Canada’s main stock market ended a choppy day higher on Friday, capping off a strong week due to positive global economic signals and a further round of solid North American earnings reports.  Canadian mining shares were higher as commodity prices advanced.  A strong profit forecast at Canadian National Railway (CNR) strengthened confidence that 2^nd quarter earnings period would assist investor confidence.

Higher corporate profits are signaling the economy might be in better shape than anticipated.  The investor mood also benefited from a new round of solid U.S. corporate results, including Verizon Communications and a dividend hike by General Electric.  Strong earnings helped the TSX main index to finish the week with a 1.2% gain.  The Toronto Stock Exchange’s S&P/TSX composite index ended the session up Friday 46.45 points, or 0.4%, at 11,714.63.

Canada is clearly benefiting from the fact that China is now taking more of a growth stance over an inflation concern stance right now.  On the economic side, Statistics Canada said moderating energy prices helped slow Canada’s annual inflation rate in June from May, suggesting the central bank has breathing room to take a gradual approach to future interest rate hikes.

In the United States General Electric (GE) delivered a shot of confidence to U.S. investors when it raised its dividend on Friday, pushing the S&P 500 through the key 1,100 level.  GE gained after the U.S. conglomerate increased its quarterly dividend by 20%. GE’s move spurred heavy institutional buying and sparked a decisive move higher, a positive sign of rising investor optimism.  The wide-ranging impact GE has on the economy, coupled with another round of strong earnings, bolstered investor confidence.  GE is a company whose has businesses that extend throughout large parts of the economy, and the dividend hike clearly shows they are more confident on their future prospectus.  Although, the dividend the company currently pays is still only fraction of what the company paid shareholders before February 2009.

The Dow Jones industrial average gained 102.32 points, or 0.99%, to 10,424.62. The Standard & Poor’s 500 Index rose 8.99 points, or 0.82%, to 1,102.66. The Nasdaq Composite Index gained 23.58 points, or 1.05%, to 2,269.47.  The S&P 500 rose above 1,100 for the 1^st time in a month after coming close but failing 4 times in July.   In order to provide a clear technical bull signal the index needs to move above the 200-day moving average of 1,113.  For the week each respective index moved ahead by more than 3% while the Nasdaq erased losses for the year and ended flat. The Dow and S&P 500 remained negative so far in 2010. Many analysts currently believe the sell-off has run its course and the early July low will prove to be the low for the year.  The economy will remain the “wild card”, with the potential to cool investor enthusiasm and a round of new economic data will be looked at to determine the strength of the economic recovery.

Hoping to ease fears over any impact from the euro zone debt crisis, European regulators assessed how banks would cope with another downturn. Seven of 91 banks failed the tests, fewer than expected, but analysts questioned whether the tests were tough enough.

As equity markets enter this week it will need another round of convincing earnings reports to fuel the rally.  The markets endured malaise with poor economic data and downbeat testimony from Federal Reserve Chairman Ben Bernanke on Wednesday, but turned decisively after a number of strong results pointed to better times ahead.  There is a constant struggle between the bulls and the bears when in fact the answer is in the middle ground. Investors have been forced to readjust their expectations for the economy, with data showing the pace of the recovery has gone from a sprint to a crawl.   It has also prompted a divisive argument over the likelihood of a double dip recession. However, if worries over a double dip are starting to be discounted out of the market, an unexpected positive could fuel the market higher.

Regards,

Wilfred Vos Bcs, FMA, CIM, CFP, FCSI, DMS, CBV, MBA, CFA

SVP & Partner

Canada’s main stock index rose more than 1.0% on Friday, rallying for a 4th consecutive day as stunning jobs data lifted investor confidence in Canada, while firm resource prices helped materials lead the gains. Materials were up 2.3%, rebounding from Thursday’s selloff, as the price of gold moved back above $1,200 an ounce. As well, copper prices advanced to their highest in nearly 2 weeks on improving global demand. Heavyweight financials were also among the solid gainers, rising 1.37%. The most influential advancer on Friday was Research In Motion (RIM), rising 7%, after the BlackBerry smart phone maker said it is preparing to launch an applications store and consumer Internet services in China as part of its push into the world’s top mobile market.

The Toronto Stock Exchange’s S&P/TSX composite index climbed 137.08 points, or 1.2%, to end at 11,570.45. For the week, the TSX is up more than 3%, making a strong comeback after hitting its lowest close in 8 months on Monday. Confidence in the domestic economy underscored the positive prospects for growth and outweighed any negative implications of higher borrowing costs that will result with stronger job growth. Data released early on Friday showed Canada’s economy created 93,200 jobs in June, a near record gain and 6 times more jobs than forecast.

In the United States Wall Street closed out its best week in a year on Friday, snapping back from a long stretch of selling, as investors looked ahead to what many expect will be a solid earnings season.

Stocks ended near the day’s highs, but trading was thin. Just 6.197 billion shares traded on the New York Stock Exchange, the American Stock Exchange and Nasdaq, making it the lowest-volume day of the year. The major stock indexes advanced 5% in the holiday-shortened week, as investors put a string of dismal data behind them to focus on what is expected to be another solid quarter for corporate results and focused on some bargain hunting.

Investors expect to see good margins, very healthy balance sheets as companies basically state that even with the slowdown they can still earn money. Previous data has revealed that companies are not building inventory and not adding workers. In other words, they are very well positioned for the worst case economic scenario.

