benjamin tal weekly market update june 24th 2011

8/6/2019 Benjamin Tal Weekly Market Update June 24th 2011

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Weekly Market Insight

June 24, 2011

NORTH AMERICAN & INTERNATIONAL ECONOMIC HIGHLIGHTS

The Emperor Has No Clothesby Benjamin Tal

If the real measure of intelligence is what you do when you don’t know what to do, then the next few weeksand months will test the economic IQ of both Bernanke and Carney.

At this point most would agree that the current economic situation is not clearer than when both centralbankers described the outlook as “unusually uncertain”. And this was before Tunisia, before Egypt, beforeLibya and before Japan. Add to the fog an increased nervousness about China and eurozone debt and thecurrent economic environment might be even more uncertain than “unusually uncertain”.

So what do you do when you don’t know what to do? At the minimum you don’t take chances. And that’swhy we expect both central banks to be extremely conservative over the next year.

Sure, people have been musing about QE3 —but Bernanke again showed no signs of going that route thisweek. The end of QE2 come June 30th will be a non-event, not only because the efficient discountingmechanism called the financial market has already priced it in, but mainly because of the fact that there is little

to price in. By almost any measure, QE2 was not a major force impacting the market, since as opposed to QE1,it was relatively narrow in scope and was introduced in an improved economic environment.

So if QE2 was not very effective, chances are that QE3 would be even less effective. And if you are Bernankeyou have two options: use an ineffective weapon and reveal your helplessness, or keep this ineffective weaponin reserve as a perceived potential tool, while hoping that nobody in the crowd exclaims that the emperor hasno clothes.

Simply put, applying QE3 would be more risky than not applying it. And the Fed’s lack of ammunition is whyearlier this week its chief made it very clear that Washington should take it slow when dealing with the deficit.

While in the US the main problem is that monetary policy is not working, in Canada the opposite the case—it

is working too well. This was the first recession ever that real household credit continued to expand, reflectinga relatively secure household sector vs. an American consumer that lost 60% of its confidence. Add to that aCanadian banking sector that was willing to lend and here in Canada we were firing on all cylinders while theUS was lacking firepower.

Interest rates effectively stimulated the economy on their way down, but with the Canadian debt-to-incomeratio now at a new record high, rates will be even more effective on their way up. This increased sensitivity ofthe economy to monetary policy will limit the ability of the Bank of Canada to raise rates. The surprise will behow little tightening in monetary policy it will take to slow down a Canadian consumer that is already steppingon the brakes.

Economicshttp://research.cibcwm.com/res/Eco/EcoResearch.htm



CIBC WORLD MARKETS INC.

Weekly Market Insight 2

Market Snapshot

US Current* yesterday* a week ago* a month ago* a year ago*

TED SPREAD (bps) 24 24 22 21 4310Y / 2Y SPREAD (bps) 255 256 258 258 2432Y SWAP SPREAD (bps) 28 28 27 19 36

3M T-Bill (%) 0.01 0.01 0.03 0.04 0.11

LIBOR 1 MONTH (%) 0.19 0.19 0.19 0.19 0.35LIBOR 3 MONTH (%) 0.25 0.25 0.25 0.25 0.54

2-YR BOND (%) 0.35 0.35 0.37 0.48 0.685-YR BOND (%) 1.45 1.46 1.54 1.71 1.9110-YR BOND (%) 2.90 2.91 2.95 3.06 3.11

A Rate d / 10Y TREASURY (bps) 149 155 145 136 181B Rate d / 10Y TREASURY (bps) 517 516 490 465 659BB Rate d / 10Y TREASURY (bps) 329 335 312 303 448

CANADA

PRIME / BA SPREAD (bps) 180 180 180 180 183

CDOR 3 MONTH (%) 1.17 1.18 1.18 1.20 0.83CDOR 3 MONTH / 3M T-BILL SPRE AD (bps) 29 30 25 25 26

10Y / 2Y SPREAD (bps) 145 144 145 153 161

2-YR BOND (%) 1.45 1.47 1.50 1.53 1.62

5-YR BOND (%) 2.10 2.12 2.18 2.34 2.5410-YR BOND (%) 2.90 2.91 2.94 3.06 3.24

A Rate d / 10Y TREASURY (bps) 114 121 113 111 135BBB Rate d / 10Y TREASURY (bps) 201 206 197 189 199CAN Sover eign Agency / 10Y TREASURY (bps) 39 43 35 31 52

COMMODITIES

WTI CRUDE FUTURE (US$ / bbl.) 90.9 90.8 93.4 100.9 75.8NATURAL GAS (US / MMBtu) 4.2 4.2 4.4 4.5 4.8SILVER (US /t oz.) 34.7 35.2 35.7 38.0 18.4GOLD (US$ / t oz.) 1515.0 1521.3 1536.2 1534.0 1228.4WHEAT (US¢ / bu.) 657.5 610.0 679.8 811.5 465.8SOYBE ANS (US¢ / bu.) 1323.8 1310.3 1355.0 1387.5 962.8SUGAR (US¢ / lb.) 27.5 26.4 26.0 22.9 16.5CORN (US¢ / bu.) 693.3 641.8 711.0 746.3 349.8

FX

C$ / US$ 0.982 0.981 0.982 0.977 1.044US / EURO 1.421 1.415 1.428 1.424 1.224C / EURO 1.395 1.388 1.403 1.392 1.277YEN / US$ 80.260 80.550 80.190 81.090 90.150US / BRITISH POUND 1.601 1.597 1.616 1.643 1.489SWISS FRANCS / US 0.837 0.839 0.848 0.857 1.111

* As of 11:00 a.m.Note: Data is for refe rence only.





