Midday Market Update

U.S.

At midday, U.S. equities are lower led by weakness in Energy and Financial subsectors of the S&P 500 in-line with lower energy prices and negative news regarding Lehman Brothers (LEH US). At midday, shares of Lehman Brothers are getting hammered after talks with Korea Development Bank have apparently ended. The stock is now down over 27% and touched as low as 8$ per share. Lehman Brothers is dragging down the Financial subsector of the S&P 500, currently down 3.4%.

Washington Mutual (WM US) continues to plummet after the largest U.S. savings and loan company replaced CEO Kerry Killinger and has been put under special regulatory supervision, following dramatic losses from mortgages. Washington Mutual is trading lower by over 19%.

Commodity related stocks are posting steep declines in-line with much lower commodity prices, dragging down the Energy and Materials subsectors down by 3.5% and 2.8%, respectively.

Canada

At midday, equities in Canada are materially lower, led by weakness in the Materials and Energy subsectors of the S&P/TSX. Commodity-related stocks are being “whacked” lower by broad-based, heavy declines in commodity prices and worries over slowing economic growth.

The Energy subsector is posting a loss of 4.4% with crude oil trading lower by over 2% as threats from Hurricane Ike eased and expectations increased that OPEC will not cut any output. Worthy of mention are Canadian Natural Resources (CNQ) which plunged 4.7% and Suncor Energy (SU), down 4.5%.

The Materials subsector is also lower, down 5.0% in-line with lower gold and base metals prices, as the U.S. dollar traded higher. Gold-miner Agnico-Eagle (AEM) declined by 5.3%. Fertilizer producers are down with Potash Corp of Saskatchewan (POT) falling almost 7%.

All major Canadian banks are trading lower led by the Canadian Imperial Bank of Commerce (CM), down 1.4% as the Finance subsector of the S&P/TSX is down 0.5%.

A Globe and Mail article reported that CI Financial Income Fund (CIX-UN) is in preliminary talks to sell investment banking unit Blackmont Capital Inc to Canaccord Capital Inc (CCI), in exchange for a minority stake in Canaccord. CI Financial is trading 1.1% higher.
Companies reporting today include Major Drilling Group International (MDI) and Harry Winston Diamond Corp (HW). Both companies will report after the close.

International

In Asia, equities fell on concerns that global economic growth is slowing. Materials, shipping and financial companies closed lower with Nikkei and Hang Seng posting negative returns of -1.77% and -1.46% at the close. Worthy of mention are Newcrest Mining Ltd. and Cnooc Ltd. which led commodity stocks lower, as gold and oil declined. Other big losers included Mitsui O.S.K. Lines Ltd, and Macquarie Group Ltd which closed 6.9% and 7.3% lower as investors lost confidence in Lehman Brothers Holdings and feared further writedowns.

Currencies & Commodities

Commodities are under pressure with Natural Gas down 3.7% and Crude oil for October delivery trading 2.0% lower as it appears that Hurricane Ike will miss most oil & gas facilities in the Gulf of Mexico.

The Saudi Arabia’s oil minister commented that supplies are sufficient to meet current demand, suggesting that OPEC will maintain current output. The price of crude oil is currently at its five-month low.

The CRB index is now up only 1.0% on a year to date basis, and down 24% from its all-time high in July. CMX metals prices are declining with Gold, Silver, Platinum, Nickel and Copper all lower.