October 31st 2013 Business & Market Updates

Yup its Halloween, which of course also means its month end and it looks like the pundits got both September and October wrong as markets world wide for the most part rallied.

Looking at the overnight numbers, Asia was off about a point following the close in the US yesterday.

Europe on the other hand is rallying up about half a point at midday as investors continue to look for value in the region.

US futures are off slightly this morning despite the fact the Initial Weekly Jobless Claims were virtually at estimates coming in at 340000 vs. 338000.  Also, as mentioned yesterday the FOMC did release the minutes of their two day meeting (attached) and stated that there would be no change to asset purchases or interest rates until both inflation and employment further improved.  The comments indicated that economic improvement is continuing but still at a sluggish pace.  Muddle through comes to mind again.  This is the new normal for the foreseeable future in my view.  As always, I have highlighted in RED the points in the release that I think were interesting.  Bottom line accommodative monetary policy continues.

I have also added the most recent view from Canaccord US Strategist, Tony Dwyer who is suggesting that while the markets are somewhat overbought with the run up in the last couple of months and a correction would not be a surprise, the trend continues to be higher and he continues to affirm his 1955 target on the S&P with a modest 15 multiple.  He is suggesting a modest 4 to 7% correction only and that those that are investors to stay where they are as the rally on the other side of the correction, if indeed it does occur, will be strong.

Canada released GDP numbers for August this morning beating estimates year over year at 2.0% vs. 1.7%.  Canadian futures are off about a half a point however on weak gold prices this morning.

Gold is down 23 bucks to 1325, oil is off 0.33 to 96.44 mostly on supply increases and the loonie has rebounded a third of a cent this morning to 95.77.  The bond market is flat with US and Canadian 10 year yields at 2.50% and 2.39% respectively.

Mandate earnings released after the close last night and this morning for the most part were meets or beats.  AltaGas beat on earnings and beat revenues by a large margin, American Railcar missed by a penny but also saw huge revenue increases, Visa met estimates with revenues were slightly below mostly due to declining demand by consumers in Q3, Williams beat by a large amount on both earnings and revenues and lastly, Valeant Pharma beat on both earnings and revenues.  In all a pretty solid group.

Kenneth A. Dick, BA, CIM, CFP, FCSI

Branch Manager & Portfolio Manager | Independent Wealth Management

Canaccord Genuity Wealth Management




Retail Sales Number and Jobless Claims Down

This morning in Europe, the ECB has been appointed the the Unions top banking supervisor, which I have been suggesting for many months that this is a requirement to provide some degree of financial stability to the region.  With this supervisory role comes all the bells and whistles that we have in North America in regard to guarantees, deposit insurance etc.  Of course this will not happen overnight and there will be many more heated discussions in the weeks months and years to come however the progress continues to show that the Euro Union moving in the right direction to provide a stable economic environment for the region.  While this news is positive, the markets in the region are off about a quarter point on the continuing fiscal cliff stalemate in the US.

Moving to North America, the FOMC released their recent minutes from their monthly meeting late yesterday afternoon and while the monetary stimulus was enhanced with an additional $45bn per month of US treasury purchases on top of the current $40bn per month or mortgage back purchases, Mr. Bernanke made it clear that monetary stimulus alone will not rescue the US economy and the current fiscal discussions going on in Washington need to be successful to avert a recession next year.  Of course that commentary caused markets to reverse later in the day yesterday and the follow through this morning, while muted has caused futures to trade flat currently.  I have attached the FOMC Minutes (highlights are my emphasis) and a commentary from Credit Suisse FYI.

Also in the US this morning we got the Retail Sales numbers for November which were a little below estimates.  We also got the Weekly Jobless Claims which were very positive for the 3 week in a row as 29000 less claimants’ were recorded with the number coming down to 343000 vs. estimates of 369000 and last week at 372000.

Gold however has not fared as well as the recent rally coupled with Bernanke’s comments on employment caused the sellers to come out late yesterday and again this morning as the commodity is down more than 1.5% on big volume once again trading down through the $1700.00 level.  Oil is also lower on supply numbers down about a half a point.

In Canada we got the New House Price index for October which showed continued slowing growth with a 2.4% year over year increase however for the month prices were flat.

Gold miner Agnico Eagle (a stock currently in my mandates) has announced they will be increasing the dividend by 10% starting in the next quarter.  More evidence that the miners are starting to get the message that income streams are what keep investors interested especially in the higher Beta securities as the volatility in the sector continues.

Courtesy of:

Kenneth A. Dick, BA, CIM, CFP, FCSI
Portfolio Manager & Branch Manager
Independent Wealth Management