October 8th, 2013 Business and Market Update

Asia was higher overnight by about a half a point on no real news other than bargain hunters coming back into the market after a few days of selling.

Europe is off about a quarter point this morning on news of slower German exports in August.

In North America, the focus is still on the budget and debt ceiling impasse in the US Congress.  There was some movement yesterday suggested by the White House that there could be some short-term increase in the debt ceiling to avoid default.  At the same time some of the far right Reps are suggesting that an increase in the debt ceiling is not required as long as interest payments and other immediate costs are met.  Of course the downside would be all of the services that need funding and where they would rank as to priority.  The fact that there are more than 4 million transactions a day that are performed by the government trying to prioritize them would be virtually impossible.  Also, other nations and economic associations including the IMF have chimed in today suggesting a default on US debt would throw the world into deep recession.  At some point the kids in Washington will get it.

US futures are trading higher by a about a quarter point as markets continue to look at this fight as political only.

Canada is higher in the pre-market by about a quarter point on some positive housing start numbers for August.

Gold is off by 3.00 to 1322, oil is up three quarters of a point to 103.77 and the loonie is flat at 96.90.  The ten year bonds in both the US and Canada are relatively flat this morning at 2.64% and 2.58% respectively.

Lastly, the Canadian government determined that Manitoba Telecom cannot sell its interest in Allstream while in the same breath would allow foreign carriers into the country to compete.  Can you say confusion!  Also, US corporate raider Carl Icahn has disclosed that he has amassed a 6% ownership position in Talisman Energy which has the takeover rumors once again making headlines.  The company has been a lacklustre performer for the past several years but does have some prime energy interests in Canada and a market cap of more than $13bn.  We shall see where this goes.

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

Branch Manager & Portfolio Manager | Independent Wealth Management

Canaccord Genuity Wealth Management

www.glwm.ca

October 7th, 2013 Market Update

With no movement over the weekend on the US budget, markets are continuing to retreat and have again overnight in Asia as market there were off about 1.25%.  Europe at midday is showing declines of 0.75% and US futures are lower by about three quarters of a point.  Canadian futures are about a half a point lower.

It would seem that both side continue to dig in with the right side of the aisle playing a game of chicken with the left.  As the debt ceiling deadline gets closer, we are now getting comments from some of the biggest holders of US debt, namely China at $1.2Trillion and the Euro Union at a little under that number.  The politics of the day are no longer an issue as far as the stake holders are concerned.  The term, get it done seems to be the message that is being broadcast across globe to the Americans.

Gold is trading higher this morning by about 8.00 to 1318, oil is off a buck at 102.87 and the loonie is off a third of a cent to 96.84.  Debt markets are rallying on the budget impasse with the US and Canadian 10 year bonds are yielding 2.61% and 2.55% respectively.

Our US strategist Tony Dwyer makes some interesting points on the current situation which I have included below:

  • The government shutdown and heated debt limit debate should push any possible “tapering” into the first quarter until the Fed is able to forecast the economic impact.
  • The trend of the economic data remains positive with Consumer Confidence, Housing, Employment, and debt service ratios at/near the best levels of cycle. The steepness of the yield curve and historically narrow corporate spreads suggest years of growth ahead.
  • Bank lending standards continue to ease as manufacturing expands, suggesting business spending a long way away from turning negative.
  • Q3/13 EPS reporting season is beginning with consensus expectations of 4.5% growth vs. a year ago. Every reporting season since Q1/09 has seen final results ahead of beginning of season expectations by an average 5.5% (2.8% over past four quarters), suggesting upside to EPS over coming weeks.
  • The valuation expansion that began in November 2011 continues to track the past two non-recession valuation expansions, suggesting our 2014 SPX target of 1,955 may be overly conservative for both time and price. Our target is based on 17x our 2014 estimate of $115. We view both our multiple and EPS assumptions as very conservative. The government shutdown and debt limit debate should push out expectations of Fed “tapering,” which keeps the yield curve steep and long-end near current levels.
  • While absolute corporate credit yields are off the low, as is typical at this point in the cycle, the Investment and Speculative Grade debt-to-UST yield has moved back to the best levels of the current cycle.
  • Corporate credit new issuance continues at a record pace. That is going to fund a lot of buybacks, M&A and other pro-equity moves.
Kenneth A. Dick, BA, CIM, CFP, FCSI

Branch Manager & Portfolio Manager | Independent Wealth Management

Canaccord Genuity Wealth Management

www.glwm.ca

 

October 2nd, 2013 Business and Market Updates

Some decent upside in China overnight on the back of the US markets upside move yesterday.  Japan on the other hand fell about 2% due to the an increase in Sales Tax.

Mario Draghi speaking this morning is suggesting that the Euro recovery is continuing albeit at a slow pace.  He is confident the trend will continue and will do all he can to maintain or increase the current pace.  With all that said he left rates alone at 0.5% which caused some weakness in markets there.  The big index is down about a half a point.  Also, our Italian friends have done another about face today as the coalition members governing the country have now decided to continue on as they were.  On Monday if you recall, the coalition was dissolving which would have led to another election.  It would seem that the Italian people were not having any of that and the government listened.  Hmmmm, make you think of a certain government to the south of us that may take some notice of the peoples demands over their own posturing?

The US futures are off about a half a point on the ADP Employment numbers which came in at 166000 vs. 180000 estimated for September.  Also August was revised lower.  These numbers will play into the Non-Farm Payrolls for September which are scheduled to be released (maybe) Friday.  I say maybe as one of the government agencies that has been shut down is the Bureau of Statistics.  Hopefully the work had been completed before Monday.

Canada is following the US lead and trending down about a half a point.

