September 3, 2015 Newsletter

Dear Friends, 

Tangents: 

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

PHOTOS OF THE DAY

The Cotopaxi volcano spews ash and vapor, seen from Quito, Ecuador, early Thursday. Cotopaxi began showing renewed activity in April and its last major eruption was in 1877. Dolores Ochoa/AP

Lebanese anglers cast fishing poles from a rocky coastal area at the Mediterranean Sea in Beirut, Lebanon, Thursday.

Market Closes for September 3^rd, 2015

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Eric Lam

     (Bloomberg) — Canada stocks climbed, joining gains in equities around the world after the European Central Bank revamped its quantitative-easing program and pledged to use all tools to bolster growth. Canadian shares advanced 0.4 percent at 4 p.m. in Toronto, paring an earlier advance of as much as 1.2 percent as anxiety about the U.S. government’s jobs report offset stimulus optimism. Energy and financial-services stocks led gains. The Standard & Poor’s/TSX Composite Index has recovered 0.9 percent in two days, after a 2.7 percent rout on Tuesday.

     A global equity gauge of developed and developing markets rose 0.5 percent as volatile Chinese markets will remain closed for the rest of the week while the country celebrates the 70th anniversary of Japan’s defeat at the end of World War II.

     Exports from Canada surged for a second month in July, led by increases in motor vehicle shipments, aircraft-related sales and consumer goods. Energy product exports declined. The nation’s trade deficit narrowed to C$593 million, the lowest since November 2014. Data earlier in the week indicated Canada’s economy had contracted a second straight quarter, meeting the definition of a technical recession.

     ECB President Mario Draghi increased the purchase limit of a country’s debt stock, allowing officials to buy higher proportions of each euro area member’s debt. European Central Bank officials also cut forecasts for economic growth and inflation, due to the emerging-market rout.

     Gold prices tumbled 0.8 percent, the most in a week, to $1,124.50 an ounce in New York as demand for the metal as an alternative asset declined. Goldcorp Inc. retreated 3.6 percent.

     The S&P/TSX rose 51.16 points to 13,596.41 at 4 p.m. in Toronto, paring a weekly decline to 1.9 percent. The equity gauge has dropped 7.1 percent in 2015.

     Canadian Western Bank fell 2.5 percent, after reporting third-quarter earnings. Bank of Nova Scotia and Royal Bank of Canada, among the nation’s largest lenders, increased at least 0.9 percent.

     Energy producers rose 0.5 percent as a group, halting a two-day slide. TransCanada Corp. rose 1.1 percent. Oil traded above $51 in London and West Texas Intermediate crude added 1.1 percent to $46.75. Oil has fluctuated this week after capping the biggest three-day rally in 25 years on Monday.

     China, Canada’s second-largest trading partner, is shutting down its exchanges and banks until Monday to commemorate the 70th anniversary of Japan’s World War II defeat, giving investors a breather from the volatility that has engulfed Chinese markets and the rest of the world.

     First Quantum Minerals Ltd. advanced 3.4 percent for a second day of gains as copper hit a three-week high to lead an advance in base metals. Teck Resources Ltd. added 2.3 percent.

     The resource-rich S&P/TSX has been one of the worst- performing developed markets in the world this year as crude plunged. Energy and raw-materials producers have the biggest declines among 10 industries in the S&P/TSX this year.

US 

By Jeremy Herron and Oliver Renick

     (Bloomberg) — An almost 200-point rally in the Dow Jones Industrial Average faded in afternoon trading as optimism over European stimulus, which provided a boost to government bonds, gave way to anxiety ahead of Friday’s U.S. jobs report.

     U.S. equities ended the day little changed, with attention focused on Friday’s payrolls data, which is expected to provide the last major clue on the state of the economy before the Federal Reserve next meets. Stocks rallied earlier in the session, while the euro tumbled and sovereign debt rose, after Mario Draghi said the European Central Bank is expanding the scope of monetary stimulus amid signs of a slowdown in the region.

     “There’s going to be caution not only going into the jobs report but into the long weekend,” said Tim Ghriskey, who helps oversee $1.5 billion as managing director and chief investment officer at Solaris Asset Management. “Draghi threw a degree of caution on the markets, but now people are waiting for tomorrow, absolutely.”

     The nonfarm payrolls data Friday represents the last major data point before the Fed meets on Sept. 16-17 to discuss the timing of its first increase in interest rates in nearly a decade. U.S. reports Thursday showed jobless claims rose more than forecast last week, while a measure of the services industry hovered just below a 10-year high.

