the S&P 500’s 10 main groups declined, with technology, industrial and consumer discretionary companies leading the drop. Phone companies climbed as Verizon Communications Inc. bounced 0.4 percent after sliding 1.8 percent Friday. Frontier Communications Corp. rose 1.3 percent.

     Semiconductors in the S&P 500 fell as Avago Technologies Ltd. and Micron Technology Inc. sank at least 2.5 percent. Avago’s buyout target Broadcom Corp. decreased 2 percent. Intel extended its losing streak to six days, the longest since January 2014. Shares lost 1.7 percent and are down more than 9 percent since announcing on June 1 its $16.7 billion deal to buy Altera Corp.

     Also dragging down the tech group, Apple Inc. slumped 0.7 percent, earlier down as much as 1.4 percent, and Facebook Inc. fell 1.8 percent. International Business Machines Corp. declined 1.2 percent to a seven-week low.                         

     A Bloomberg gauge of U.S. airlines tumbled 4.4 percent to its lowest since November. JetBlue Airways Corp. retreated 7.2 percent, and American Airlines Group Inc. dropped 4.5 percent as Raymond James Financial Inc. downgraded its shares. The firm also cut Delta Air Lines Inc. and United Continental Holdings Inc., which slid more than 4.3 percent. The Dow Jones Transportation Average lost 2.1 percent.

     Wynn Resorts fell 6.2 percent, the most in more than a month after several analysts said gambling revenue this month in Macau will be below their initial estimates. Las Vegas Sands Corp. and MGM Resorts International declined at least 5 percent.

     Energy shares erased an early gain to fall along with oil prices. Devon Energy Corp. and Apache Corp. lost more than 1.9 percent. Chevron Corp. dropped 1.2 percent to an almost three- year low.

Have a wonderful evening everyone.

Be magnificent!

If you are in the moment, you are in the infinite.

-Swami Prajnanpad

As ever,
 

Carolann

Genius without education is like silver in the mine.

                       -Benjamin Franklin, 1706-1790

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