The Dow Jones industrial average was up 0.58%, the Standard & Poor’s 500 Index was up 0.72% and the Nasdaq Composite was up 0.97%. The S&P 500 rose for a 4th straight day, up 5.4% for the week, its best week since mid-July 2009. But the index is still down about 11.7% from its most recent closing high in late April. The Dow rose 5.3% and the Nasdaq advanced 5% on the week.

The earnings season unofficially begins with Alcoa Inc. after the closing bell today. Analysts are expecting overall 2nd quarter earnings to grow by 27%, according to Thomson Reuters data. This is up from the 22.4 % that analysts were anticipating at the beginning of the year. Alcoa, the 1st Dow component to report, is expected to swing to a 2nd quarter profit, though falling aluminum prices have prompted analysts to cut their estimates on the stock.

In economic news, U.S. wholesale sales fell unexpectedly in May, lifting inventories to their highest level in 11 months, a government report showed. Analysts said a slackening in demand could lead businesses to try to curb the inventory buildup, weighing on economic growth. Recent U.S. data showing slowing growth in the services and manufacturing sector, weakness in housing and a stagnating jobs market also worried investors, although most say it is too early to call a double-dip recession.

Canada’s biggest companies are expected to deliver only modest earnings growth for the 2nd quarter, and that’s probably not enough to lift the spirits of investors as they obsess about an uncertain global economy. Most Canadian companies will report their quarterly results during the next 2 or 3 weeks. The timing is less than ideal, with the market focused on Europe’s debt crisis, slowing Chinese growth and the threat of a double-dip recession. Given those concerns, it will take a combination of robust results and a healthier global outlook to repair fractured sentiment, analysts said.

Companies in the Toronto Stock Exchange’s blue-chip S&P/TSX 60 index are expected to average 2% gains in 2nd quarter earnings per share compared with last year, according to Thomson Reuters StarMine SmartEstimates. The index is trading at about 10 times the next 12-month forward earnings which is on the cheaper side of the historical norm. The index dropped just under 10% from its high of the year in April to its low point in early July.

In the short-term stock markets will likely take a wait and see approach as earnings season kicks into high gear and investors take a pause from the sharp gains posted last week.

Regards,

Wilfred Vos Bcs, FMA, CIM, CFP, FCSI, DMS, CBV, MBA, CFA

SVP & Partner

On Friday the Canadian stock market hit its lowest level in more than 4 months as resource issues, particularly gold miners, stumbled heavily to start the 3rd quarter of the year. Gold shares were hurting after prices were hit hard on Thursday, when Canadian markets were closed for Canada day. The index’s materials sector, which includes golds, was down more than 3% to lead declines.

Mining issues failed to get a lift from news that Australia dumped its proposed “super profits” tax on the sector in favour of a lower resource rent tax.

The Toronto Stock Exchange’s S&P/TSX composite index ended down 98.36 points, or 0.87%, at 11,196.06. The decline gave the index a weak start to the second half of the year after losing more than 6% in the 2nd quarter, the largest share in the past few weeks. The stock market was off 4.4% in the holiday shortened week.

A report that showed U.S. employment fell in June, the 1st monthly drop this year, added to worries that the global economic recovery was failing to gain traction. You are seeing more and more discussion about the risk of a double dip recession.

In the United States, Wall St. fell on Friday to close out the worst week in 2 months as disappointing jobs data joined other recent evidence pointing to a tepid economic recovery. Adding to stocks’ weaker tone was a technical move that indicated more selling pressure may be ahead. The S&P 500’s 50-day moving average broke below its 200-day moving average, a break known as the “death cross.” According to technical analysts, a “death cross” occurs when a shorter-term average falls below a longer-term average. The phenomenon last occurred between the 50- and 200-day moving averages in December 2007, soon after the market began a decline that eventually took the S&P 500 to 12-year lows.

As mentioned, the Non-farm payrolls fell in June for the 1st time this year, adding to a slew of economic reports signaling the U.S. recovery is slowing. In short, it is not really possible to be bullish about the jobs report. The Labor Department reported non-farm payrolls dropped by 125,000, the largest decline since October and affected by the loss of temporary government census jobs.

The unemployment rate fell to 9.5%, the lowest level since July, but only because a flood of jobless workers gave up their employment search. Private hiring rose 83,000, the department said, up from the previous month. Other weak data on Friday came in new orders for U.S. factories, which showed the sharpest drop since the depth of the recession and the 1st decline in 9 months.

Financials and economically sensitive sectors were the biggest decliners. The S&P 500 financial index dropped 1.1%, while consumer discretionary stocks were down 1.2%.

The Dow Jones industrial average dropped 46.05 points, or 0.47%, to 9,686.48. The Standard & Poor’s 500 Index lost 4.79 points, or 0.47%, to 1,022.58. The Nasdaq Composite Index fell 9.57 points, or 0.46%, to 2,091.79. Earlier in the week, the S&P fell below the 1,040 level, viewed by many analysts as a critical support level which it had successfully held several times in the past 5 months. For the week, the Dow fell 4.5%, the S&P lost 5% and the Nasdaq shed 5.9%.

This morning global stock prices fell for the 4th day running on growing concerns of slowdowns in the United States and China, the 2 main pillars of global growth. Trading was expected to be light on Monday because of the U.S. Independence Day holiday.

