Month-in-Review: July 2010

Transcription

1 Portfolio Advisory Group Month-in-Review: July 2010 What Moved the Markets North American markets moved higher in July, with the S&P/TSX Composite gaining 3.7% to finish the month at 11, Tentative optimism in the Eurozone, coupled with largely positive Q2 earnings reports, and the subsequent rally in commodity prices created upward pressure in the markets. The S&P 500 and the Dow made significant gains during the month, up 6.9% and 7.1%, respectively. On July 20th, the Bank of Canada raised the target overnight rate for the second time this year to 0.75%, while the U.S. Fed kept its fed funds rate unchanged. Crude ended the month up 4.4% while base metal prices were up sharply, with copper and nickel gaining 12.2% and 7.1%, respectively. Gold bullion closed down by 5% over the month, as investors moved into riskier assets. The Q2 earnings season in Canada can be characterized as mildly constructive with 51% of companies reporting to date having generated positive earnings surprises. Potash Corp. (POT) raised its full year forecast, Loblaws (L) saw higher margins, and Suncor (SU) generated improved production growth, as all three companies beat street estimates. Meanwhile, the U.S. earnings season was far better with 76% of companies beating expectations. Apple (AAPL) and Ford (F) both reported solid earnings beats on higher sales volumes. However, the US banks did not fare as well as other groups with Bank of America (BAC) and Citigroup (C) both posting disappointing results on lower capital markets related business. After several repeated attempts, BP PLC (BP) successfully capped the Macondo well and stopped the flow of oil in the Gulf of Mexico. Meanwhile, in a clear victory for President Obama and his Administration, the Financial Reform Bill passed the final hurdle of the Senate and was quickly signed into law. Separately, the SEC settled Professional Wealth Management Since 1901

2 its landmark case against Goldman Sachs (GS) for $550 million. Overseas, European regulators released the results of their bank stress tests, and only 7 of 91 banks failed. Despite skepticism around the tests methodology, the results provided much needed disclosure and appeared to restore some confidence to the region. Winston Diamond (HW). TD Bank (TD) purchased The South Financial Group in the U.S., and French oil company Total Energy (TOT) purchased UTS Energy Corp. (UTS) for $1.5 billion looking to build exposure to the Canadian Oil Sands. In Canadian M&A news, Alimentation Couche-Tard (ATD.B) launched a $1.9 billion bid for Casey s General Stores (CASY) but so far has missed the mark in terms of the offer price. Kinross Gold (K) made windfall profits selling its stake in the Diavik dimond mine back to Harry Number Crunching Equity Indices Index Level Month YTD* S&P/TSX Composite Index 11, % -0.3% Dow Jones Industrial Average 10, % 0.4% S&P 500 Index 1, % -1.2% NASDAQ Composite Index 2, % -0.6% MSCI World 1, % -3.7% MSCI EAFE 1, % -6.7% MSCI World TR 3, % -1.9% S&P/TSX Sector Performance Index Level Month YTD* S&P/TSX Financials 1, % 1.4% S&P/TSX Energy 2, % -4.6% S&P/TSX Materials 2, % -0.7% S&P/TSX Industrials 1, % 4.4% S&P/TSX Consumer Discretionary % 10.3% S&P/TSX Telecom Services % 8.8% S&P/TSX Information Technology % -12.9% S&P/TSX Consumer Staples 1, % -2.4% S&P/TSX Utilities 1, % 1.6% S&P/TSX Healthcare % 23.1% Commodities (US$) Spot Price Month YTD* Crude Oil (WTI per barrel) $ % -0.5% Natural Gas (per million btu) $ % -11.6% Gold (per ounce) $1, % 7.7% Silver (per ounce) $ % 6.7% Copper (per pound) $ % -0.9% Nickel (per pound) $ % 14.2% Aluminum (per pound) $ % -1.6% Zinc (per pound) $ % -20.9% S&P/TSX Index - Target Overnight Rate, LTM *YTD return data is simple price return. All indices are in local currency unless otherwise noted. Source: Bloomberg Currencies (in Canadian Dollars) Exchange Month YTD* US Dollar % -2.2% Euro % -10.9% British Pound % -5.2% Japanese Yen (100) % 5.2%

