September 7th, 2011 Newsletter
Dear Friends,
Tangents:
It’s that time of year….this appeared in the Globe & Mail on Monday:
Morals back in class
“He who steals an egg, steals an ox – as all French children knew until 1969, when teachers were told to remove lessons on proverbs from the national curriculum,” says The Times of London. “Now primary schools are being told to bring them back as part of a drive to teach moral values to a generation often depicted as lost. When France’s 6.6 million primary-school children return [this] week after the holidays, they will be invited to learn and discuss a proverb or saying written on the whiteboard in the class. ‘I’m bringing morals back to school,’ said Luc Chatel, the education minister who [on Aug. 31] instructed primary schools to organize lessons on ‘the precepts of the honest man’ as often as possible; preferably every morning. ‘I want children to learn about good and evil, truth and falsehood, dignity, courage and honesty.’ ’’
Manners maketh man.
-motto of William of Wykeham (1324-1404), bishop of Winchester and founder of Winchester College; English proverb, mid 14th century.
Photos of the day
September 7, 2011
A test of the Tribute in Light rises above lower Manhattan in New York. Four World Trade Center (2nd l.) is under construction. The memorial, sponsored by the Municipal Art Society, will light the sky on the evening of Sept. 11, 2011, in honor of those who died ten years ago in the terror attacks on the United States. Mark Lennihan/AP
Fans of the Lokomotiv ice hockey team lay flowers and light candles at the Lokomotiv Arena to pay tribute to the players killed in a plane crash, in the city of Yaroslavl, on the Volga River northeast of Moscow, Russia. The Yak-42 jet carrying the Lokomotiv ice hockey team crashed while taking off near Yaroslavl. Misha Japaridze/AP
Market Commentary:
Canada
By Matt Walcoff
Sept. 7 (Bloomberg) — Canadian stocks rose for the first time in four days, led by energy and financial companies, as a German court rejected challenges to Europe’s debt bailout and investors speculated a new stimulus plan will spur U.S. growth.
Suncor Energy Inc., Canada’s largest oil and gas producer, gained 3.7 percent as crude futures advanced the most in four weeks. Toronto-Dominion Bank, the country’s second-biggest lender by assets, increased 1.4 percent after the Bank of Canada said there is less need to withdraw stimulus. Westport Innovations Inc., which develops natural-gas engine technology, soared 18 percent after reaching a marketing agreement with Royal Dutch Shell Plc.
The Standard & Poor’s/TSX Composite Index climbed 202.02 points, or 1.6 percent, to 12,720.56.
“When there’s a bit of better-than-expected news, there’s a bit of a knee-jerk reaction,” Ian Nakamoto, director of research at money manager MacDougall MacDougall & MacTier Inc. in Toronto, said in a telephone interview. The firm oversees $4 billion.
The S&P/TSX dropped 2 percent in the previous three days, including a 0.8 percent drop Sept. 2 after the U.S. said employment didn’t increase in August. Concern over the European debt crisis intensified after German Chancellor Angela Merkel’s party lost a state election. Canada’s stock benchmark has declined 5.4 percent this year.
Germany’s top court today rejected challenges to the country’s participation in bailouts for indebted euro-region governments. Industrial production in the country increased eight times more last month than the median economist forecast in a Bloomberg survey, the Bundesbank said today.
U.S. President Barack Obama is set to lay out plans to Congress tomorrow to inject more than $300 billion into the economy next year, mostly through tax cuts, infrastructure spending and aid to state and local governments.
Oil futures rebounded from a one-week low in New York. Suncor rose 3.7 percent to C$30.36. Canadian Natural Resources Ltd., the country’s second-largest energy company by market value, gained 3.2 percent to C$35.66. Athabasca Oil Sands Corp., PetroChina Co.’s partner in Canadian oil-sands development, advanced 5.8 percent to C$13.65. TransGlobe Energy Corp., which operates in Egypt and Yemen, jumped 9.8 percent to C$9.91.
Every S&P/TSX bank and the three biggest insurers in the index climbed after the Bank of Canada kept its benchmark interest rate at 1 percent.
“In light of slowing global economic momentum and heightened financial uncertainty, the need to withdraw monetary policy stimulus has diminished,” the bank said in a statement.
TD increased 1.4 percent to C$77.65. Royal Bank of Canada, the country’s largest lender by assets, rose 1.4 percent to C$48.90. Manulife Financial Corp., North America’s fourth- biggest insurer, gained 2.9 percent to C$13.
All 15 companies in an index of S&P/TSX base-metals and coal producer advanced as copper rallied. The metal climbed as Freeport-McMoRan Copper & Gold Inc. faced labor disputes in Peru and Indonesia.
