Need To Know News

IA Clarington Canadian Leaders Fund has been outperforming more than 95% of its competitors, and now portfolio manger Pierre Bernard has sold more than half the C$100mln fund’s energy holdings and increased investment in banks by 44%.

According to Bernard, energy companies are about to start feeling the rising costs of materials and won’t be making the same kinds of profits for much longer, while banks — having weathered the credit crunch — look primed for a rebound in earnings.

Canada’s Finance Minister Jim Flaherty seems reluctant to pressure oil producers to lower prices as requested by France in a letter sent to members of the G-8 this week, which argued that soaring oil prices are a threat to economic growth.

Flaherty’s response was that gasoline prices are determined in world markets and are not the choice of a single country. Currently Canada’s economy has been sheltered from the US slowdown on the strength of those skyrocketing prices for oil and natural gas exports.

French FinMin Christine Lagarde’s letter suggests that when the G-8 finance minsters meet in Osaka later this year they could consider urging oil producers to increase production. Her sentiments are backed by the UK’s Gordon Brown.

Boston FED President Eric Rosengren said the housing market still presents the great downside risk to the economy, but the aggressive cutting of rates should help the economy in H2. He added that while Core PCE inflation is not good, but has been worse in previous periods.

Construction Spending is expected to fall 0.6% in April following a 1.1% decline prior. Private Residential Construction fell 4.6% in March, Private Non-Residential Construction rose 1.9%, and Public Construction increased 0.6%.

Private Residential Construction Spending will continue to drag on overall construction spending, especially single-family and home improvement spending, as the US housing market continues to stumble through spring.

Overall Construction Spending in April should received a boost from private non-residential and public construction spending, however these gains are unlikely to fully mitigate the negative impact from declines in private residential spending.

Related Data:

• April aggregate construction hours worked fell 1.5%
• March Pending Home Sales Index down 1%
• May NAHB Housing Market Index: 19 from 20 in April
• April Housing Starts up 8.2%, Building Permits up 4.9%
• March House Price Purchase Index down 0.4%
• April Existing Home Sales down 1%
• S&P/CaseShiller Composite 20 year-over-year down 14.4%
• April New Home Sales up 3.3%

Energies are mixed with Crude up 0.2% to 126.87 after dipping to 124.67 earlier in the day.  Unleaded is marginally higher at 340.5, Heating Oil is down 1.18% to 366.60, and Natural Gas is 1.73% to 11.675.

Metals are well bid with Gold, reversing its 3-day loss trend, is up 0.9% to 889.6, Silver up 1.6% to 16.770, Platinum is up 1.2% to 2014 and Copper up 1% to 359.45.

Calgary-based Enbridge Inc., Canada’s largest pipeline company, is accepting $1.7bln for its 25% interest in Spanish crude products operator Compania Logistica de Hidrocarburos, divesting that interest to a group of investors as it focuses on Alberta’s burgeoning output.

Among the buyers are the Canadian Public Sector Pension Investment Board, AMP Capital Investors, and subsidiaries of Deutsche Bank.

Enbridge is planning to spend some C$12.2bln on its North American projects, including a C$2bln pipeline.

Equity futures are all marginally higher right now with Dow and S&P futures up 0.2%, and Nasdaq futures up 0.5%. S&P futures have traded in a fairly tight range between yesterday’s close (1398) and the high (1404) when PCE was released this morning . S&P futures threatened to break through the high end of today’s range when crude hit lows (124.67) around 10:30, but bounced back after oil reversed course.

The 1% gain in S&P Financials is being largely offset by similar declines in Energy stocks. The Nasdaq is getting a big boost from Dell (+8%) after it’s strong earnings last night.

Bonds are higher across the board for the first time this week despite the slightly higher-than-expected May UofM Confidence and May Chicago PMI data. The May Chicago PMI Prices Paid Index grew to 87.5 from 82.9 prior, a bearish development for bonds which may have limited the upside in today’s rally.

The uptick in fixed income has been global, as European and Asian bonds are all higher across the board. The 10yr Gilt is up 0.24% with a yield of 4.994%, the 10yr Bund is up 0.17% with a yield of 4.577%, and the 10yr JGB is up 0.35% with a yield of 1.739%.

In the US, the 30yr is up 0.4% with a yield of 4.707%, the 10yr is up 0.3% with a yield of 4.032% and the 2yr is yielding 2.617%. The short end of the curve is flat with the 3month bill yield at 1.89% and the 4week and 6month bills each yielding 4%.

Speaking from London, Canadian Prime Minister Stephen Harper says an agreement on regulations designed to avoid future crashes in global markets is starting to develop among G-8 nations.

Already finance ministers from around the world have endorsed a 100-day strategy to shore up regulation, and later this year the G-8 leaders will meet to discuss the global economy in the context of $382bln credit losses and write-downs at the world’s biggest banks. Meanwhile, other bodies such as the Organization of Securities commissions are weighing in with new regulations for markets.

So far, Treasury has sent out 57.433mln total economic stimulus payments totaling $50.041bln.