World stocks measured by MSCI All-Country World Index dropped by 0.1% lower after 3 consecutive days of declines. The index has lost 16% since mid-April, and is down 11% for the year (in local currency). The index carried a 1-year forward price-to-earnings (P/E) ratio of 11.9, a level last seen in April 2009 and well below its 10-year average of 15.42, according to Thomson Reuters DataStream.

French Economy Minister Christine Lagarde said that stress test results to be published on July 23rd will show that “banks in Europe are solid and healthy.” The bank stress test published in April 2009 in the United States was a key catalyst to rebuilding trust at that time. However, there is a certain amount of skepticism that the stress tests (on banks) will either be fudged or the complete results won’t be published. In turn, investors may still not receive the required level of clarity that they need to push stocks back up.

So what is the outlook?

The “death cross” is a bit of a concern from a technical perspective but valuations are becoming significantly more attractive as a result of the current short-term sell-off in stock prices. You still need job growth which will take time but at the same time it is hard to determine what catalyst would cause stock markets to drop a further 5% to 10% unless we have a 2nd great recession. A 2nd great recession will materialize in the event that we have a collapse in the credit/financial markets again. Given the yield on corporate bonds and the current default rates it is unlikely that we will endure a 2nd great recession but the risk is not zero. In the short-term is hard to see a catalyst that will justify a significant move on the upside conversely, it will also be hard to justify a big increase in interest rates in the short-term.

Regards,

Wilfred Vos Bcs, FMA, CIM, CFP, FCSI, DMS, CBV, MBA, CFA

SVP & Partner

Canada’s main stock market dropped yesterday as slowing growth in China, worry over looming euro-zone bank repayments, and a drop in U.S. consumer confidence unnerved investors around the world. China’s exports face “strong headwinds” in the 2nd half of the year from policy tightening measures and the European debt crisis which reduce the prospects of a rebound in the stock market. All 10 sectors of the index declined in value as weakness in the energy, financials and materials sectors led declines. The index had the biggest 1-day drop since the “flash crash” of May 6th of this year.

Stock market declines were largely driven by a revision to the Conference Board’s leading economic index for China to a 0.3% gain in April instead of the 1.7% rise the group had reported earlier. The Toronto Stock Exchange’s S&P/TSX composite index closed 343.17 points, or 2.96%, lower at 11,263.83. The day’s low was 11,244.03, the TSX’s weakest level since May 21st. Also driving the index down was data that showed U.S. consumer confidence fell steeply in June as worries about the employment market grew.

The market was already jittery about scheduled bank repayments worth 442 billion Euros to the European Central Bank on Thursday that could leave a liquidity shortfall in the financial system of more than 100 billion Euros.

Investors want to see jobs being created in the private sector in the U.S.; China needs to report some sustainable growth and European countries need to refinance their debt.

In the United States investors fled the stock market and the S&P 500 tumbled to its lowest level in 8 months in a sell-off triggered by a wave of increasing alarm over the global economic outlook. All but 1 stock in the S&P 500 ended lower as escalating doubts about the stability of Europe’s banks roiled markets once again. Zimmer rose 0.1% for the only gain in the S&P 500. Since 1996, there have only been 3 days that only 1 stock within the S&P 500 advanced on the day, according to data compiled by Bloomberg.

The S&P 500 had tumbled below its 2010 intraday low of 1,040.78 during the day, which analysts said could ignite further declines. The index closed at its lowest level since October 30th, breaking its closing low for the year at 1,050.47 which is another bearish signal for stock markets.

The Dow Jones industrial average lost 268.22 points, or 2.65%, to 9,870.30, the Standard & Poor’s 500 Index fell 33.33 points, or 3.10%, to 1,041.24 and the Nasdaq Composite Index dropped 85.47 points, or 3.85%, to 2,135.18. The S&P 500 has tumbled 14% from this year’s high on April 23rd, economically sensitive sectors such as materials, industrials and financials were among the hardest hit and led decliners.

The Chicago Board of Options Exchange (CBOE) volatility index which is known as Wall Street’s fear gauge, jumped 22% to a day high of 35.39, its highest level since early June, in a sign more volatility could be coming to fruition.

U.S. consumer confidence dropped sharply in June, after rising for three months, on worries about the labor market, according to a report from the Conference Board. The news heightened fears of an economic slowdown after a recent spate of weak data from the housing and job markets. The group’s index of consumer attitudes fell to 52.9 in June from a downwardly revised 62.7 in May. The June figure was sharply below the median of forecasts from analysts polled by Reuters. Assessment of the employment market also worsened, with the “jobs hard to get” index rising while the “jobs plentiful” index slipped. “There remain a lot of questions around the sustainability of economic growth. The median forecast called for a decline to 62.5, and the gauge was lower than all projections in a Bloomberg News survey of 71 economists.

The confidence report was at odds with last Friday’s consumer sentiment data from the Thomson Reuters/University of Michigan Surveys of Consumers. That survey showed sentiment in June rose to its highest since January 2008. Tuesday’s report comes just days ahead of the government’s monthly data on employment, one of the most widely watched economic indicators. The report this Friday is forecast to show non-farm payrolls fell in June in the United States, according to a Reuters’ survey.

Stocks retreated even after home prices in 20 U.S. cities rose in April from a year earlier as sales got a boost from a tax credit aimed at reviving the industry that triggered the worst recession since the 1930s. The S&P/Case-Shiller index of property values climbed 3.8% from April 2009, the biggest year-over-year gain since September 2006. The increase exceeded the median forecast of economists surveyed by Bloomberg News.

