October 20, 2014 Newsletter

Dear Friends,

Tangents:

Had a wonderful time at the World Business Forum in NYC.  Many fascinating speakers again this year and lots of brilliant ideas about what the future holds. Managed to catch the amazing Matisse Cutouts exhibit at MOMA and also some of The New Yorker Festival.  One of the topics at the festival was Mapping the Brain which featured a panel of neuroscientists talking about the amazing progress being made in this task through collaboration (instigated by Bill Clinton) by many different disciplines similar to how the human genome was mapped. 

Saw some terrific theatre too – Mia Farrow & Brian Dennehy in Love Letters – incredible- and The Curious Incident of the Dog in the Night (just opened and not to be missed). Ditto for Disgraced. White Alba truffles arrived in the city – Del Posto has them on offer among many other restaurants.

Lots to catch up on today. Markets are behaving now that I’ve returned ha! ha! Actually it’s Apple – just reported earnings – excellent numbers!  Talk soon.

PHOTOS OF THE DAY

A couple looks up at the autumn colors as they walk through trees at Sheffield Park Garden near Haywards Heath in southern England. Luke MacGregor/Reuters

The rising sun paints a burnt orange sky behind a group of leafless trees in Paint Township, Pa. Todd Berkey/The Tribune-Democrat/AP

Market Closes for October 20^th, 2014    

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Eric Lam

     Oct. 20 (Bloomberg) — Canadian stocks capped the biggest three-day advance in two years as Valeant Pharmaceuticals International Inc. rallied after boosting its earnings forecast and bank shares advanced.

     Valeant climbed 3.9 percent after also reporting better- than-expected earnings. Toronto-Dominion Bank and Royal Bank of Canada, the nation’s largest lenders, advanced at least 0.4 percent. Canadian Pacific Railway Ltd. slipped 1.5 percent after ending merger talks with CSX Corp.

     The Standard & Poor’s/TSX Composite Index rose 110.09 points, or 0.8 percent, to 14,337.77 at 4 p.m. in Toronto. The benchmark equity gauge has rallied 3.4 percent in three trading days, the most since July 2012. It ended little changed last week to snap a six-week losing streak, the longest stretch of losses in more than two years.

     The index has fallen 8.4 percent since Sept. 3, trimming its advance for the year to 5.3 percent. Trading volume today was 19 percent lower than the 30-day average, according to data compiled by Bloomberg.

     Agnico Eagle Mines Ltd. rose 5.8 percent to C$34.22 and B2Gold Corp. increased 5.6 percent to C$2.44 as raw-materials stocks increased 2 percent as a group. All 10 industries in the S&P/TSX advanced.

     Gold for December delivery climbed 0.5 percent to $1,244.70 an ounce in New York as the U.S. dollar weakened, boosting demand for the metal.

     Canadian Pacific lost 1.5 percent to C$221.65. Canada’s second-largest railroad approached CSX with a proposal for a coast-to-coast tie-up to improve service and boost competition. CSX, the largest railroad in the eastern U.S., rejected the proposal and no further talks are planned.

     Pacific Rubiales Energy Corp. surged 11 percent to C$17.72. The S&P/TSX Energy Index added 0.6 percent, erasing an earlier loss. The group has advanced for three days after posting the longest losing streak since 1997. The energy gauge gained 5.1 percent in the past three days, the most since July 2012.

     Niko Resources Ltd. plunged to 33 Canadian cents a share from 73 cents, the biggest percentage drop since 1993, after the government of India revised its domestic gas price policy.

     Brent crude fell 0.9 percent in London to $85.40, a level that’s prompting speculation OPEC will respond by cutting supply. West Texas Intermediate was little-changed.

     The S&P/TSX trades at 18.4 times reported earnings, down from a peak of 21 set in June, according to data compiled by Bloomberg.

US

By James Herron and Callie Bost

     Oct. 20 (Bloomberg) — The Standard & Poor’s 500 Index rose for a third day, while European stocks retreated. Apple Inc. climbed in extended trading after posting earnings, while gold advanced and U.S. crude oil reversed losses.

     The S&P 500 added 0.9 percent to 1,904.01 by 4 p.m. in New York, while Apple rose 1.1 percent after markets closed. The Dow Jones Industrial Average ended the day up 0.1 percent as a slide in International Business Machines Corp. limited gains. The Stoxx Europe 600 Index lost 0.5 percent. Ten-year U.S. Treasury yields were little changed at 2.19 percent after earlier slipping to as low as 2.16 percent. Gold climbed 0.5 percent. Oil was at $82.71 after earlier sliding 1.5 percent.

     About $4.3 trillion has been wiped from the value of global equities over the past four weeks on concern global economic growth is slowing. The European Central Bank started purchases of covered bonds today in an effort to stimulate the region’s economy, according to three people familiar with the matter. Chinese expansion will slow to about 4 percent annually after 2020 following decades of rapid growth, the Conference Board said before gross domestic product data due tomorrow.

     “In the U.S., we’re coming into the real heart of earnings season,” Bill Stone, chief investment strategist at PNC Wealth Management, said in a phone interview. He helps oversee $132 billion. “The bigger picture could be soothed with a decent earnings season, and so far, so good, a few individual names aside like IBM. The bigger picture is that I’m hopeful we’ll see the fundamentals in the U.S. are still attractive.”                        

     Shares of Apple climbed to $100.75 by 4:56 p.m. in New York, after the company projected revenue for the holiday quarter that exceeded the average analyst estimate. The Cupertino, California-based company’s fiscal fourth quarter results also beat projections, with net income rising to $1.42 a share, compared with the $1.30 a share predicted by analysts.

     Apple said new larger-screen iPhones will help boost sales by at least 10 percent during the October-through December period, according to a statement.

