November 25, 2015 Newsletter

Dear Friends,

Tangents:

Carolann is out of the office, I will be writing the newsletter on her behalf.

PHOTOS OF THE DAY 

A man stops to look at a frozen handrail as he walks his dogs along the coastline in Dalian, Liaoning province, China, Wednesday. Reuters

Santa Claus, from the Macy’s Thanksgiving Day Parade, visits the trading floor of the New York Stock Exchange before the opening bell Wednesday. Richard Drew/AP

Market Closes for November 25^th, 2015

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Eric Lam

     (Bloomberg) — Canadian stocks were little changed as a rebound in Valeant Pharmaceuticals International Inc. fizzled in afternoon trading, offsetting gains in consumer shares and Bombardier Inc.

     Consumer-staples companies advanced 1.4 percent. Alimentation Couche-Tard Inc. added 1.7 percent to a record after the gas-bar and convenience store retailer raised its dividend and posted second-quarter earnings ahead of estimates yesterday. George Weston Ltd., parent of supermarket chain Loblaw Cos., jumped 2.9 percent, bringing its two-day gain to 4.2 percent, the most in a year.

     The Standard & Poor’s/TSX Composite Index fell 4.41 points, or less than 0.1 percent, to 13,403.42 at 4 p.m. in Toronto. The index was up as much has 0.6 percent earlier in the day. It has dropped 8.4 percent this year, trailed only by Singapore and Greece among developed markets. 

     Valeant retreated 0.9 percent, after surging as much as 3.3 percent to recover from a loss of 5 percent early in the day. Sydney-based Bronte Capital in a blog posting identified 78 pharmacies with names alluding to chess moves or to Stephen King novels it claims are probably tied to the drugmaker. The hedge fund has a short-selling position against Valeant that would let it profit on the stock’s decline, the company confirmed in an e- mail.

     Briefly the largest company in Canada by market capitalization this year, Valeant has plunged 67 percent from an Aug. 5 all-time high amid scrutiny over its drug pricing practices and relationship with mail-order pharmacies such as Philidor RX Services, first highlighted by short-seller Andrew Left’s Citron Research.

     Activist investor Bill Ackman has been a staunch backer of the company, increasing his fund’s stake in Valeant to 9.9 percent, from 5.7 percent as of Sept. 30, in a series of transactions starting in October, according to a Monday regulatory filing. Ackman also defended Valeant at length in a marathon conference call Oct. 30.

     Oil producers fell 0.7 percent, halting a two-day advance, after a government report showed that U.S. crude, gasoline and distillate fuel stockpiles increased.

     Energy and raw-materials producers, along with health-care stocks, have fallen at least 21 percent this year to lead declines in the S&P/TSX. A combination of slowing economic growth in China and a rally in the U.S. dollar due to impending interest-rate increases from the Federal Reserve as soon as December have crimped commodities prices.

     Bombardier jumped 12 percent, the most in seven weeks, after a three-day decline brought it to the lowest level in almost three months. While profit and sales could fall next year, recent investments from within the company’s home province of Quebec have improved liquidity and buoyed the outlook for aircraft-development programs, Bombardier said Tuesday at its annual investor day in New York.

US

By Stephen Kirkland and Jeremy Herron

     (Bloomberg) — Most U.S. stocks rose in light trading, while bonds fluctuated as signs Russia won’t escalate tensions after the downing of its warplane saw investors to shift their attention to evidence the American economy is robust enough to withstand higher interest rates.

     The Russell 2000 Index of small-cap equities led gains, while the Standard & Poor’s 500 Index meandered amid below- average volumes ahead of Thursday’s Thanksgiving holiday in the U.S. The dollar strengthened as orders data added to the picture of a stabilization in manufacturing, even as consumer spending climbed less than was forecast. The euro slipped to a seven- month low on bets regional policy makers will bolster stimulus, while crude oil rose above $43 a barrel. Brazilian assets tumbled as a graft scandal widened.

     U.S. and German leaders called for an easing of tensions a day after Turkey’s downing of the Russian jet threatened to escalate the conflict in Syria, unsettling financial markets. In the U.S., the biggest part of the economy is off to a slow start to the holiday season, adding an element of doubt as to the strength of the economic recovery even as goods orders pick up. Speculation is mounting that the Federal Reserve will boost interest rates before the year is out, just as the European Central Bank increases stimulus.

     “Consumers are in pretty good shape, but continue to be relatively conservative in how they’re spending money,” said David Donabedian, chief investment officer of Atlantic Trust Private Wealth Management, which oversees $27 billion. “It’s a typical mixed bag of economic news. It will be a light trading day.”

     The S&P 500 fell less than 0.1 percent to 2,088.87 as of 4 p.m. in New York, capping its third straight move of less than 0.2 percent following its best weekly advance this year. Trading in S&P 500 stocks was 31 percent below the 30-day average. The Russell 200 jumped 0.8 percent to its highest level since Nov. 6.