What is the outlook?

Unfortunately, stock markets need a catalyst to bottom out and resume some upward momentum. The catalyst must be an improved outlook as it relates to: 1) sovereign debt issues; 2) global growth; and 3) the employment market. These are all macro issues which will outweigh any positive micro or company specific developments. Conversely, stocks are currently not cheap enough in order to attract buyers in order to push stock markets up. Said differently, expect stocks to test new recent lows before investors come out to bargain hunt. In turn, expect interest rates to stay lower for longer than anticipated which will provide some stimulus to the overall economy while governments attempt to pull back their direct stimulus measures.

With time stocks will advance again on the assumption that credit markets and/or the financial system remains functional thereby, giving consumers, business and government’s access to credit on reasonable terms. A functioning capital market will provide the required resources to fund productivity growth and innovation which will translate into future profits.

This morning investors are looking a little more optimistic with stock futures and commodity prices looking up rebounding from a steep sell-off yesterday, as investors were comforted that European banks were less reliant on funding from the European Central Bank (ECB). Investors awaited a June employment report from Automatic Data Processing (ADP) at 8:15 a.m. EDT. Economists in a Reuters survey expected that 60,000 jobs were created in June versus 55,000 in May. At 8:30 a.m. EDT, the Institute for Supply Management (ISM) New York releases the June index of regional business activity while the Institute of Supply Management (ISM) Chicago releases its index of manufacturing activity at 9:45 a.m. EDT. Economists forecast a reading of 59.0 in the month versus 59.7 in May.

Regards,

Wilfred Vos Bcs, FMA, CIM, CFP, FCSI, DMS, CBV, MBA, CFA

SVP & Partner

Canada’s main stock index ended lower in volatile trading yesterday as energy and financial shares dropped on economic uncertainty and offset gains by surging gold issues. Markets continue to fret about the uncertainty in Europe. With ongoing fears about euro zone debt contagion causing investors to flee to safe-haven assets, gold rallied to less than $10 below its all-time high.

The Toronto Stock Exchange’s S&P/TSX composite index closed down 0.56%.

In the United States stocks fell, taking the S&P 500 to its lowest close in 7 months, as industrials and technology shares fell and investors stayed on their heels after last week’s payrolls figure discouraged buyers from entering the stock market. The Nasdaq led declines as investors sold large cap technology as Research in Motion Ltd (RIM) fell on worries about the BlackBerry’s sales and after the introduction of Apple’s latest iPhone although, Apple also fell.

The S&P 500 is down 13.7% from its April 23rd closing high for the year, firmly in correction territory. The benchmark index breached a key technical support level around 1,060 late in the afternoon.

On Friday, the major U.S. stock indexes slid more than 3% after the weaker-than-expected May non-farm payrolls report and as worries increased over the sovereign debt crisis in some European countries, the latest being Hungary.

The Dow Jones industrial average fell 1.16%, the Standard & Poor’s 500 Index fell 1.35% and the Nasdaq Composite Index fell 2.04%. The stock market has been sensitive to recent news or headlines, particularly out of Europe, and that has prompted some abrupt intraday swings in the S&P 500. The CBOE Volatility Index VIX, remains at an elevated level, though it has eased back since May.

After the market closed Federal Reserve Chairman Ben S. Bernanke said the U.S. recovery probably won’t quickly bring down the unemployment rate, which is likely to stay “high for a while.” Given the depth of the recession, the recovery is “moderate paced,” Bernanke said during a question-and-answer session on ABC News. In Europe, policy makers “are committed to avoiding default in Greece” and elsewhere, he said.

While the Fed will raise interest rates from a record low before the economy returns to “full employment,” Bernanke said officials don’t know when the process will start. The banking system isn’t fully healthy and lenders are “cautious” in providing credit, he said. “The unemployment rate is still going to be high for a while, and that means that a lot of people are going to be under financial stress,” Bernanke said.

Bernanke and his colleagues will give updated economic projections when they next meet in Washington June 22-23. The Fed chief reiterated today that the central bank’s “extended period” of a record low interbank lending rate is conditioned on high unemployment, low inflation and stable price expectations. “We have right now a very accommodative, very easy monetary policy,” Bernanke said. “We can’t wait until unemployment is where we’d like it to be” or inflation gets “out of control” to tighten credit, he said.

This morning North American stock futures are up, commodity prices have rebounded a little and European shares have paired their losses based on the Bernanke comments. I would expect to see some hesitant bargain hunting but it will take time for the stock market to identify a key catalyst to push things higher with above average volumes.

Regards,

Wilfred Vos Bcs, FMA, CIM, CFP, FCSI, DMS, CBV, MBA, CFA

SVP & Partner

Canada’s main stock index fell more than 2% on Friday, following disappointing May jobs figures in the United States and worries that Hungary may be the latest casualty of Europe’s fiscal woes. In short, sovereign debt fears and issues are rising and spreading.

The weak U.S. employment report coupled with a Hungarian official warning of a “Greek-style” debt crisis also dragged on the euro, which fell below $1.20 for the 1st time in more than 4 years.

