November 9, 2011 Newsletter
Dear Friends,
Tangents:
-from The Book of Days:
James Agate, Ego, November 9th, 1942. The Torch landings at Casablanca, Algiers and Oran had taken place the day before.
A glorious day, in every sense of the word. Alexander’s great victory [Alamein] and the invasion by the Americans of French North Africa have put the people of this country into better fettle than they have known since 1925, when, at Melbourne on the third day of the second Test Match, Hobbs and Sutcliffe put on 283 runs for England’s first wicket and sent the Stock Exchange up two points.
Photo of the day
November 9th, 2011
Team Telefonica, skippered by Iker Martinez from Spain at the start of leg 1 of the Volvo Ocean round-the-world race 2011-12 from Alicante, Spain to Cape Town, South Africa. Ian Roman/Volvo Ocean Race/AP.
Market Commentary:
Canada
By Matt Walcoff
Nov. 9 (Bloomberg) — Canadian stocks fell the most in five weeks as financial and energy shares declined on concern the spread of Europe’s debt crisis to Italy may weaken the global economy.
Suncor Energy Inc., the country’s largest energy company, declined 5.6 percent as natural gas futures retreated after analysts forecast supplies will near a record. First Quantum Minerals Ltd., Canada’s second-largest publicly traded copper producer, plunged 14 percent after its earnings trailed all 13 analyst estimates in a Bloomberg survey. Royal Bank of Canada, the country’s biggest lender by assets, lost 2.8 percent.
The Standard & Poor’s/TSX Composite Index dropped 332.63 points, or 2.7 percent, the most since Oct. 3, to 12,156.22.
Thirteen stocks in the index advanced, the fewest since Aug. 4. “Europe is a disaster zone,” Sebastian van Berkom, a money manager at Van Berkom & Associates in Montreal, said in a telephone interview. The firm oversees about C$1.6 billion ($1.6 billion). “With 10-year bond yields in Italy over 7 percent, we’ve got a problem. The outlook for economic growth continues to deteriorate as the financial crisis continues.”
The S&P/TSX is set to underperform the S&P 500 for the first year since 2003 as most major raw materials have declined.
Energy and raw-materials companies make up 49 percent of Canadian stocks by market value, the most among major developed markets, according to Bloomberg data. Canada’s equity benchmark gauge has lost 9.6 percent this year, while its U.S. peer has slipped 2.3 percent.
Italian bond yields climbed to euro-era records today after LCH Clearnet SA raised deposit requirements for trading the debt securities. HSBC Holdings Plc, Europe’s largest lender by market value, plunged 5.8 percent in London after saying investment banking profit fell in the third quarter. Stocks extended losses as Greece’s rival political parties failed to agree on who will succeed Prime Minister George Papandreou.
Natural gas retreated 2.5 percent on the New York Mercantile Exchange a day before the U.S. is to report inventories of the fuel. According to the median forecast of analysts in a Bloomberg survey, supplies will climb to 3.826 trillion cubic feet, within 0.4 percent of the record set last November. Crude oil declined 1.1 percent.
Suncor lost 5.6 percent to C$31.44. Canadian Natural Resources Ltd., the country’s second-largest energy company by market value, slipped 4.1 percent to C$36.97.
Canadian Oil Sands Ltd., the largest owner of the Syncrude project, decreased 5.9 percent to C$20.96 after Phil Skolnick, an analyst at Canaccord Financial Inc., cut his 12-month share- price forecast to C$25 from C$26. The company has “very little free cash flow left to support the quarterly dividend,” Skolnick wrote in a note to clients.
All major base metals traded on the London Metal Exchange fell, with copper declining for a fourth day. An index of industry companies in the S&P/TSX lost 7.5 percent, the most since Sept. 22.
Teck Resources Inc., Canada’s largest base-metals and coal producer, retreated 6.3 percent to C$37.73. Ivanhoe Mines Ltd., which is building a copper and gold mine in Mongolia with Rio Tinto Group, slumped 6.5 percent to C$21.14. Molybdenum and copper producer Mercator Minerals Ltd. dropped 11 percent to C$1.70.
First Quantum sank 14 percent, the most since May 2010, to C$19.76 after its third-quarter profit missed the average analyst estimate by 46 percent, excluding certain items. The company also cut its 2011 forecasts for copper and gold production.
Other metals companies to drop after missing analysts’ earnings estimates included Pan American Silver Corp., which tumbled 8.5 percent to C$27.79, and molybdenum producer Thompson Creek Metals Co., which declined 8 percent to C$6.53 in the second day of trading after disclosing its financial results.
CB Gold Inc., which is developing a project in Colombia, plunged 19 percent to C$1.38 after restating drilling results. The shares had jumped 151 percent from Oct. 21, the trading day before the company released the original results, to yesterday.
All S&P/TSX banks and the three largest insurers declined. Royal Bank decreased 2.8 percent to C$45.13, falling behind Toronto-Dominion Bank in market value for the first time since 2000. Bank of Nova Scotia, Canada’s third-largest lender by assets, slipped 2.6 percent to C$51.33. Manulife Financial Corp., North America’s fourth-biggest insurer, lost 5.3 percent to C$12.10.
Technology-patent owner Wi-LAN Inc. slumped 8.5 percent to C$6.76 after cutting its 2011 sales and earnings forecasts.
Indigo Books & Music Inc., Canada’s largest bookstore chain, soared a record 36 percent to C$9.12 after Rakuten Inc. agreed to buy Kobo Inc., a maker of electronic-reading hardware and software, for $315 million. Indigo is the majority owner of Kobo.
US
By Rita Nazareth
Nov. 9 (Bloomberg) — U.S. stocks slumped, driving the Standard & Poor’s 500 Index to its biggest decline since August, amid concern that European leaders may be unable to keep the euro zone intact as Italian yields surged to a record.