First Quantum Minerals Ltd., the country’s second-biggest publicly traded copper producer, rose 5.5 percent to C$23.25. Ivanhoe Mines Ltd., which is building a copper and gold mine in Mongolia with Rio Tinto Group, gained 8.5 percent to C$21.77.
Major Drilling Group International Inc., a contract driller, surged 9.6 percent to C$12.65 after reporting first- quarter earnings that beat the average analyst estimate in a Bloomberg survey by 12 percent, excluding certain items. The jump was the biggest since October 2009.
Westport rose 18 percent to a nine-year high of C$26.85. Shell and Westport will jointly offer fuel supply, customer support and maintenance to owners of North American natural-gas vehicles, Shell said in a statement.
Magna International Inc., Canada’s largest auto-parts maker, rallied 5.2 percent to C$36.98 after Ravi Shanker, an analyst at Morgan Stanley, raised his rating on the shares to “overweight” from “underweight.” Shanker cited share-price declines since Aug. 4 and the company’s “best-in-class” balance sheet. Magna had $1.74 billion of cash and equivalents as of June 30.
Bombardier Inc., the maker of trains and airplanes, rebounded 5.5 percent to C$4.70 after closing at a one-year low yesterday. Boeing Co. raised its 20-year commercial-aircraft- demand forecast for China by 15 percent.
Transcontinental Inc., Canada’s largest printer, plunged 9.4 percent, the most since March 2009, to C$11.86. The company reported third-quarter earnings that trailed the average analyst estimate in a Bloomberg survey by 9.9 percent, excluding certain items.
Evertz Technologies Ltd., which makes electronics for broadcasters, soared 12 percent, the most since February 2009, to C$13 after its first-quarter profit surpassed the average analyst estimate in a Bloomberg survey by 19 percent, excluding certain items.
Imax Corp., the maker of giant-screen movie projection systems, surged 9.5 percent to C$18.07. The shares have rallied 30 percent since closing at the lowest relative to earnings since 2000 on Aug. 22.
US
By Stephen Kirkland and Rita Nazareth
Sept. 7 (Bloomberg) — Stocks rose, rebounding from a four- day global slump that drove valuations to the lowest level since 2009, amid speculation President Barack Obama’s plan for more than $300 billion in economic stimulus will boost growth.
Treasuries, German bunds and gold fell as the dollar snapped a six-day rally.
The MSCI All-Country World Index surged 2.8 percent and the Standard & Poor’s 500 Index jumped 2.9 percent at 4 p.m. in New York. The 10-year Treasury yield added six basis points to 2.04 percent after reaching a record low yesterday, and Germany’s yield climbed six basis points to 1.91 percent. The dollar weakened against the euro after legal challenges to Germany’s role in the region’s rescue funds were rejected by the nation’s top court. Gold dropped the most in two weeks and copper advanced above $9,000 a metric ton in London.
Equities rallied after a selloff erased $2.5 trillion from global markets this month and left the MSCI World trading at 12 times reported earnings. Obama plans to propose tax cuts, infrastructure spending and direct aid to state and local governments. Federal Reserve Bank of Chicago President Charles Evans called for more stimulus to reduce a 9.1 percent jobless rate, including a commitment to keep interest rates low until unemployment falls to around 7.5 percent.
“The stock market likely marked its bottom,” David Sowerby, a Bloomfield Hills, Michigan-based portfolio manager at Loomis Sayles & Co., which oversees $150 billion, said in a telephone interview. “To the extent that President Obama’s message is permanent versus temporary, the market and the economy will respond more favorably.”
The S&P 500 rallied the most in two weeks, rebounding from a three-day, 4.4 percent slump. Yahoo! Inc. surged 5.4 percent after ousting Chief Executive Officer Carol Bartz and announcing a strategic review of its business. Bank of America Corp. climbed 7 percent after naming Tom Montag and David Darnell as co-chief operating officers and ousting wealth-management head Sallie Krawcheck and consumer-banking leader Joseph Price from its management ranks.
JPMorgan Chase & Co., American Express Co. and Alcoa Inc. also rallied at least 4 percent to help lead gains in all 30 stocks in the Dow Jones Industrial Average. All 10 of the main industries in the S&P 500 advanced, led by financial and energy companies.
Obama will address Congress tomorrow amid unemployment that remains at 9.1 percent more than two years after the recession’s official end. Evans’s speech places the Chicago Fed president among the “few” members of the Federal Open Market Committee who, according to minutes of the group’s gathering in August, favor a “more substantial move” beyond the central bank’s pledge to hold rates at record lows for about two years.
“Given how truly badly we are doing in meeting our employment mandate, I argue that the Fed should seriously consider actions that would add very significant amounts of policy accommodation,” Evans, 53, said in the text of a speech today in London. “Such further policy accommodation does increase the risk that inflation could rise temporarily above our long-term goal of 2 percent.”
