Midday Market Comments

Canada

 

At midday, equities in Canada are marginally higher after climbing back from steep losses earlier in the day with strength in the Materials and Energy subsectors of the S&P/TSX despite lower prices of crude oil and most metals.  

 

Encana Corp (ECA) and Canadian Natural Resources (CNQ) both rallied by 3.1% and 4.2%, respectively.  In the Materials subsector, Potash Corp of Saskatchewan (POT) and Agnico Eagle (AEM) rallied 4.2% and 2.3%, respectively as investors bought beaten up commodity stocks at what some perceive to be bargain prices.

 

The Financial subsector is lower by 0.7% as most major Canadian banks trade lower with the exception of Bank of Nova Scotia (BNS) which is up 0.3%.  Canadian Imperial Bank of Commerce (CM) is leading the rest of the banks lower by 2.8%.  The health of the U.S. financial sector is weighing heavily on Canadian banks after investment bank Lehman Brothers failed to announce deals to raise capital.

 

Statistics Canada released Canada's trade surplus numbers which narrowed more than expected in July as imports rose twice as fast as exports.  Energy exports fell for the first time in nine months.  There is some evidence of a cooling house market in Canada as price increases for new homes in Canada eased in July, advancing only 0.1%.  

 

Apparel retailer Lululemon Athletica Inc (LLL) rallied 6.2% after reporting a sharp rise in 2008 Q2 profit.  

 

U.S.

 

At midday, U.S. equities have recovered from earlier losses and are flat for the day with weakness in the Financial subsector of the S&P500 offset by strength in Materials and Energy.

 

Financials are under pressure as shares of Lehman Brothers Holdings Inc (LEH US) continued to plunge and are now down 31% after the U.S. investment bank suffered one of its worst quarterly losses in company history (almost US$ 4 billion).  Lehman said it would spin-off part of its commercial real estate assets, among other moves. Rumors out of NYC - Goldman looking at Lehman - no surprise here. Likely GS will want Fed guarantee like JPM got with Bear Stearns. Washington Mutual (WM US) followed Lehman and dropped 9% more after a ratings agency on Tuesday changed its outlook on the largest U.S. savings and loan to negative from stable, according to Reuters.  

 

International

 

Equities in Asia fell to their lowest low since November 2005 on concern credit-market losses will increase and slowing growth will damp demand for the region's exports.  Both the Nikkei and Hang Seng closed lower by 2.0% and 3.1% respectively.   Investors in Asia sold financials after Lehman Brothers plunged yesterday and posted a wider loss than analysts expected.  Both Mitsubishi UFJ Financial Group Inc and Australia & New Zealand Banking Group Ltd closed lower by more than 4%.  Mazda Motor Corp. declined more than 10% after the European Commission cut it's European growth outlook. 

 

In Europe, equities also declined led by retailers and financial firms on growing concerns over a deepening economic slowdown.   Home Retail Group Plc dropped 6.2% after reporting lower sales.  All major European indices are currently trading in negative territory with losses just under 1%.

 

Currencies & Commodities

 

Crude oil declined $0.84 to $101.78 per barrel and was trading earlier around the psychologically important $100 per barrel mark as the broad-based commodity sell-off trend continues amid persistent concerns over a slowing global demand.  Hurricane Ike is receiving daily news coverage and publicity, but does not seem to be causing any supply worries.

 

Gold dropped below $740 /oz and is at it's lowest level since October 2007 as the U.S. dollar gained and reduced demand for the precious metal as an alternative investment.  CMX prices of platinum and copper are also lower at midday, led by silver, down over 4%.  Aluminum is trading higher.