     Futures traders are betting the Fed will push back raising its fed funds rate. The probability of an increase in September has fallen to 28 percent, from 38 percent at the end of last week, according to data compiled by Bloomberg. The figures are based on the assumption that the benchmark will average 0.375 percent after the first hike.

     “The granddaddy of numbers is the report tomorrow and as the Fed moves, the market will move,” Terry Sandven, who helps oversee $126 billion as chief equity strategist at U.S. Bank Wealth Management in Minneapolis, said by phone. “The economics scoreboard seems strong enough to warrant something other than crisis-level rates, but there’s also justification to wait for the end of the year.”

     ECB President Draghi said the central bank will use all tools available to spur growth. He acknowledged a “somewhat weaker economic recovery” in the region, and said the emerging- market rout sparked by China’s shock devaluation of its currency last month threatened global expansion.

     The Standard & Poor’s 500 Index closed up 0.1 percent by 4 p.m. in New York, after briefly erasing a rally of more than 1 percent. The gauge surged 1.8 percent Wednesday after tumbling 3 percent the day before, when it notched up its third-worst drop of 2015. The index remains about 6 percent below the level it traded at on the day China devalued the yuan.

     The pullback in major indexes Thursday coincided with the release of research from a JPMorgan Chase & Co. strategist arguing that robotic selling by quantitative investment funds tuned to volatility and price trends — which contributed to last month’s losses in U.S. stocks — is only about halfway completed.

     Marko Kolanovic said such traders probably have to get rid of another $100 billion in stocks in the next one to three weeks. On Aug. 27, Kolanovic warned in a similar note that “price insensitive” program traders are likely to cause repeated selloffs.

     The Stoxx Europe 600 Index rallied 2.4 percent Thursday as investors welcomed the assurances of ECB support after the China-fueled volatility.

     The MSCI Emerging Markets Index advanced for the first time this week, rising 0.6 percent as benchmark gauges in Egypt, India, Hungary, Poland, South Africa and Dubai all rallied more than 1 percent.

     “One modest positive today is the fact China is offline for its Victory Day commemorations,” said Chris Weston, Melbourne- based chief markets strategist at IG Ltd. “So traders and investors will be focused on domestic data, valuations and trying to understand how to navigate these crazy markets.”

     Markets in Hong Kong were closed Thursday for the World War II anniversary celebrations, while those on the mainland remain shut for the rest of the week.

     The euro slid 0.9 percent to $1.1123, while the yen dropped 0.2 percent to 120.07 per dollar. The euro weakened versus all of its 16 major counterparts after policy makers cut economic forecasts and raised the limit on bond purchases per issue under their quantitative-easing program.

     The British pound fell for an eighth straight day against the greenback, its longest stretch of declines in almost a year, as data showed growth in the U.K. services sector unexpectedly slowed in August.

     Benchmark 10-year Treasury yields fell two basis points, or 0.02 percentage point, to 2.16 percent. German 10-year bunds climbed for a third day while yields on similar-maturity Italian debt dropped the most in more than two weeks.

     The ECB’s 25-member Governing Council kept the main refinancing rate at 0.05 percent Thursday as predicted by all 47 economists in a Bloomberg survey. The deposit rate and the marginal lending rate stayed at negative 0.2 percent, and 0.3 percent, respectively.

     The Bloomberg Commodity Index rose 0.6 percent, advancing for a second day. Copper climbed 2.5 percent in London, while nickel and aluminum gained at least 1.3 percent.

     West Texas Intermediate crude climbed 1.1 percent to $46.75 a barrel in New York, after falling as much as 1.3 percent earlier in the day. Brent oil rose 18 cents to $50.68 in London.

     Gold for immediate delivery fell 0.8 percent to $1,125.46 an ounce. The metal lost 0.6 percent on Wednesday, its first decrease in four days.

Have a wonderful evening everyone.

Be magnificent!

“The best and most beautiful things in the world cannot be seen or even touched – they must be felt with the heart.” Helen Keller

As ever,

Karen

“Education is the most powerful weapon which you can use to change the world.”

Nelson Mandela

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

Senior Portfolio Manager &

Senior Vice-President

Queensbury Securities Inc.,

St. Andrew’s Square,

Suite 340A, 730 View St.,

Victoria, B.C. V8W 3Y7