September 26th, 2011 Newsletter
Dear Friends,
Tangents:
September 26th: Birthday, T.S. Eliot, b. 1888.
We shall not cease from our exploration, and at the end of all our exploring,
we shall arrive where we started and know the place for the first time. –T.S. Eliot, 1888-1965
Autumn officially arrived on Friday….in the northern hemisphere, the autumn equinox signals the gathering of the harvest; we can enjoy Earth’s bounty together. We must accustom ourselves to the days growing shorter, prepare for winter.
Photos of the day
September 26, 2011
Wales supporters pose for a photo before their Rugby World Cup Pool D match against Namibia at Stadium Taranaki in New Plymouth, New Zealand.Nigel Marple/Reuters.
Antonio Banderas and Salma Hayek, voice actors for the animated movie Puss In Boots, gesture to a cat during a photocall to promote their film in Moscow. Ivan Burnyashev/Reuters.
Market Commentary:
Canada
By Kaitlyn Kiernan
Sept. 26 (Bloomberg) — Canadian stocks advanced the most in more than a month as banks and commodity futures gained on speculation Europe will act to stem its debt crisis.
Royal Bank of Canada, the country’s largest lender by assets, advanced 4.1 percent amid rumors that the European Central Bank would create a European version of the U.S.’s Troubled Asset Relief Program, cut interest rates and restart covered-bond purchases. Ivanhoe Mines, which is building a copper and gold mine in Mongolia with Rio Tinto Group, plunged 9.2 percent after the government of Mongolia sought to increase its stake in the project. Suncor Energy Inc. rose 4.5 percent after natural gas futures advanced as warmer-than-normal weather increased demand for the power-plant fuel.
The Standard & Poor’s/TSX Composite Index gained 244.32 points, or 2.1 percent, to 11,707.19, the most since Aug. 23.
The index swung between gains and losses before rallying after 2:30 p.m. “The market didn’t really digest that rumor until this afternoon when it finally tuned into the sense of urgency in Europe,” Barry Schwartz, a money manager at Baskin Financial Services Inc., said in a telephone interview. The firm oversees C$420 million ($410 million).
Canada’s stock benchmark slumped 6.5 percent last week, the most since March 2009, as economic data from Europe, North America and China were more indicative of a slowdown than most economists had forecast in Bloomberg surveys. Crude oil declined 9.2 percent while gold sank 9.6 percent and silver plunged 26 percent as investors sold commodities to cover losses in other assets. Energy and raw-materials companies make up 47 percent of Canadian stocks by market value, according to Bloomberg data.
Canadian banks advanced amid speculation that the European Central Bank may restart covered-bond purchases next week and cut interest rates next month. The reintroduction of 12-month loans to banks will also be discussed at the ECB’s Oct. 6 policy meeting, a euro-region central bank official said, who spoke on condition of anonymity because the information is confidential.
Royal Bank of Canada climbed 4.1 percent to C$47.98. Toronto-Dominion Bank, the country’s second-largest lender by assets, advanced 4.1 percent to C$73.85. Bank of Montreal, Canada’s fourth-largest lender by assets, rose 4.2 percent to C$58.29. The S&P/TSX Energy Index rose 2.7 percent to end a six-day drop as crude futures advanced.
Suncor Energy, the country’s biggest oil and gas producer, climbed 4.5 percent to C$27.66. Canadian Natural Resources Ltd., the country’s second-biggest energy company by market value, jumped 1.7 percent to C$31.55. Talisman Energy Inc., an oil and gas producer with operations in North America, gained 2.5 percent to C$13.69.
Gold fell, capping the biggest three-session slump since 1983, and silver closed below $30 an ounce on investor sales to cover losses in other assets. Extorre Gold, which explores in Argentina, lost 6.1 percent to C$7.30. Detour Gold Corp., the company exploring for gold in northern Ontario, decreased 2.7 percent to C$31.17.
Tahoe Resources slid for a third day, falling 8 percent to C$15.57. Michael Gray, an analyst at Macquarie Group Ltd., lowered his 12 month price estimate on the shares to C$23 from C$27.
Ivanhoe Mines erased 9.2 percent to C$15. The company is half-way through completion on a project in Mongolia that will be one of the world’s five-biggest copper mines, according to Rio Tinto Group.
The government of the Asian country is seeking to boost its stake in the mine to 50 percent from 34 percent, Dashdorj Zorigt, Mongolia’s minerals minister, told reporters at Oyu Tolgoi yesterday. Such an increase is permitted only after 30 years, according to a summary of the $10 billion project agreement from London-based Rio, which said the new proposal may alarm foreign investors.
US
By Stephen Kirkland and Rita Nazareth
Sept. 26 (Bloomberg) — Stocks rallied, rebounding from last week’s decline, and Treasuries retreated as European officials discussed plans to tame the region’s debt crisis.
Commodities reversed losses and the Dollar Index retreated.
The Standard & Poor’s 500 Index jumped 2.3 percent to 1,162.93 according to preliminary closing figures at 4 p.m. in New York. Ten-year U.S. Treasury note yields increased six basis points to 1.90 percent, rising from near a record low. The S&P GSCI Index of commodities gained 0.2 percent, erasing an earlier drop of as much as 2.6 percent, as oil snapped a three-day slump. The Dollar Index slipped 0.4 percent, while the euro weakened against 13 of 16 major peers.
The European Central Bank is likely to debate restarting covered-bond purchases and may discuss interest-rate cuts to ease funding strains, a euro-region central bank official said.
German Chancellor Angela Merkel’s comments that leaders must erect a firewall around Greece prompted speculation about a European version of the U.S.’s Troubled Asset Relief Program after finance chiefs including U.S. Treasury Secretary Timothy F. Geithner urged more efforts to prevent contagion.