Investors don’t like what is happening in Europe, they wanted to see more strength in jobs and they really don’t like the general uncertainty in the stock market. Hiring by U.S. private employers slowed sharply in May, a setback for the economy’s recovery in Canada’s biggest trading partner. Investors were optimistic that there would be some strong private sector job growth in the United States. The U.S. Labor Department said the U.S. economy added 431,000 jobs in May far short of the 513,000 that Wall Street had expected. The unemployment rate dropped to 9.7% in May from 9.9% in April. However, only about 10% of those jobs were created from the private sector the residual came from government hiring and the majority of those hires were part time. Analysts said it didn’t alter their view that the economy is stabilizing, although gradually, with many expecting unemployment will remain high for some time.

In short, this is confirmation that there is a V-shaped type recovery, but are in a below- average recovery and we should see a sustainable expansion, but a below average expansion. Said differently, we have a long way to go although, things are likely not going to get worse on the economic front by a material amount.

The Toronto Stock Exchange’s S&P/TSX composite index closed down 242.26 points, or 2.05%, at 11,569.61 with all 10 of its main groups lower. The index was off 0.9% for the week.

Global growth concerns overshadowed a rosier domestic employment report that showed Canada added almost double the number of jobs expected in May at 25,000. The impressive domestic data prompted analysts to predict the Bank of Canada would come under more pressure to raise interest rates again next month, despite the rocky global landscape. Although, it does not appear that other Central Banks will follow anytime soon.

In the United States stocks cascaded to their lowest close since February on Friday after May’s jobs figure hit investors already hurting from worry over another developing debt crisis in Hungary. Wall Street, which is down 12.5% since the April 23rd closing high for the year, the sell-off was led by economically sensitive sectors, including industrials, technology and small-caps, on concerns that the economy will recover by fits and starts.

The Dow Jones industrial average dropped 323.31 points, or 3.15%, to 9,931.97, the Standard & Poor’s 500 Index dropped 37.95 points, or 3.44%, to 1,064.88 and the Nasdaq Composite Index dropped 83.86 points, or 3.64%, to 2,219.17. The Chicago Board of Options Exchange (CBOE) Volatility Index or VIX, Wall Street’s key measure of investor fear, jumped 20.43% to 35.48. For the week, the Dow lost 2%, the S&P 500 fell 2.3%, and the Nasdaq shed 1.7%.

The S&P 500 fell below 1,070, which had been considered a support level for the market. The index closed just below the intraday low the market reached during the so-called “flash crash” on May 6th.

This week U.S. stocks could face further pressure unless investors get some relief from worries about Europe, jobs and the toll they might take on the economic recovery. At some point things will need to bottom out. Reports on retail sales and consumer sentiment, both of which should offer clues on the outlook for spending, are among this week’s major economic indicators.

The impact of BP’s massive Gulf Coast oil spill on the environment and the energy industry also is likely to stay in focus, with moves to contain the spill so far having failed. Although, containment efforts appear to be gaining some traction (this will take months if not years to fully resolve itself).

Stocks will await further direction from Europe before making any major move either up or down.

Outlook

No one said 2010 was going to be an easy year in the stock markets and for economic growth worldwide. The bad U.S. stock market performance in May, the worst in 15 months, is the latest evidence of a difficult year that started with cautious optimism for investors trying to navigate the economic recovery, sovereign debt crisis and policy reforms.

Negative news, especially from the euro zone combined with stock market drops and the gloomy pictures streaming from the ecological disaster in the Gulf of Mexico has created a significant level of uncertainty. Twice in May, the VIX index spiked above 40 before quickly retreating, indicating high levels of uncertainty amongst investors.

One ‘silver lining’ has been corporate profits, which have been a bullish, are in general up more than 30% from last years profits (which were low). Only 6 times since 1950 have corporate profits risen by more than 30% or faster year-over-year and each of these periods we have seen real Gross Domestic Product (GDP or the level of economic activity) growth of at least 3% in the following year and by job growth of 1.9% or better.

The road ahead will likely not be much smoother than what we have experienced during the previous 6 months in stock markets.

This morning stock index futures were slightly higher, reversing sharp declines from last week, as solid German data eased concerns about a wobbly European economy and the S&P looked to bounce off a key technical level. German industrial orders jumped far more than expected in April, adding to signs that Europe’s largest economy was on the path to durable growth helped by a lower euro currency.

BP gained 4.1% in premarket trade after the company said it was capturing most of the oil gushing from its gushing Gulf of Mexico well, and that an additional capture system would be ready in mid-June.

Regards,

Wilfred Vos Bcs, FMA, CIM, CFP, FCSI, DMS, CBV, MBA, CFA

SVP & Partner

Canada’s stock market ended sharply lower in volatile day yesterday, after worse than expected global manufacturing data raised concerns about the pace of the global economic recovery, hurting oil prices and energy shares. Energy shares sank 3.3%. Data showed manufacturing growth slowed in the Euro zone and China, but there was some relief in the United States, where there was some evidence of some sluggish improvements.

Investors are nervous about global growth and all the head-winds.

The Toronto Stock Exchange’s S&P/TSX composite index ended 191.02 points, or 1.62%, lower at 11,571.97. The index swung between positive and negative for much of the day. Recently, stock markets have endured a bout of nervousness in the last hour of trading and the market seems to have given up the gains of the day and noise dive. It does not help that there are some new political tensions in the Middle East between Israel and Turkey.

The Bank of Canada raised its key interest rate; the 1st in the G7 industrialized economies to do so after the global recession, but said the European debt crisis made its next move highly unpredictable. The rate hike, to 0.5% from 0.25%, is a response to 2 quarters of extraordinarily strong growth in Canada. However, the bank cautioned investors against betting on an uninterrupted tightening campaign, due to the Euro zone fiscal problems and an uneven global recovery. “Given the considerable uncertainty surrounding the outlook, any further reduction of monetary stimulus would have to be weighed carefully against domestic and global economic developments,” the central bank said.

