October 29, 2014 Newsletter

Dear Friends,

Tangents:

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

PHOTOS OF THE DAY

Dew drops hang on a spider web in Vertou near Nantes, France. Stephane Mahe/Reuters

An opera singer, wearing a dress covered in poppies, sings during a ceremony at the King Albert I Monument in Nieuwpoort, Belgium. The ceremony commemorates the WWI 100th anniversary of the First Battle of Ypres. Geert Vanden Wijngaert/AP

Market Closes for October 29^th, 2014    

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Eric Lam

     Oct. 29 (Bloomberg) — Canadian stocks fell, after climbing to a three-week high, as financial shares and gold producers slipped after the U.S. Federal Reserve ended its asset-purchase program.

     Toronto-Dominion Bank and Royal Bank of Canada, the nation’s largest lenders, paced losses in financial shares. Barrick Gold Corp. retreated 4.9 percent to its lowest level since 1992 as gold prices fell. Teck Resources Ltd. gained 1.9 percent after boosting its forecast for zinc-concentrate production. Horizon North Logistics Inc. plunged 29 percent after earnings fell short of analysts’ expectations.

     The Standard & Poor’s/TSX Composite Index fell 96.68 points, or 0.7 percent, to 14,527.57 at 4 p.m. in Toronto, trimming its advance since a low on Oct. 15 to 4.7 percent.

     Eight of the 10 industries in the benchmark Canadian equity gauge declined today.

     Barrick Gold lost 4.9 percent to C$14.36, closing at its lowest level since 1992, as the gold producer prepares to report earnings after the market close. Gold futures fell, extending losses, after the central bank decision cut demand for the metal.

     The Fed maintained its pledge to keep interest rates low for a “considerable time” as it ended a quantitative easing program that added $1.66 trillion to its balance sheet. Policy makers said while inflation in the near term will probably be held down by lower energy prices, it repeated language from September that the likelihood of inflation running persistently below 2 percent has “diminished somewhat.”

     Bankers Petroleum Ltd. climbed 1.6 percent to C$4.34 and Athabasca Oil Corp. increased 0.5 percent to C$3.87. Brent crude rose to a two-week high after OPEC’s Secretary-General said the recent plunge in prices doesn’t reflect the balance between supply and demand.

US

By Oliver Renick and Jeremy Herron

     Oct. 29 (Bloomberg) — U.S. stocks pared declines, Treasuries retreated and the dollar rallied after the Federal Reserve confirmed it will end its asset-purchase program amid signs of a strengthening economy.

     The Standard & Poor’s 500 Index slid 0.1 percent at 4 p.m. in New York. The index fell as much as 0.8 percent after the Fed’s policy statement before trimming the slide. The 10-year Treasury note yield rose three basis points to 2.32 percent. The Bloomberg Dollar Spot Index jumped 0.6 percent, erasing earlier losses. Gold prices headed for the biggest drop in three weeks. The New Zealand dollar retreated against its major peers after the central bank held interest rates steady.

     The Fed retained its commitment to keep interest rates low for a “considerable time” as it ended a two-day policy meeting. Officials said labor market conditions “improved somewhat further,” and that a range indicators suggests that “underutilization of labor resources is gradually diminishing,” modifying earlier language that referred to “significant underutilization.”

     “The Fed’s decision is a surefire indication that the U.S. economy is continuing to move along at a robust pace,” Chad Morganlander, a money manager at St. Louis-based Stifel Nicolaus & Co., which oversees about $160 billion, said in a telephone interview. “The liquidity program has been a major stimulant to the market, and investors will now have to readjust to the new environment.”

     Policy makers said that while inflation in the near term will probably be held down by lower energy prices, it repeated language from its September statement that “the likelihood of inflation running persistently below 2 percent has diminished somewhat.”

     Concerns that Europe will slip into a recession just as Fed bond buying ends sent the S&P 500 down 7.4 percent from an all- time high of 2,011.36 in mid-September through Oct. 15.