Morgan Stanley and Goldman Sachs Group Inc. dropped at least 8.2 percent, following losses in European lenders, after LCH Clearnet SA raised the extra charge it levies on clients for trading Italian government bonds and index-linked securities. General Motors Co. tumbled 11 percent after abandoning its target for European results. Adobe Systems Inc. sank 7.7 percent on plans to cut jobs as it lessens its focus on older products.
The S&P 500 slid 3.7 percent to 1,229.10 as of 4 p.m. New York time, after rising 1.8 percent over the previous two days. The Dow Jones Industrial Average lost 389.24 points, or 3.2 percent, to 11,780.94. The Stoxx Europe 600 Index decreased 1.7 percent as the 10-year Italian note yield topped 7 percent.
“It’s just like a scary movie as it never ends,” Keith Wirtz, who oversees $16.7 billion as chief investment officer at Fifth Third Asset Management in Cincinnati, said in a telephone interview. “The overarching problem is that most of the economies in Europe can’t sustain the size of their governments. We’re going to have this headache for a long time to come.”
Today’s equity slump erased the month-to-date gain in the S&P 500. About 11 stocks fell for each that gained on U.S. exchanges. All 10 groups in the S&P 500 retreated as gauges of financial, commodity and industrial companies fell at least 3.8 percent. The Chicago Board Options Exchange Volatility Index, which measures the cost of using options as insurance against declines in the S&P 500, soared 32 percent to 36.16.
Europe’s biggest clearinghouse said that customers must put down bigger deposits to trade Italian bonds as concern rises that the government will struggle to reduce the world’s third- largest debt burden. Italian yields surged as Prime Minister Silvio Berlusconi said he won’t resign until austerity measures are passed, even after he failed to muster an absolute majority on a routine ballot in parliament yesterday.
Equities extended losses as Handelsblatt reported that German Chancellor Angela Merkel’s Christian Democratic Union party wants to make it possible for European Union members to exit the euro area, citing unnamed participants in the discussion. A French official said there are no plans to shrink the euro area. In Greece, Prime Minister George Papandreou’s drive to put together a unity government fell into disarray as rival parties squabbled over the choice of the next premier.
“The Greek flu is hitting Italy,” James McDonald, chief investment strategist at Northern Trust Corp. in Chicago, which manages $643 billion, said in a telephone interview. The market wants to know “who’s going to be the new leadership? Until they know the new leadership’s willingness to implement reforms, they are going to require higher compensation.”
The KBW Bank Index sank 5.9 percent as all of its 24 stocks retreated, extending this year’s slump to 26 percent. Morgan Stanley fell 9 percent to $15.76. Goldman Sachs erased 8.2 percent to $99.67.
General Motors declined 11 percent, the biggest drop since its post-bankruptcy public offering a year ago, to $22.31. The automaker, which hasn’t turned an annual profit in Europe in more than a decade, abandoned its target for break-even results in the region as a quarterly loss there lowered overall profit.
Adobe lost 7.7 percent to $28.08. The company plans to cut 750 jobs as it lessens its focus on older products. The reduction, mostly in North America and Europe, will cost $87 million to $94 million before taxes, the company said. After the costs, net income will be 30 cents to 38 cents a share, compared with a previous forecast of 41 cents to 50 cents.
Concern that Europe’s debt crisis may thwart a global economic recovery sent the Morgan Stanley Cyclical Index down 4.6 percent. The Dow Jones Transportation Average of 20 stocks slumped 3.8 percent. FedEx Corp., operator of the biggest cargo airline, slipped 4.4 percent to $79.35. Apple Inc., the biggest technology company, lost 2.7 percent to $395.28.
Energy and raw material producers retreated as the dollar rose, reducing the appeal of commodities. Alcoa Inc., the largest U.S. aluminum producer, slid 5.4 percent to $10.20. Chevron Corp. fell 4.2 percent to $104.28.
One stock in the S&P 500 rose today, the lowest number since June 2010. Best Buy Co. advanced 1.4 percent to $27.22.
The world’s largest consumer-electronics retailer may post its first monthly comparative sales gains in six quarters, according to Cleveland Research.
Yahoo! Inc. swung between gains and losses, falling 0.3 percent to $15.92. Alibaba Group Holding Ltd. and Softbank Corp. are talking with private-equity funds about making a bid for all of the company without its blessing, people with knowledge of the matter said.
After the close of regular trading, Cisco Systems Inc. rallied 4.1 percent to $18.34 at 5:41 p.m. New York time. The world’s biggest maker of networking equipment reported profit and sales that exceeded analysts’ estimates, bolstered by a turnaround effort and demand for data centers. The shares sank 3.8 percent in regular trading today.
The S&P 500 may halt its biggest gain in 20 years, according to two indicators studied by technical analysts at UBS AG. October’s 11 percent rally, which was the biggest monthly advance since 1991, failed to leave the S&P 500 above its 200- day average, limiting the potential for a rally, the Zurich- based analysts wrote in a report yesterday.
The team also said their model for moving average convergence-divergence, or MACD, is heading into “bear mode.”
“We see the risk of more near-term weakness into next week,” Marc Muller and Michael Riesner wrote in the report.
“Given the high volatility, we would see a pullback into next week still as a trading opportunity for aggressive traders, whereas, on the upside, we wouldn’t chase the market.”
Have a wonderful evening everyone.
Be magnificent!
The spirit of democracy
is not a mechanical thing
to be adjusted by abolition of forms.
It requires change of heart.
-Mahatma Gandhi, 1869-1948
As ever,
Carolann
Feel the fear and do it anyway.
-Susan Jeffers