3 North American Equity Performance July 2010 World Markets July 2010 Canada: S&P/TSX M/M: 3.7% YTD: -0.3% U.S.: S&P 500 M/M: 6.9% YTD: -1.2% Brazil: Bovespa M/M: 10.8% YTD: -1.6% U.K.: FTSE 100 M/M: 6.9% YTD: -2.9% Germany: DAX M/M: 3.1% YTD: 3.2% India: Sensex M/M: 0.9% YTD: 2.3% China: Shanghai Index M/M: 10.0% YTD: -19.5% Hong Kong: Hang Seng M/M: 4.5% YTD: -3.9% Japan: Nikkei M/M: 1.6% YTD: -9.6% Australia: S&P/ASX 200 M/M: 4.5% YTD: -7.7% World equity markets staged a July rally as investor sentiment improved on both economic news and corporate earnings. In Europe, the results of the bank stress tests were released and only 7 of 91 banks failed, providing much needed relief to the region. Meanwhile, the Govenor of the Bank of Canada stated that the chance of a double dip recession was remote after raising the overnight rate to 0.75%. In the U.S., the S&P 500 had the best monthly performance since July In Asia, fears about a Chinese slowdown appeared to ease as the Shanghai Property Index and regional equity markets recovered. *** All returns calculated in local currency. Source: Bloomberg

4 Canadian and US Economic Data July 2010 Better Than Expected Event Period Consensus Actual Prior 20-Jul US Building Permits MOM% JUN 0.20% 2.10% -5.90% 30-Jul US Chicago Purchasing Manager JUL Jul US Continuing Claims 17-Jul 4500K 4565K 4487K 16-Jul US CPI Ex Food & Energy (MoM) JUN 0.10% 0.20% 0.10% 22-Jul US Existing Home Sales JUN 5.10M 5.37M 5.66M 22-Jul US House Price Index MoM MAY -0.30% 0.50% 0.80% 22-Jul US Leading Indicators JUN -0.30% -0.20% 0.40% 9-Jul CA Net Change in Employment JUN 20.0K 93.2K 24.7K 26-Jul US New Home Sales JUN 310K 330K 300K 15-Jul CA New Motor Vehicle Sales MoM MAY 0.0% 0.2% -4.7% 30-Jul US U. of Michigan Confidence JUL F As Expected 16-Jul US Consumer Price Index (MoM) JUN -0.10% -0.10% -0.20% 15-Jul US Capacity Utilization JUN 74.10% 74.10% 74.70% 20-Jul CA Bank of Canada Rate 20-Jul 0.75% 0.75% 0.50% 14-Jul US Retail Sales Less Autos JUN -0.10% -0.10% -1.10% Weaker Than Expected 23-Jul CA Bank Canada CPI Core MoM JUN 0.1% -0.1% 0.3% 6-Jul CA Building Permits MoM MAY -2.0% -10.8% 5.4% 27-Jul US Consumer Confidence JUL Jul CA Consumer Price Index MoM JUN 0.0% -0.1% 0.3% 1-Jul US Domestic Vehicle Sales JUN 8.81M 8.57M 9.14M 28-Jul US Durable Goods Orders JUN 1.00% -1.00% -1.10% 30-Jul US GDP QoQ (Annualized) 2Q A 2.6% 2.4% 2.7% 30-Jul CA Gross Domestic Product MoM MAY 0.2% 0.1% 0.0% 9-Jul CA Housing Starts JUN 190.3K 189.3K 189.1K 20-Jul US Housing Starts JUN 577K 549K 593K 29-Jul US Initial Jobless Claims 24-Jul 460K 457K 464K 1-Jul US ISM Manufacturing JUN Jul US ISM Non-Manf. Composite JUN Jul CA Manufacturing Sales MoM MAY 0.5% 0.4% 0.2% 30-Jul US Personal Consumption 2Q A 2.4% 1.6% 3.0% 15-Jul US Producer Price Index (MoM) JUN -0.1% -0.5% -0.3% 29-Jul CA Raw Materials Price Index MoM JUN 1.0% -0.3% -7.2% 22-Jul CA Retail Sales MoM MAY 0.4% -0.2% -2.0% 27-Jul US S&P/CaseShiller Home Price Ind MAY Jul CA Unemployment Rate JUN 8.1% 7.9% 8.1% 2-Jul US Unemployment Rate JUN 9.8% 9.5% 9.7% 21-Jul CA Wholesale Sales MoM MAY 0.4% -0.1% -0.3% 2-Jul US Change in Manufact. Payrolls JUN 25K 9K 29K