International Stock IndexesThursday, June 23, 2011

YTD 3-yr

High Low - + % chg % chg

The Global Dow (World) 2074.96 2028.31 2045.79 -29.17 -1.41 0 -2 2262.21 1699.63 14.8 -6.9

The Global Dow Euro (World) 1362.84 1351.18 1361.5 7.9 0 0.58 -7.1 1548.75 1272.45 unch. -4

DJ Global Index (World) 256.39 250.88 253.06 -3.33 -1.3 0 -0.3 274.64 203.56 18.9 -2.3

DJ Global ex U.S. (World) 220.94 215.71 216.36 -4.58 -2.07 0 -2.3 238.76 176.81 17.2 -3.8Asia Pacific 0 0 0 0 0 0 0 0 0 0 0

All Ordinaries (Australia) 4599.4 4560.5 4561.4 -29.4 -0.64 0 -5.9 5064.9 4250.6 1.3 -5.5

S & P/ASX 200 (Australia) 4540.5 4500.2 4500.5 -32.1 -0.71 0 -5.2 4971.2 4222.1 0.5 -5.2

DJ CBN China 600 (China) 24919.49 24247.77 24857.67 424.15 0 1.74 -6.9 29974.75 20950.68 7.3 4

Dow Jones China 88 (China) 239.34 233.36 238.65 3.8 0 1.62 -2 278.82 208.48 6.3 -1.4

Shanghai Composite (China) 2693.42 2630.34 2688.25 38.93 0 1.47 -4.3 3159.51 2363.95 4.7 -0.9

Hang Seng (Hong Kong) 21905.1 21632.87 21759.14 -100.83 -0.46 0 -5.5 24964.37 19842.2 4.9 -1.4

Bombay Sensex (India) 17754.55 17482.21 17727.49 176.86 0 1.01 -13.6 21004.96 17441.44 unch. 7.4

Jakarta Composite (Indonesia) 3829.63 3801.7 3823.65 1.82 0 0.05 3.2 3872.95 2871.55 31.2 17.4

Nikkei 300 (Japan) 168.7 167.08 167.55 -0.76 -0.45 0 -8.1 198.35 156.93 -5.7 -15.2

Nikkei Stock Avg (Japan) 9652.41 9553.3 9596.74 -32.69 -0.34 0 -6.2 10857.53 8605.15 -3.3 -11.5

Topix Index (Japan) 830.85 822.78 825.51 -3.48 -0.42 0 -8.2 974.63 766.73 -6.2 -15.1

Kuala Lumpur Composite (Malaysia) 1567.19 1562.2 1563.19 -4.16 -0.27 0 2.9 1574.49 1299.5 17.9 9.4

NZSX-50 (New Zealand) 3474.03 3 454.44 3461.81 4.35 0 0.13 4.6 3577.44 2933.82 13.5 1.7

KSE 100 (Pakistan) 12518.22 12363.28 12508.42 139.01 0 1.12 4 12681.94 9516.42 27.7 3.9Manila Composite (Philippines) 4252.82 4237.47 4241.14 -4.14 -0.1 0 1 4397.3 3290.98 27.2 19.3

Straits Times (Singapore) 3057.52 3029.19 3044.72 1.89 0 0.06 -4.6 3313.61 2820.35 6.9 0.7

Kospi (South Korea) 2064.96 2048.06 2055.86 -8.04 -0.39 0 0.2 2228.96 1671.82 18.2 6.2

Colombo Stock Exchange (Sri Lanka) 6871.68 6871.68 6871.68 -56.06 -0.81 0 3.6 7811.82 4470.78 49.3 40.5

Weighted (Taiwan) 8619.39 8559.33 8567.28 -53.76 -0.62 0 -4.5 9145.35 7254.06 12.9 2.8

SET (Thailand) 1020.09 1013.38 1014.13 -9.73 -0.95 0 -1.8 1109.92 793.19 27.9 9.7

Europe 0 0 0 0 0 0 0 0 0 0 0

Stoxx Europe 50 (Europe) 2526.24 2483.52 2491.56 -33.93 -1.34 0 -3.7 2768.65 2287.92 3.2 -5.3

Euro Stoxx 50 (Euro zone) 2786.09 2722.04 2730.86 -64.21 -2.3 0 -2.2 3068 2507.83 3.2 -7.3

Euro Stoxx (Euro zone) 274.32 267.96 268.68 -5.63 -2.05 0 -2.1 296.96 240.62 5.9 -6.5