     The gauge then rallied 6.6 percent through yesterday after latest rally began after Fed Bank of St. Louis President James Bullard said policy makers should consider delaying the end of quantitative easing.

     “Anybody who was holding out hope that QE would continue now has to throw in the towel,” Joe “JJ” Kinahan, chief strategist at TD Ameritrade Holding Corp., which oversees $666 billion in client assets, said via phone. “Just like a kid moving out for the first time, until they actually have to pay those first bills, it hasn’t really registered.”

     The Bloomberg Dollar Spot Index, which tracks the greenback against 10 major currencies, reversed after earlier dropping 0.2 percent.

     The index was headed for its first monthly decline since June on concern slowing global growth and rising risks of disinflation will spill over into the world’s biggest economy, prompting traders to push back on their bets on the timing of the Fed’s rate increase. Policy makers have kept their key interest rate at zero to 0.25 percent since December 2008.

     Gold prices fell as the end of bond purchases cut demand for the metal as hedge against inflation. Bullion for immediate delivery dropped 1 percent to $1,215.69 an ounce in New York, heading for the biggest drop since Oct. 3. Prices touched $1,215.47, the lowest since Oct. 8.

     West Texas Intermediate gained for a second day after an Energy Information Administration report showed growth in U.S. inventories slowed. Brent climbed.

     Stockpiles rose 2.06 million barrels in the seven days ended Oct. 24, following a combined increase of 21 million in the previous three weeks, the EIA said.

     Brent touched a two-week high after OPEC’s Secretary- General said the recent plunge in prices doesn’t reflect the balance between supply and demand.

     Investors have also been watching U.S. corporate results. About 80 percent of S&P 500 companies that have posted quarterly earnings this season have topped analysts’ estimates for profit, while 60 percent beat sales projections, data compiled by Bloomberg show.

     Seven of the 10 of the main S&P 500 groups slid today, with energy and bank shares advancing at least 0.1 percent. Commodity producers sank 1.3 percent to pace losses.

     Facebook Inc. declined 6.1 percent, the most since March, after predicting the slowest revenue growth since the first quarter of 2013. Gilead Sciences Inc. slid 2.4 percent after third-quarter profit missed estimates. U.S. Steel Corp. rallied 5.1 percent after reporting better-than-expected quarterly results.

     “The economic outlook and earnings outlook still looks largely intact going forward and we’re seeing earnings come through not wildly exceeding expectations but exactly where we need them to be to drive equity markets,” Darrell Cronk, deputy chief investment officer at Wells Fargo Private Bank in New York, said by phone.

     The Stoxx Europe 600 Index closed 0.3 percent higher rising for a second day to the highest level since Oct. 7.

     Total SA rose 2.6 percent after posting third-quarter net income that beat analysts’ estimates. Deutsche Bank AG declined 1.9 percent after Germany’s biggest lender swung to a loss in the third quarter. Air France-KLM Group slid 0.5 percent after quarterly profit fell. Sanofi dropped 4.4 percent after firing its chief executive officer.

     The MSCI Emerging Markets Index pared an earlier gain to 0.9 percent.

     The Shanghai Composite Index rose for a second day, climbing 1.5 percent. The Hang Seng China Enterprises Index of mainland companies listed in Hong Kong jumped 1.7 percent, recover losses since protesters and police clashed outside the government’s headquarters on Sept. 26.

     The ruble weakened 1 percent to 42.8816 per dollar and bringing this month’s drop to 7.7 percent, the most among 24 developing nations.

     The slide in the face of $24 billion of interventions is stoking speculation the Bank of Russia will accelerate its switch to a free float. The central bank, which plans to stop managing the ruble in 2015, is scheduled to meet Oct. 31.

Have a wonderful evening everyone.

Be magnificent!

“Strength does not come from physical capacity. It comes from an indomitable will.” Mahatma Gandhi

Karen

“Life is really simple, but we insist on making it complicated.” Confucius

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