The rate hike itself was widely expected. In a Reuters poll of 40 analysts, 32 had forecast a ¼ point rate hike. No surprise in the decision but the tone was slightly more dovish than the markets had anticipated. We have been stating all along that interest rates will remain lower for longer than people anticipate (look at Japan). We are not suggesting that rates will not increase but we are suggesting that in the medium to long-term (next 3 to 5 years) less than what investors anticipate (especially in the United States).

The Bank of Canada has broken ranks with the U.S. Federal Reserve in the past, but generally the two policy rates move in tandem. But the U.S. Federal Reserve continues to promise to hold its rate ultra low for an extended period, depending on economic conditions. The European Central Bank, which has cut rates to 1.0 percent, is far from considering its exit strategy as it takes extraordinary steps to ease the debt crisis and prevent it from snuffing out a recovery on the continent.

Canada’s economy fell into mild recession last year, but its banks emerged unscathed from the credit crisis and jobless rates did not soar as high as in the United States. Consumer spending and a hot housing market have fueled a faster than expected recovery since then. The economy grew at a surprising 6.1% annual clip in the 1st quarter, and by 4.9% in the 4th quarter of 2009. It said the global recovery is “increasingly uneven,” with emerging markets taking the lead while there is a “possibility of renewed weakness in Europe.” The debt crisis in Greece and some other European countries has so far had only a limited impact on Canada through lower commodity prices and tighter financing conditions. However, some countries will now have to cut spending quickly (don’t want to be the next PIGS country, Portugal, Italy, Greece or Spain) and that, combined with debt reduction by banks and households, could slow global growth. That could hurt Canada’s export-dependent economy.

In the United States stocks fell as energy shares slid after the latest failed attempt to halt the oil spill in the Gulf of Mexico and the U.S. government announced a criminal probe into the disaster. Investors punished shares of companies directly involved with the spill and losses accelerated into the close following the news of the investigation. There is so much uncertainty; investors are stepping to the sidelines. U.S.-listed shares of BP which owns the well, tumbled 15% and has now lost about $75.03 billion since the April 20th rig explosion, and the stock has the lowest price-to-earnings ratio of any of the major oil companies as a result of the fall The losses signaled growing frustration over the difficulty of sealing off the worst oil spill in U.S. history.

The Dow Jones industrial average declined by 1.11% to 10,024.02, the Standard & Poor’s 500 Index fell 1.72% and the Nasdaq Composite Index fell 1.54%.

This morning stocks declined in Europe (a little catch up from yesterday), led by energy companies. U.S. futures fluctuated before a report that may show the number of contracts to purchase previously owned homes rose in April for a 3rd consecutive month as buyers rushed to lock in a government tax credit. The index of pending-home purchases climbed 5% following a 5.3% gain a month earlier, according to the median forecast in a Bloomberg News survey of 40 economists. The National Association of Realtors report is due at 10 a.m. in Washington.

Regards,

Wilfred Vos Bcs, FMA, CIM, CFP, FCSI, DMS, CBV, MBA, CFA

SVP & Partner

Canada’s main stock index ended only slightly lower yesterday after a sharp fall early in the day as surging gold mining shares cushioned a drop in energy shares on worries that Europe’s banking problems could derail global economic recovery. Gold miners rose as bullion prices climbed on safe-haven buying, and by the end of the day energy and financial shares had trimmed early losses.

The index was able to find support at around its 200-day moving average of around 11,500, a technical level closely watched by strategists and market watchers. Energy shares and Canadian banks, even though they have limited exposure to European debt, were caught up in a global sell-off early in the day that helped send the TSX down 2%. Catalysts for the sell-off included the necessity for the Bank of Spain to rescue a local lender over the weekend and the military tension between North and South Korea.

The Toronto Stock Exchange’s S&P/TSX composite index finished the day down 0.03%, at 11,518.08.

In the United States stocks staged a furious late-day rally to push the S&P 500 into positive territory as the focus shifted from European debt woes to buying after shares hit 6-month lows. Major U.S. indexes had fallen more than 3% early in the day on growing questions about the stability of the European banking system after a small Spanish bank failed over the weekend. Equities have been under nearly constant selling pressure the last few weeks. The morning’s action reflected the market’s nervousness as the S&P 500 fell through the May 6th “flash crash” level to its lowest level since early November 2009, down 14.5% from its April 26th closing high of this year.

In short, the market stopped and thought that maybe investors have sold too much and that maybe they have priced in Europe too much. Investors are beginning to realize that there is not a silver bullet that can instantly fix this problem. Strategists linked the rebound in stocks to strengthening of the Euro. The single currency earlier fell to an 8 ½ year low against the yen and approached a 4 year low versus the U.S. dollar, while safe-haven U.S. Treasuries rallied.

The Dow Jones industrial average dropped 0.23%, but the Standard & Poor’s 500 Index gained 0.04% while the Nasdaq Composite Index fell 0.12%. European markets fell to their lowest level in nearly 9 months. The Chicago Board of Options Exchange (CBOE) Volatility Index or VIX fell 9.7% to 34.61 after reaching an earlier high of 43.74 or a gain of 14.1%. U.S. consumer confidence rose for the 3rd straight month in May to the highest in more than 2 years. But that was countered by a report showing single-family home prices dropping in the 1st quarter on renewed price pressure as federal aid faded away.