5 Canadian Equities July 2010 S&P/TSX Composite Sector Movement -16% -14% -12% -10% -8% -6% -4% -2% 0% 2% 4% 6% 8% 10% 12% 14% 16% INFORMATION TECHNOLOGY CONSUMER STAPLES UTILITIES INDUSTRIALS FINANCIALS ENERGY CONSUMER DISCRETIONARY TELECOM HEALTHCARE MATERIALS Top 10 S&P/TSX Contributors/Decliners by Index Points Potash Corp of Saskatchewan Inc Royal Bank of Canada Suncor Energy Inc Toronto-Dominion Bank/The Research In Motion Ltd Bank of Montreal Bank of Nova Scotia Teck Resources Ltd Agrium Inc Canadian Imperial Bank of Commerce/Canada Encana Corp New Gold Inc Silver Wheaton Corp Yamana Gold Inc Kinross Gold Corp IAMGOLD Corp Agnico-Eagle Mines Ltd Eldorado Gold Corp Goldcorp Inc Barrick Gold Corp U.S. Equities July 2010 S&P 500 Sector Movement -10% -8% -6% -4% -2% 0% 2% 4% 6% 8% 10% MATERIALS INDUSTRIALS ENERGY TELECOM CONSUMER DISCRETIONARY UTILITIES INFORMATION TECHNOLOGY FINANCIALS CONSUMER STAPLES HEALTHCARE Top 10 S&P 500 Contributors/Decliners by Index Points Microsoft Corp General Electric Co Chevron Corp JPMorgan Chase & Co Exxon Mobil Corp AT&T Inc Wal-Mart Stores Inc Coca-Cola Co/The Oracle Corp Wells Fargo & Co Micron Technology Inc Stryker Corp Berkshire Hathaway Inc Merck & Co Inc Thermo Fisher Scientific Inc Johnson & Johnson Newmont Mining Corp Medco Health Solutions Inc Bank of America Corp Weyerhaeuser Co The information contained in this report has been compiled by RBC Dominion Securities Inc. ( RBC DS ) from sources believed by it to be reliable, but no representations or warranty, express or implied, are made by RBC DS or any other person as to its accuracy, completeness or correctness. All opinions and estimates contained in this report constitute RBC DS s judgment as of the date of this report, are subject to change without notice and are provided in good faith but without legal responsibility. This report is not an offer to sell or a solicitation of an offer to buy any securities. Additionally, this report is not, and under no circumstances should be construed as, a solicitation to act as securities broker or dealer in any jurisdiction by any person or company that is not legally permitted to carry on the business of a securities broker or dealer in that jurisdiction. This material is prepared for general circulation to Investment Advisors and does not have regard to the particular circumstances or needs of any specific person who may read it. RBC DS and its affiliates may have an investment banking or other relationship with some or all of the issuers mentioned herein and may trade in any of the securities mentioned herein either for their own account or the accounts of their customers. RBC DS and its affiliates may also issue options on securities mentioned herein and may trade in options issued by others. Accordingly, RBC DS or its affiliates may at any time have a long or short position in any such security or option thereon. Neither RBC DS nor any of its affiliates, nor any other person, accepts any liability whatsoever for any direct or consequential loss arising from any use of this report or the information contained herein. This report may not be reproduced, distributed or published by any recipient hereof for any purpose. RBC Dominion Securities Inc.* and Royal Bank of Canada are separate corporate entities which are affiliated. *Member Canadian Investor Protection Fund. Registered trademark of Royal Bank of Canada. Used under licence. RBC Dominion Securities is a registered trademark of Royal Bank of Canada. Used under licence. Copyright All rights reserved.