     Texas Instruments Inc., a semiconductor maker, rose 2.5 percent in after-hours trading after forecasting fourth-quarter profit and revenue that may exceed analysts’ estimates.

     Profit for S&P 500 companies probably rose 5.9 percent in the third quarter — a forecast that’s been revised upward from an increase of 4.8 percent as of Oct. 10 — and sales increased 4 percent, according to analysts’ projections compiled by Bloomberg.

     “The state of corporate earnings in the U.S. is on solid footing,” Adam Parker, chief U.S. equity strategist at Morgan Stanley in New York, wrote in a report today.

     IBM shares fell 7.1 percent after the company ditched its five-year profit goal amid a struggle to transform quickly enough to cope with an industrywide shift to the cloud-computing era. IBM, which accounts for 7.8 percent of the price-weighted Dow, shaved 84 points off the index to trim its advance to 19 points even as 24 of its 30 stocks rose.

     Consumer stocks including Hasbro Inc. and Lennar Corp. rose at least 3.5 percent to pace gains in that group. CSX Corp. dropped 1 percent after merger talks with Canadian Pacific Railway Ltd. ended.

     The S&P 500 rallied following a four-week decline, its longest stretch of losses since August 2011. The gauge is down 5.3 percent from a record high reached in September.

     European shares fell after SAP SE cut its profit forecast and Royal Philips NV earnings missed analysts’ estimates. Fourteen of the 19 industry groups in the Stoxx 600 dropped. The gauge has fallen for four weeks, the longest slump since June 2013.                        

     SAP retreated 5.8 percent after cutting its full-year earnings while Royal Philips slid 3.7 percent after third- quarter sales and profit missed analysts’ estimates. Nutreco NV jumped 39 percent after SHV Holdings NV agreed to buy the fish- feed maker.

     Tesco Plc added 2.7 percent after the London-based Times said that private equity firms may be interested in acquiring its Asian business. Adidas AG rose 3.6 percent after the Wall Street Journal said a group of investors is planning to bid about 1.7 billion euros ($2.2 billion) for its Reebok unit.

     The MSCI All-Country World Index climbed 0.7 percent for a second day of gains, while MSCI’s Asia Pacific index gained 2.2 percent, rebounding after a six weekly declines to advance the most in more than two years. The MSCI Emerging Markets Index climbed 0.5 percent. Foreign investors bought 28 billion won more shares than they sold on South Korea’s Kospi Index today, the first net inflows since Sept. 30.

     The People’s Bank of China is providing funds to joint- stock banks to help them prepare for year-end liquidity needs, a government official familiar with the matter said Oct. 17, asking not to be identified because there hasn’t been an official announcement. The liquidity injection came before the start of a Communist Party meeting today and tomorrow’s GDP data.

     Government bonds from Italy and Spain fell, extending a selloff from last week. Italy’s 10-year rate climbed 10 basis points, or 0.10 percentage point, to 2.60 percent after increasing 17 basis points last week. Spain’s debt rose nine basis points to 2.26 percent.

     The ECB bought short-dated notes from Societe Generale SA and BNP Paribas SA, according to two people familiar with the matter, who asked not to be identified because the information is private. An ECB spokesman confirmed that purchases started today. Officials at SocGen and BNP weren’t immediately available to comment on the transactions.                           

     “From today we will begin to know how aggressive the ECB will be in bidding for bonds,” said Agustin Martin, head of European credit research at Banco Bilbao Vizcaya Argentaria SA in London.

     Gold climbed for the first time in three days, with futures for December delivery rising 0.5 percent to $1,244.70 an ounce. U.K. natural gas dropped for a second day. Ukraine will have natural gas for the winter after agreeing to pay $385 per thousand cubic meters of fuel from Russia until March 31, Ukraine President Petro Poroshenko said. Russia pipes about 15 percent of the European Union’s natural gas needs through Ukraine.

     The ruble weakened 0.8 percent against to 40.9616 per dollar, after capping its sixth weekly decline Oct. 17. Russia has spent more than $13 billion to stem the currency’s slump this month amid a bear market in oil, the nation’s main export earner, and as sanctions over its involvement in the Ukraine conflict worsened a dollar shortage.

     Russia’s foreign minister said his country will refuse to accept conditions to end the sanctions after talks in Italy failed to produce a breakthrough to bolster a truce in the eastern Ukrainian conflict. Russia, the world’s biggest energy exporter, has been told to comply with various criteria before the U.S. and its allies revoke the limitations, Sergei Lavrov said in the transcript of an NTV interview posted on the ministry’s website yesterday.

     Russia’s credit rating was cut last week by one step to Baa2, the second-lowest investment grade, a with a negative outlook by Moody’s Investors Service, which cited sluggish growth prospects and the erosion of reserves.

     West Texas Intermediate crude ended the U.S. session down 0.1 percent after sinking 3.6 percent last week. Brent crude fell 1 percent to $85.33 per barrel in London. Both oil types are trading in bear markets amid concern global crude supplies are exceeding demand.

Have a wonderful evening everyone.

Be magnificent!

I have found that life persists in the midst of destruction

and therefore there must be a higher law than that of destruction.

Only under that law would a well-ordered society

be intelligible and live worth living.

And if that is the law of life,

we have to work it out in daily life.

Mahatma Gandhi

As ever,
 

Carolann

In nature, there are neither rewards nor punishments – there are consequences.

                                                                 -Robert G. Ingersoll, 1833-1899

Carolann Steinhoff, B.Sc., CFP®, CIM, CIWM

Senior Vice-President &

Senior Investment Advisor

Queensbury Securities Inc.,

St. Andrew’s Square,

Suite 340A, 730 View St.,

Victoria, B.C. V8W 3Y7