     Energy shares trimmed earlier declines after U.S. government data showed crude-oil stockpiles rose less than analysts forecast. Pfizer Inc. climbed 2.8 percent to lead health-care companies’ advance. Macy’s Inc. gained 1.9 percent and travel-related companies rebounded to pace an increase among consumer discretionary companies.

     The Stoxx Europe 600 Index rose 1.4 percent, as travel and leisure stocks rebounded from the biggest drop since September. Abengoa SA’s bonds and stock tumbled to records after the embattled renewable-energy company said it was seeking preliminary protection from creditors. Banco Santander SA, Spain’s largest bank, and Banco Popular Espanol SA, the sixth- biggest, dropped more than 2 percent.

     The MSCI Asia Pacific Index slipped 0.5 percent Wednesday, led by losses in Japan and Australia.

     Yields on the benchmark U.S. 10-year note fell one basis point, or 0.01 percentage point, to 2.23 percent. The yield touched 2.2 percent Tuesday, the lowest level since Nov. 4. U.S. bond markets are shut Thursday for the holiday and open for a partial session Nov. 27.

     The yield difference between two- and 10-year Treasuries shrank to the narrowest since February amid lackluster inflation and as bets on a December rate hike from the Fed hold above 70 percent.

     Euro-area government bonds advanced on bets economic stimulus will be expanded before the year is out. ECB Vice President Vitor Constancio fueled that speculation, saying risks to the euro-area economy are to the downside in a Bloomberg TV interview Wednesday.

     Germany’s two-year note yields slipped to a record alongside those of peers including Spain and Belgium. Yields were negative on German bonds with maturities out as far as seven years on Wednesday.

     The Bloomberg Dollar Spot Index, a gauge of the greenback versus 10 major peers, rose 0.1 percent following a 0.3 percent retreat last session. The euro fell 0.2 percent to $1.0619, nearing the $1.0458 level reached on March 16, its weakest since January 2003. The currency dropped 0.1 percent to 130.32 yen on Wednesday.

     Central bank policy makers including ECB President Mario Draghi have said they will do whatever is required to ward off deflation before their Dec. 3 meeting. Any move by the Fed to raise rates in December would dim the allure of the 19-nation currency versus the greenback.

     The Ibovespa stock gauge sank 2.9 percent, the most since Oct. 13, while the Brazilian currency dropped 1.2 percent, the most among 16 major currencies tracked by Bloomberg. Billionaire Andre Esteves, who transformed Grupo BTG Pactual into the largest independent investment bank in the region, was detained Wednesday, sending shares of the lender down a record 21 percent. Delcidio Amaral, the leader of the government coalition in the Senate, was also held.

     Brazil’s equity market has lost about a third of its value since March 2014, when a widening probe into a pay-to-play scheme between an alleged cartel of builders and state-run oil producer Petroleo Brasileiro SA left President Dilma Rousseff fighting for her political survival. The lack of support from Congress had the government struggling to approve measures that could shore up the nation’s finances, seeing Brazil ousted from a group of investment-grade countries in September.

     Bank Itau Unibanco Holding SA and Petrobras led Ibovespa losses, while Brazil’s $4.3 billion in bonds due 2025 fell the most in three weeks.

     Russia’s ruble declined for the third time in four days and Turkey’s lira dropped to a two-week low as Russia ratcheted up criticism of Turkey for shooting down the warplane on Tuesday. Chinese shares rallied amid speculation state intervention to stabilize the market is working, with the Shanghai Composite Index up 0.9 percent amid losses throughout the region.

     West Texas Intermediate crude climbed 0.4 percent to $43.04 a barrel after earlier retreating back below $42. Crude had gained more than 6 percent over the previous two trading sessions. The U.S. report showed that crude, gasoline and distillate fuel stockpiles increased last week.

     Gold fell to near a five-year low as investors focused on data showing an increase in U.S. orders for business equipment and a drop in jobless claims, boosting speculation over the Fed’s action on rates. Higher borrowing costs damp the metal’s appeal as a store of value.

     Copper, zinc and aluminum traded near their lowest levels in six years, and nickel has slumped this week to the least in more than a decade. Iron ore has taken a fresh beating, with prices sinking to the lowest level in six years as output cuts at Chinese mills hurt demand while low-cost supplies from the biggest miners expand.

Have a wonderful evening everyone.

Be magnificent!

 

“What is the difference between an obstacle and an opportunity? Our attitude toward it. Every opportunity has a difficulty, and every difficulty has an opportunity.” 
― J. Sidlow Baxter 

As ever,

Karen
 

“A warm smile is the universal language of kindness.” William Arthur Ward

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