The Fed said the economy grew at a slower pace in some regions of the country as shoppers limited their spending and factories curbed production. The economy continued to expand at a “modest pace,” though some districts noted “mixed or weakening activity,” the Fed said in its Beige Book survey released today. Fed Chairman Ben S. Bernanke will talk about the U.S. economic outlook tomorrow in Minneapolis.
Treasury 10-year notes fell for the first time in a week. Thirty-year bonds also retreated, sending their yields up nine basis points to 3.36 percent.
The Stoxx Europe 600 Index advanced 3.1 percent, rebounding from the lowest level in more than two years. The gauge’s valuation had dropped to about 10.4 times reported earnings, near the cheapest level since December 2008, according to data compiled by Bloomberg. Cie. Financiere Richemont SA jumped 7.3 percent as the second-biggest luxury-goods company reported sales that beat estimates. Germany’s DAX Index jumped 4.1 percent, the most since May 10.
The Dollar Index, which tracks the U.S. currency against those of six trading partners, fell 0.7 percent, dropping for the first time in seven days. The Swedish krona strengthened 0.8 percent against the euro after the central bank signaled it may raise interest rates one more time this year.
The Australian dollar appreciated against 15 of 16 major peers monitored by Bloomberg, climbing 1.6 percent versus the U.S. dollar, after a report showed the economy grew last quarter at the fastest pace in four years. The Swiss franc weakened to 1.21015 per euro, a day after the central bank set a ceiling of 1.20 versus the 17-nation currency and said it was prepared to use “unlimited” quantities of cash to defend it. The franc declined 8.1 percent versus the euro yesterday, the biggest drop since the shared currency’s introduction.
The yield on the 10-year Spanish bond fell 19 basis points to 4.98 percent, declining for the second straight day, with the similar-maturity Italian security’s yield sliding 24 basis points. Greek bonds fell, sending 10-year yields up 27 basis points to 20.08 percent.
Germany’s Federal Constitutional Court in Karlsruhe threw out suits targeting the country’s share of the 110 billion euros ($154 billion) in loans for Greece from euro-region governments and the International Monetary Fund as well as a separate 750 billion-euro rescue fund approved last year to halt the spread of the Greek debt crisis. The ruling clears the way for Chancellor Angela Merkel’s coalition to participate in the European rescue plans.
The Italian Senate approved Prime Minister Silvio Berlusconi’s revised austerity plan, setting up a final vote in the Chamber of Deputies as Italy seeks to stem surging bond yields. The austerity package, the second in a month, was announced on Aug. 5 to convince the European Central Bank to buy Italian bonds after the 10-year yield surged to a euro-era record of 6.4 percent.
The cost of insuring European government bonds fell from records. The Markit iTraxx SovX Western Europe Index of credit- default swaps linked to 15 nations sank 10 basis points to a mid-price of 317.
The Markit CDX North America Investment Grade Index, which investors use to hedge against losses on corporate debt or to speculate on creditworthiness, fell 5.2 basis points to a mid- price of 121 basis points, according to index administrator Markit Group Ltd.
Copper jumped 1.9 percent, the most in a week, to close at $4.132 a pound on the Comex in New York, and climbed to $9,092 a ton on the London Metal Exchange as threats of mine strikes heightened concern that a global shortfall of the metal will worsen. Nickel surged 5.3 percent, the most since May 2010.
Freeport-McMoRan Copper & Gold Inc.’s Peruvian workers will begin a two-day stoppage today over pay increases, a union official said. Another strike may start at the company’s Grasberg mine in Indonesia next week, unless workers are offered higher wages.
Gold futures dropped for a second day, falling 3 percent to $1,817.60 an ounce. Oil rallied the most in four weeks, surging 3.9 percent to $89.34 a barrel in New York as storms threatened to reduce production from the Gulf of Mexico, where shut-ins from last week’s hurricane probably curbed stockpiles.
The MSCI Emerging Markets Index rose 2.3 percent, rebounding from a three-day slide. Benchmark gauges in South Africa, Russia and Poland jumped more than 3 percent as prices for oil and industrial metals increased.
The Shanghai Composite Index added 1.8 percent, the most in two weeks, after the China Securities Journal said the central bank may ease monetary policy. China’s central bank may add cash to the market by buying bills from banks in open market operations or cutting the required reserve ratio for banks, the China Securities Journal, which is operated by the official Xinhua News Agency, said in a commentary. Korea’s Kospi Index rallied 3.8 percent.
Have a wonderful evening everyone.
Be magnificent!
An individual is a separate entity without connection.
A person is an individual connected.
-Swami Prajnanpad, 1891-1974
As ever,
Carolann
Sooner or later, those who win are those
who think they can.
-Richard Bach, 1936-