This morning things are looking a little better as corporate earnings are strong (BMO exceeding expectations) and bargain hunting although the ‘era’ of instability will continue for some time.

Regards,

Wilfred Vos Bcs, FMA, CIM, CFP, FCSI, DMS, CBV, MBA, CFA

SVP & Partner

Canada’s main stock market ended a 6 day losing streak on Friday, led higher by resources and bank shares, as some positive developments in Europe and recent price declines helped spur investor buying or bargain hunting. The resource-heavy index fought back from a 14-week low touched earlier on Friday, led by a 1.7% rise in the energy sector, while materials moved up by 0.7% and financials climbed 0.9%.

The Toronto Stock Exchange’s S&P/TSX composite index closed up 1.01%, at 11,521.35, earlier in the day, the index sank to 11,179.97, its lowest level since February 9th of this year. Despite Friday’s rally, the TSX was off 4% for the week as investor sentiment was beaten down by concerns that austerity measures in some Euro zone countries would hurt European and global growth.

But confidence in the market edged higher on Friday after the head of the European Central Bank said the Euro was not in danger, while German lawmakers backed a $1 trillion rescue plan for the Euro zone, alleviating some of the concerns over sovereign debt levels and prospects for economic recovery.

In Canada, data showed Canadian inflation was higher than expected in April, while retail sales in March soared from February.

The United States also snapped a 3 day losing streak on Friday as investors bought beaten-down shares including banks on bets the financial regulation bill won’t be as onerous as some had feared. Nonetheless, the benchmark S&P 500 index was down 10.6% from its April 23rd high in what is traditionally considered a correction as investors fled risky assets on fears the Euro zone’s debt crisis. Bank shares rose a day after the U.S. Senate approved a sweeping overhaul of regulation of Wall Street firms, capping months of wrangling over the biggest changes since the 1930s. The Senate bill must now be merged with a measure approved in December by the U.S. House of Representatives. Top Democratic lawmakers said they aim to get a bill approved by a House-Senate conference committee to President Barack Obama to sign by July 4th.

The Dow Jones industrial average gained 1.25%, the Standard & Poor’s 500 Index gained 1.50% and the Nasdaq Composite Index gained 1.14%. Trading was choppy throughout the day as May equity options and some options on stock indexes will stop trading at Friday’s close. For the week, the S&P ended down 4.2%, the Dow lost 4% and the Nasdaq was down 5%.

Investors were also tempted back into the market after a nearly 4% sell-off on Thursday, the biggest 1-day drop since April 2009, that left stocks at cheap valuations. Interest rates and inflation in the United States are close to zero and the S&P 500 multiples are low when the economic fundamentals in the U.S. are still pretty positive. It is geopolitical and sovereign debt issues that are holding investors back from buying.

Yesterday, the Canadian stock market was closed but in the United States they were open. In the United States stocks slid driving the Dow to its lowest level since February 10th as fresh signs of Europe’s banking problems emerged. Financial shares were among the day’s largest decliners, with the KBW Bank index falling 3.3%. Concerns about Europe’s banking system continued to weigh on markets, after the Bank of Spain took over a small savings bank, CajaSur, over the weekend, increasing anxiety among investors worried about debt problems spreading throughout financial markets.

What happens specifically to Greece does not matter a whole lot, but if you start spreading to larger countries like Spain, then it becomes an issue. The Dow Jones industrial average dropped 1.24%, the Standard & Poor’s 500 Index dropped 1.29% and the Nasdaq Composite Index dropped 0.69%.

Economic data showed sales of previously owned U.S. homes rose to a 5-month high in April as buyers rushed to close on contracts before a federal home buyer tax credit expired, although housing inventory also increased.

This morning stocks fell around the world. Commodity prices led the way on mounting tension on the Korean peninsula between North and South Korea and concern Spain’s ailing banks signal a widening European debt crisis. The MSCI World Index of 23 developed nations’ stocks fell as much as 1.9%. Futures on the Standard & Poor’s 500 Index retreated 2.3% and the MSCI Emerging Markets index declined 3.6%. Oil slid below $68 a barrel for the 1st time since February and the Canadian dollar fell to $0.92. The Euro also fell for a 2nd day against the U.S. dollar, losing 1.5%.

In addition, 4 Spanish banks said they will combine as regulators and push lenders to merge with stronger partners and after the International Monetary Fund (IMF) yesterday urged the nation to take more steps to overhaul its financial institutions. The North Korea Intellectuals Solidarity group said on its website that the country’s military was put on alert, and the U.S. announced plans yesterday to conduct anti-submarine exercises with South Korea following the March 26th torpedoing of a warship.

Increasing tensions on the Korean peninsula, coupled with deepening concern about sovereign debt risks in Europe, are affecting investors’ sentiment although, much of North Korea’s comments appear to be bluffing. I don’t think another disastrous event will happen but more uncertainty is not healthy (there just seems to be more cockroaches in the kitchen). We have got another round of taking off the risk trade going on around the world, and stock markets are doing it in pretty dramatic fashion. Said differently, stock markets are instantaneously assuming the worst, selling 1st and then asking questions and looking at valuations.