Gold is up about 14.00 to 1300.00, oil is off 7 cents to 101.63 and the loonie is down 13 bps to 96.69.  Debt markets are rallying into the employment numbers with the US and Canadian 10 year bonds yielding 2.63% and 2.54% respectively.

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

Branch Manager & Portfolio Manager | Independent Wealth Management

Canaccord Genuity Wealth Management

www.glwm.ca

 

 

October 1st, 2013 Business & Market Update

Well, looks like the kids in DC just couldn’t share the crayons and now have shut down the non-essential government services in the US.  As I have mentioned in past blogs, a deal will be struck and the debt ceiling will be increased and we will move on to the next crisis.  In the interim, nothing else has changed.

Overnight, markets in Asia were mixed and relatively flat.  Euro markets are higher by about a half a point despite some disappointing economic news out of Germany and the continuing Italian government saga of “Where’s the Prime Minister”.

In North America, US futures were not phased by the budget idiocy as futures are higher by about a third of a point.  Canada is flat this morning.

Gold is in another free fall as the commodity is lower by about 33.00 to 1295 suggesting that a solution is in the works to the crisis.  Oil is down a half a buck to 101.40 and the loonie is flat at 96.96.

The 10 year bonds in both the US and Canada are both trading lower this morning causing yields to rise to 2.63% and 2.56% respectively.

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

Branch Manager & Portfolio Manager | Independent Wealth Management

Canaccord Genuity Wealth Management

www.glwm.ca

September 26th, 2013 Business & Markets

A mixed overnight session in Asia as Japan was higher and China lower.  Japan’s economy is improving on the stimulus that Abe continues to provide while in China there are conflicting reports on the state of the economy as two different reports are somewhat contradictory.

Europe is mixed with the macro index off just slightly, despite continued positive news on the recovery in the region.  UK consumer spending was stronger than expected for for August.

US futures are being driven by some positive employment numbers this morning as Weekly Initial Jobless Claims came in 5000 lower than last week at 305000 and 20000 below estimates of 325000.  Continuous claims were at 2.823mm vs. 2.818mm estimated, which is neutral.  The second Q2 GDP revision came in at estimates at 2.5%.  Markets are looking to open up about a quarter point.

Canadian futures are relatively flat this morning with no economic news today with markets continuing to be range bound.

In regard to the Debt Ceiling deadline, I am in the camp that there will be some type of solution by month’s end as the last time the government shut down (in the mid-90’s) is cost GDP about a half a point and a couple of billion dollars to get things restarted.  The global recovery is also a factor as strong economic and political leadership out of the US is paramount in continuing the process.

Gold is down a couple of bucks to 1331, oil is up 0.32 to 102.37 and the loonie is unchanged at 96.96.  The US and Canadian 10 year bonds are trading slightly lower this morning with yields rising to 2.65% and 2.57% respectively.

Lastly, I am seeing some positive indicators that would suggest the 4th quarter could be stronger.  The shipping indices continue to march higher.  Iron Ore (to China) has been increasing for the last 2 quarters out of Brazil and Australia.  Coal and grain shipments have also been moving higher over the last quarter as the dry goods index and the shipbuilding index continue to advance.  We are also seeing Intermodal rail indices over the last few weeks improve dramatically.  Could set up well for a reasonable Q4.  We shall see……

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

Branch Manager & Portfolio Manager | Independent Wealth Management

Canaccord Genuity Wealth Management

www.glwm.ca

September 20th, 2013 Business & Market Update

A relatively quiet day yesterday is leading to another today.  Asia was virtually flat on low volume overnight and Europe is down about a quarter point at midday going into the German elections over the weekend.  Merkle is favoured to be re-elected but by a much slimmer margin that previous according to pollsters.  We will get the results Monday.

US futures are trading a little lower this morning as we head into this quadruple witching expirationFriday.  Volumes should be large today however direction seems to be neutral.

Canadian futures are also flat this morning even with a lower inflation number that came in at estimates.

After a very busy week it would seem that the capital markets are taking a much needed rest today.

Gold after the big move the last two days is selling off today down about 20.00 to 1350.  Oil is down 0.44 to 104.10 and the loonie is off a quarter cent to 97.18.  The ten year US and Canadian bonds are a little stronger this morning with yields falling to 2.75% and 2.71% respectively.

The new iPhones go on sale today around the world and if you can believe it, people are lining up to get one.  I thought all that hype was a thing of the past.  Apparently not!!  I am sure the company would like to have people lining up to buy the stock.  Unfortunately, that is not the case.

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

Branch Manager & Portfolio Manager | Independent Wealth Management

Canaccord Genuity Wealth Management

www.glwm.ca

Tuesday, September 17th 2013 Business – Market Update

A quiet morning after a decent up day yesterday. Some selling overnight in Asia and at midday in Europe into the Fed meeting today.  Asia was down about a half a point and Europe is off a quarter point.

The US futures are trading slightly lower on what will be a light day until the minutes of the meeting are released tomorrow which will indicate whether the QE will be tapered.

Canadian futures are slightly lower.

Gold is off 3.00 to 1314, oil is trading down half a buck to 104.25 and the loonie is slightly higher at 96.93.  The US and Canadian 10 year bonds are a little stronger this morning with yields at 2.83% and 2.75% respectively.

German investor confidence once again rose last month, however inflation in the UK was lower.  The region is stabilizing however at a slow pace.

In Canada today is the last day for the telecom companies to submit bids for the available wireless spectrum.  Of course all the big boys are in and Wind Mobile has submitted their deposit to bid.  The small company, it would seem is the governments only current hope for a fourth competitor in the wireless space.  It will be interesting to see how the bids are fair.  More to come.

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

Branch Manager & Portfolio Manager | Independent Wealth Management

Canaccord Genuity Wealth Management

www.glwm.ca