Monday 17 September 2012

Financial Update - September 17, 2012


North American markets are taking a breath this morning after last week’s Fed induced frenzy. Just in case you missed it, the Federal Reserve announced a third round of quantitative easing by pledging to buy some $40 billion of mortgage backed securities per month in the open market. They left the policy open- ended, meaning they will continue to ease as long as they see fit, while also extending their expectations of keeping interest rates low until 2015. This sent equities soaring, pushing the S&P500 to its highest level since December 2007 (actually an all time high if dividend reinvestment is included). The breadth of the advance was remarkable with volumes surging and the number of stocks making new 52-week highs jumping to its strongest level since late 2010. There is some question as to whether the move will do anything stimulate the US economy, but there is no question the action is inflationary. This week should be relatively quiet compared to last week’s fireworks with little economic or profit data on tap. Rona shares declined after Lowe’s withdrew its unsolicited offer to purchase the company. Apple shares are a few pennies shy of breaching $700 after first day pre-orders of its new gadget were double the numbers of its last phone. The TSX is down 13 pts. The Dow is down 18 pts.

The Canadian dollar has slipped a little after peaking Thursday, off 9 bps this morning to US$1.0288. Bond yields are also retreating with the 5-year Canada yielding 1.47% and the 10-year 1.95%. Oil is up 30 cents to US$99.30/barrel. Gold is flat at US$1773/oz.

Have a great day.

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