“Europe will come up with something,” Jeffrey Saut, chief investment strategist at Raymond James & Associates in St. Petersburg, Florida, said in a telephone interview. His firm manages $278 billion. “I don’t think we’re going into a recession. Now is the time to be bullish, not the time to panic. The lows for the year are in.”
The S&P 500 and Dow Jones Industrial Average rose for a second day. The Dow rebounded following last week’s 6.4 percent drop, its biggest since October 2008. Financial and energy shares helped lead gain, with JPMorgan Chase & Co. and Exxon Mobil Corp. pacing the advance. Class B shares of Berkshire Hathaway Inc., billionaire investor Warren Buffett’s company, climbed on plans to buy back stock.
Boeing Co. rose as a delivery of the 787 Dreamliner ended more than three years of delays on the world’s first jetliner with a fuselage made of carbon-fiber composites.
Last week’s rout erased $1 trillion from U.S. equities, and wiped out about $3.6 trillion globally, amid concern Europe can’t contain the damage from its government-debt crisis. The S&P 500 slumped 17 percent between April 29 and Sept. 23, leaving it trading at 12.4 times earnings in the past 12 months, 4.4 percent below its average valuation at the lowest point during the last nine bear markets, according to data compiled by Bloomberg.
The S&P 500 is down more than 12 percent since the end of June, poised for its worst quarterly performance since 2008.
Stocks are having the worst quarter on record relative to U.S. Treasuries and gold, which may force investors to buy equities to rebalance their allocations, JPMorgan Chase & Co.’s Marko Kolanovic said. U.S. and emerging-market equities have returned 43 percentage points less, the most during a quarter since at least 2002, according to data compiled by Kolanovic, whose analysis is based on a model portfolio composed of stocks, bonds and gold
A gauge of U.S. homebuilder stocks rose 1.4 percent even after new-home purchases in the U.S. slid in August to a six- month low as the biggest drop in prices in two years failed to lure buyers away from even less expensive distressed properties, a Commerce Department report showed. Another report showed U.S. economic activity fell in August. The Federal Reserve Bank of Chicago’s national index, which draws on 85 economic indicators, was minus 0.43 in August versus 0.02 in July. A reading below zero indicates below-trend-growth in the national economy.
Equity-options show traders expect Europe’s debt crisis to engulf the U.S. as contracts to protect against losses in the S&P 500 erase the gap with the euro region’s benchmark gauge.
The Chicago Board Options Exchange Volatility Index rose 33 percent last week to 41.25, bringing it within seven points of the 29-month high reached Aug. 8. The VIX, as the gauge is known, eliminated more than half the discount to Europe’s VStoxx Index in the past week, cutting it to 7.3 points from 15 on Sept. 12, data compiled by Bloomberg show.
About five stocks gained for every two that fell in the Stoxx Europe 600 Index, which rebounded 1.9 percent after dropping 6.1 percent last week. BNP Paribas SA, UniCredit SpA and Deutsche Bank AG, the biggest lenders in France, Italy and Germany respectively, rose at least 4 percent.
ECB Executive Board member Lorenzo Bini Smaghi said the ECB will do whatever is necessary to supply sufficient funds to European banks.
“For liquidity, we are there” and “we are ready to do what is needed,” Bini Smaghi said in New York today. “‘‘We need to reassure the markets.’’ He also said the central bank doesn’t expect a default by Greece.
The ECB is likely to debate restarting covered-bond purchases and more measures to ease monetary conditions next week, a euro-region central bank official said. Reintroduction of 12-month loans to banks will also be discussed at the ECB’s Oct. 6 policy meeting, said the person, who spoke on condition of anonymity because the information is confidential. Interest- rate cuts are likely to be discussed, though they are not on the current agenda, the official said.
The yield on the Greek 10-year bond rose 43 basis points, driving the difference in yield with benchmark German bunds 35 basis points higher to 22.23 percentage points. Spanish 10-year yields slipped five basis points to 5.16 percent, while Italy’s were little changed and rates on similar-maturity U.K., French and German debt increased.
A benchmark gauge of U.S. corporate credit risk fell for a second day. The Markit CDX North America Investment Grade Index, which typically falls as investor confidence improves and rises as it deteriorates, declined 2.7 basis point to a mid-price of138 basis points, according to index administrator Markit Group Ltd.
The cost of insuring against default on European sovereign debt also retreated. The Markit iTraxx SovX Western Europe Index of swaps on 15 governments fell 1.7 basis points to 363.7, after earlier rising to a record.
Crude oil for November delivery gained 0.5 percent to $80.24 a barrel. Cattle and natural gas rallied more than 2.2 percent to lead gains among the 24 commodities tracked by the S&P GSCI Index.
Gold for December delivery slid 2.1 percent to $1,605.70 an ounce to extend a day-day drop to 7.8 percent, as some investors sold the metal to cover losses in other assets. Silver was little changed after plunging 26 percent over the previous two sessions.
The MSCI Emerging Markets Index declined 0.8 percent as benchmark indexes in Colombia, China and South Korea slumped at least 1.1 percent. Thailand’s SET Index tumbled 5.7 percent after the central bank said it may cut its economic growth forecasts.
Russia’s Micex Index rose 1.5 percent after Prime Minister Vladimir Putin said he would run again for president next year.
Have a wonderful evening everyone.
Be magnificent!
Selfishness in man is a beginning.
-Rabindranath Tagore, 1861-1901
As ever,
Carolann
Ultimately, the only power to which man
should aspire is that which he exercises
over himself.
-Elie Wiesel, 1928-