ATX (Austria) 2736.43 2713.42 2713.98 ... 0 Closed -6.6 3000.7 2223.63 11.8 -12.6

Bel-20 (Belgium) 2551.6 2512.06 2513.47 -44.65 -1.75 0 -2.5 2770.81 2329.6 2.3 -9.1

PX 50 (Czech Republic) 1224.4 1208.3 1210.3 -14.8 -1.21 0 -1.2 1276.3 1100.1 6.4 -8

OMX Copenhagen (Denmark) 391.16 384.51 385.4 -6.06 -1.55 0 -9.7 441.74 357.73 1.5 -1.8

OMX Helsinki (Finland) 6450.59 6360.01 6367.44 -101.12 -1.56 0 -16.9 7912.33 6134.78 -0.8 -9.7

CAC 40 (France) 3857.89 3774.27 3787.79 -83.58 -2.16 0 -0.4 4157.14 3332.46 6.5 -5.7

DAX (Germany) 7237.2 7118.52 7149.44 -128.75 -1.77 0 3.4 7527.64 5816.2 16.9 2.8

BUX (Hungary) 22497.38 22051.87 22304.4 -234.77 -1.04 0 4.6 24451.38 20221.37 4.6 2.9

FTSE MIB (Italy) 19894.48 19425.88 19468.31 -545.8 -2.73 0 -3.5 23178.38 18848.56 -2.4 -13.2

AEX (Netherlands) 332.79 326.86 328.57 -5.6 -1.68 0 -7.3 374.19 306.27 -0.2 -9.1

All-Shares (Norway) 464.17 451.92 453.11 -11.06 -2.38 0 -6.9 513.6 367.63 12.5 -6.2

WIG (Poland) 48837.12 48485.26 48485.26 ... 0 Closed 2.1 50371.74 39366.83 20.2 4.1

PSI 20 (Portugal) 7116.15 7003.39 7030.95 -116.57 -1.63 0 -7.3 8126.63 7019.28 -2.7 -9.8

DJ Russia Titans 10 (Russia) 6634.56 6427.55 6480.11 -116.46 -1.77 0 -4 7565.66 4950.56 20.3 -4.5

RTS Index (Russia) 1882.16 1822.38 1829.97 -48.41 -2.58 0 3.4 2123.56 1288.72 30.4 -7.9

IBEX 35 (Spain) 10171.3 9910.5 9942.6 -283.6 -2.77 0 0.8 11113 9160.4 3.7 -7.1

SX All Share (Sweden) 338.75 333.95 334.52 -5.32 -1.57 0 -9.2 375.82 305.38 4.9 4.2

Swiss Market (Switzerland) 6107.81 5961.97 5991.09 -122.35 -2 0 -6.9 6717.25 5942.25 -5.2 -5.2

Istanbul National 100 (Turkey) 61715.5 60465.07 61589.91 371.95 0 0.61 -6.7 71543.26 54534.28 10.1 17.9

FTSE 100 (U.K.) 5773 5663.3 5674.38 -98.61 -1.71 0 -3.8 6091.3 4805.8 11.3 unch.

FTSE 250 (U.K.) 11636.24 11451.06 11453.72 -182.44 -1.57 0 -0.9 12060.79 9139.65 18.1 7.1

Americas 0 0 0 0 0 0 0 0 0 0 0

Merval (Argentina) 3324.73 3263.35 3313.88 -19.7 -0.59 0 -6 3664.82 2185.01 44 16.6

Sao Paulo Bovespa (Brazil) 61858.97 61194.09 61194.09 ... 0 Closed -11.7 72995.69 60865.27 -6.1 -1.8

S & P/TSX Comp (Canada) 13060.56 12838.81 12979.58 -80.98 -0.62 0 -3.4 14270.53 11092.5 11.2 -4

Santiago IPSA (Chile) 4712.05 4 660.44 4 694.88 -16.21 -0.34 0 -4.7 5040.97 4025.17 15.2 15.5

IPC All-Share (Mexico) 35392.69 35026.98 35326.66 -72.78 -0.21 0 -8.4 38696.24 31156.97 9.3 6.2

Caracas General (Venezuela) 80648.3 79875.62 80158.86 283.24 0 0.35 22.7 81049.83 63843.32 24 29.8

Other Countries 0 0 0 0 0 0 0 0 0 0 0

Tel Aviv (Israel) 1226.13 1211.08 1211.08 -21.08 -1.71 0 -8.7 1341.89 1061.56 10.7 2.4

Johannesburg All Share (South Africa) 30792.87 30295.08 30326.54 -466.33 -1.51 0 -5.6 33094.06 26009.53 10.6 -0.2

Johannesburg All Share (South Africa) 31703.89 31414.09 31634.17 112.84 0 0.36 -1.5 33094.06 26009.53 16.6 0.2

*Europe, Australia, Far East; U.S.-dollar terms. Three year percent change is annualized. Sources: Reuters; WSJ.com

DAILY 52 WEEK

Index (Regiona/Country) Close Chg High Low % Chg

% Chg

Other Countries

Global

Asia Pacific

Europe

Americas





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benjamin tal weekly market update june 24th 2011

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