It will take courage to make money by investing in equities on a going forward basis but… at times of highest perceived risk the actual risk is actually lowest and at times of lowest perceived risk the actual risk is highest. It will take time to determine how things will actually unfold and how the sovereign debt and geopolitical uncertainty will be successfully resolved but over the long-term these issues will also be resolved (in order to maximize the greatest utility for all). Just be careful about the volatility because it will be volatile.

Regards,

Wilfred Vos Bcs, FMA, CIM, CFP, FCSI, DMS, CBV, MBA, CFA

SVP & Partner

Canada’s main stock market ended lower in a volatile day yesterday as gold miners dropped on sliding bullion prices and investors worried over Germany’s surprise crackdown on some speculative trading. Gold mining shares led the decline as bullion prices skidded below $1,200 an ounce.

The TSX index was also dragged lower as investors fretted that Germany’s ban on some riskier short-selling bets foreshadowed tighter financial regulation in other countries. Germany banned “naked” short sales of Euro-denominated government bonds, credit default swaps based on those bonds and shares of the country’s 10 leading financial institutions, in a move that appeared to catch its partners in the European Union off guard.

Gold has sold off because investors feel that Europe is less likely to see a mass exodus of money because of this ban on shorting and invest in gold (for example). The Toronto Stock Exchange’s S&P/TSX composite index finished the day down 0.84%. The index was briefly higher at the start of the day, but quickly dropped more than 2% to its lowest level since the market meltdown on May 6th. The index has dropped 4.3% in the past week.

Additional pressure came on news of an unexpected fall in April U.S. consumer prices, the first decline in a year. On the upside, financials shares climbed 0.2% the sector managed to limit losses ahead of earnings results next week and because the sector’s big banks are seen as comparatively safe.

In the United States stocks fell as Germany’s unilateral action to ban specific trades on some stocks and bonds sparked a fresh wave of uncertainty and risk aversion among anxious investors. Markets already fear the Euro zone’s credit woes could cut into economic growth, and Germany’s move late on Tuesday triggered selling of industrial shares, as they have heavy exposure to Europe.

It is becoming increasingly clear that these are still separate countries with their own political agendas. But not all the news was bad, as the broad S&P 500 bounced off technical support, setting a floor under its recent drop. The Dow Jones industrial average declined by 0.63%, the Standard & Poor’s 500 Index dropped by 0.51% and the Nasdaq Composite Index dropped by 0.82%. The S&P 500 briefly fell below its 200-day moving average, a key technical long-term momentum indicator. But its rebound off that level reinforced it as support going forward.

Stock indexes barely budged after the Federal Reserve gave an upbeat outlook of the U.S. economy in the minutes of the most recent meeting of its policy-setting committee. Data showed the U.S. Consumer Price Index fell for the first time in a year last month and the closely watched core inflation rate eked out its smallest annual gain since 1966, further supporting the Fed’s vow to keep interest rates low for some time.

The Federal Reserve raised its forecasts for economic growth and debated eventually selling mortgage debt, according to minutes of an April meeting that offered no hints of imminent changes in monetary policy. The Fed, in response to the worst financial crisis since the Great Depression, has bought more than $1.4 trillion in mortgage debt, an unusual step that has stoked fears of future inflation. Fed officials agreed at their April 27-28 meeting that such holdings could boost inflation expectations and would eventually have to be sold, but not anytime soon.

The report reflected the U.S. central bank’s thinking before a worsening of the European debt crisis, which has taken a toll on U.S. financial markets and prompted a reopening of a key emergency lending agreement with other central banks. Its quarterly “central tendency” forecasts showed considerably greater optimism among policy-makers, who predicted gross domestic product growth would come in around 3.2% to 3.7% this year. In January, officials thought the U.S. economy would grow between 2.8% and 3.5%.

This morning stocks slid for a 6th day and U.S. index futures declined as the Euro weakened against the dollar (we might see an advance on the Nasdaq as after the closing bell yesterday). Applied Materials, the world’s largest producer of chip making gear, posted a 2nd quarter profit as customers added capacity to take advantage of growing demand for consumer electronics, especially in emerging markets. Oil fell again to below $68.

The MSCI World Index of 23 developed nations’ stocks fell 0.5% for its longest losing streak in 4 months. The futures on the Standard & Poor’s 500 Index retreated 0.6%. The euro weakened against the dollar, trading near the lowest level in 4 years.

European finance officials meet in Brussels a day before the German parliament votes on the country’s share of a $1 trillion bailout to backstop the Euro in the wake of a worsening sovereign debt crisis. Stocks plunged yesterday as Chancellor Angela Merkel’s unilateral effort to control what she called “destructive” markets rattled investors. The German ban on some bearish bets against financial companies and government bonds wasn’t replicated in other European states.

In order for the Euro zone to start making some serious progress you need to see some serious austerity.

As Euro stocks declined yesterday and left the Euro benchmark gauge trading at less than 15 times its companies’ reported earnings, near the lowest level since December 2008. The recent slide has dragged the S&P 500 index 8.4% lower from its 2010 closing high on April 23rd and pushed the benchmark index into negative territory for the year. The Euro issues have diverted attention from a solid quarter of corporate results in the United States. In short, right now, obviously the good corporate news is not having much of an effect on the market. It is all about the technical aspect at this time, and the strengthening of the U.S. dollar, which has cut investors appetite for risk.

Regards,

Wilfred Vos Bcs, FMA, CIM, CFP, FCSI, DMS, CBV, MBA, CFA

SVP & Partner