January 29th, 2013 Market Update

Today we are seeing some weakness in Europe and in the US futures markets primarily as due to profit taking.  Overnight in Asia however markets were higher primarily on news that the Indian government had cut the benchmark lending rate to 7.75% from 8.00%. Indices were higher by about a point across the board on further increased liquidity to the region.

Europe is off about a quarter point even with news that Italy’s borrowing costs have fallen to new three year lows at the latest auction yesterday.

In the US futures are down about a quarter point currently.

The Case Shiller Housing Index was released for November and once again year over year the index has advanced, this time by 5.52% vs. estimates of 5.55%.  While the number was slightly under estimates it virtually hit the mark and also rose for the 11th straight month.  The housing recovery in the US continues to plod along and provide positive confidence numbers.

Earnings on mandate positions were released this morning on CP, Pfizer and Metro.  CP came in adjusted at estimates or $1.28 per share.  The company exceeded revenue forecasts and the all important Operating Ration fell to 74.8 from 78.5 (lower is better in the rails).  The company also guided to a very strong second half of 2013 with record revenues and earnings.  Pfizer, came in at $0.47 per share vs. $0.44 estimated.  The company also beat on the top line.  They did however caution on the balance of 2013 with lower guidance.  Metro, the big Canadian food chain had not released earnings as of yet today but did increase its dividend this morning by 16%.  The estimates on earnings are at $1.15 per share.

Both gold and oil are higher this morning rebounding against the profit taking on the Euro and North American markets.

Moody’s yesterday downgraded all of the big Canadian banks except the Royal (which was downgraded in June) citing concerns in the housing sector and the increasing consumer debt load that Canadians continue to pile on.  Canadian consumer debt as a percentage of household income hit the record 165% level in Q3 of last year and while the Q4 numbers have not been released as of yet estimates would suggest it will still be hovering around levels that the US consumer was dealing with back in 2008 just prior to the crisis down there.  I continue to reiterate to all if you can reduce debt do it, regardless of how low interest rates are as they will not stay at these levels for ever.

In Canada, Consumer Confidence was up 5.1% in December which despite the debt concerns shows that Canadians, much like our friends to the south, are continuing to see positive economic signs.

Courtesy of:

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


Europe Moving In The Right Direction

Today we are seeing some solid upside out of Europe, despite the possibility the UK may slip back into recession for the third time.  Mario Draghi, the ECB head, reiterated again at the World Economic Forum in Davos that he sees the Euro recovery to improve into the second half of the year.  Also driving Euro markets is the positive news out of Germany indicating business morale continues to rise.  Euro markets at midday are up about three quarters of a point.

Moving across the pond, US futures are stronger on the news out of Europe and continued positive earnings results as P&G, Honeywell, Kimberly Clark and Haliburton all beat estimates.  Futures are currently higher by about a quarter point.

Gold is off more the $10.00 this morning while oil continues to decouple and is up again today by about a half a point.

In Canada, a survey of analysts is suggesting the inflation target should get back into the 2% area in December but just which is the level the BOC would like it at.  Also, based on the fact the BOC in its statement earlier in the week suggested that it would not be moving to increase interest rates earlier than previously indicated caused a big slide in the Loonie yesterday which has brought our currency back to par with the USD.

Lastly, yesterday we had the tale of two companies yesterday.  Apple plummeted more than 10% on a revenue miss (earnings beat estimates) and dragged the entire sector down with it including RIM until news came out of China that hardware maker Lenovo suggested there would be some solid M&A opportunities concerning the stock.  The news caused the stock which did fall earlier in the day to finish higher.  With that said, it would seem the likelihood of a Chinese company buying the “Canadian Crown Jewel”,  to quote Steven Harper would be highly unlikely.  Also, I might suggest that the US government would have something to say as they still use the BB and national security could be compromised.  The saga continues…………..

Courtesy of:

Kenneth A. Dick, BA, CIM, CFP


Inflation in China Increases, Europe Flat, US Deficits Up

This morning we find inflation in China has crept back up to 2.5% which caused the Asian markets to sell off overnight.  On the positive side, markets in Japan were up 1.5% as the government approved a $116B(USD) stimulus package to continue to try and ignite the stagnant economy.

In Europe markets are flat this morning with no real news out of the region other than the UK Manufacturing Output numbers for December were slightly lower down 0.3%.

In North America, the Trade numbers in both Canada and US were released for December and both countries saw deficits widening.  In earnings news, Wells Fargo’s profit was up 24% from last year, however the net interest margin on loans did fall.

Ford, after increasing their dividend yesterday announced today that they are adding more than 2200 white collar jobs in the US this year to continue to improve the auto line-up.  Engineering, manufacturing and technology are the main areas that will be added to.

US futures are mixed this morning trading virtually flat currently.

Gold is off about a third of a point and oil is trading lower by about 0.75%.

Lastly, BMO released a report this morning suggesting the Canadian real estate market is in for a soft landing as we go deeper into 2013.  As I have been suggesting of late it would seem that in 2013 we will see declines across the country in real estate values.

Courtesy of:

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