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Market Round Up: September 3-7, 2012

Market Comments: Two main market movers last week were US non-farm Payroll data, and ECB meetings. Despite week jobs data, the S&P gained 2.23% throughout the week, closing at levels not seen since 2008. This is likely because the poor economic data suggests more QE is likely. With regards to the ECB, Mario Draghi said he would purchase short-term government bonds to alleviate funding pressures of struggling nations, which caused huge upward momentum in markets and the Euro alike. In essence, the ECB is “willing to absorb a big chunk of Europe’s credit and currency risk, making the remaining assets safer.”[1] Some criticism surrounding whether or not this falls into the ECBs mandate has arisen.

It was a short trading week in Canada as markets were closed Monday for Labour Day. Over August “the S&P 500’s biggest up-day sent it all of 0.7 per cent higher; the biggest down-day sent it down 0.8 per cent. Over this period, the index has risen 0.9 per cent.”[2] Normally, markets wake up in September, but this week they are still a tad sluggish, even with a rally on Thursday following Draghi’s comments (the TSX gained 1.3% Thursday, and 1.1% Friday).

Company News:  The Glencore-Xstrata (or Glenstrata colloquially) news was big news last week, and will continue to be in the upcoming week as well.  While many thought the deal was extinct, Glencore offered 3.05 of it shares for each of Xstratas, with stipulations that Mick Davis, current chief executive, would no longer head the company.  Davis would, of course, receive “£8 million and receive company shares worth up to £30 million” if the bid succeeds.[3] This essentially moves the deal from a merger to a takeover. While the company has not rejected the deal outright, they are negative about it. Also interesting is the role past prime minister Tony Blair played, brokering the deal.

RBS is in negotiations to settle on its role in the Libor manipulation, paying out close to £300 million. While this is similar to the amount Barclays paid, complications with the Department of Justice, Serious Fraud Office and national ownership of the company will complicate matters.

Apple shares reached another high last Friday, ahead of this week’s launch of the new iPhone 5. “The device is expected to have a thinner profile with a longer screen that is nonetheless still smaller than Samsung’s Galaxy S3 or Motorola’s latest RAZRs, launched last week. The iPhone 5 is almost certain to be faster, with an upgraded processor and 4G cellular data connection.”[4] This is especially noteworthy in comparison to Nokia’s launch last week, where share price dipped 15% during the CEO’s launch speech, and fell 12% on Wednesday (the day of the launch).

International News:  Investments in China have been considered ‘cheap’ for some time now. However, the country’s “transition” state makes it a difficult place to invest in (especially for wary investors). For instance, the leadership summit is scheduled for October (new leader is expected to be Xi Jinping), and few know what the authorities will do economically before, during or after. Also, many companies do not allow non-Chinese investors, so those that are available are already sifted through.






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