North American Weekly News

Week ended 7 June 2013

After weathering some volatility earlier last week, North American equity markets moved higher at the end of the period to finish in positive territory. The late-week upturn was fueled by the release of better-than-expected US employment data. The US Labor Department reported that non-farm payrolls increased by 175,000 in May, while the unemployment rate was up 0.1% to 7.6% The job gains were led by the professional and business services, food services, and retail trade sectors. Additionally, revisions in the March and April figures resulted in a net decrease of 12,000 over the two-month period. US household wealth increased by US$3 trillion to a record US$70 trillion in the first quarter of 2013, according to the Federal Reserve. The nation’s aggregate net worth was bolstered mainly by the resurgence in home prices, as well as the continued strong performance of the equity market. On the negative side, the Institute for Supply Management’s Purchasing Managers Index (PMI) fell 1.7 percentage points in May to 49.0%. The PMI reading, which represents the first contraction in the US manufacturing sector in seven months, reached its lowest level since 2009. The decline was due largely to reductions in order backlogs (an indicator of future business), production and new orders.

In news involving our large-cap portfolio holdings during the week, derivatives exchange operator IntercontinentalExchange (ICE) announced its shareholders approved the acquisition of NYSE Euronext, the operator of the New York Stock Exchange. Shareholders of NYSE Euronext also voted in favour of the deal, which still requires final approval from US and European financial regulators. Canadian transportation equipment maker Bombardier received an order for 96 of its Movia C30 rail vehicles from the Stockholm Transport Authority (STA) for delivery beginning in November 2016. The company also noted that the contract, which could be worth as much as US$771 million, contains an option for the STA to purchase up to 80 more vehicles in the future.

Regarding our small-cap company positions, apparel retailer Ascena Retail Group posted weak results for the third quarter of its 2013 fiscal year. Healthy year-over-year revenue growth attributable to last year’s acquisition of the Lane Bryant and Catherine’s brands was offset by lower overall same-store sales (those in operation for at least one year) and a decrease in gross margin. Management attributed the weakness to unseasonably cold winter and spring weather and the general economic pressure on middle-income consumers. Canadian Western Bank recorded its 100th consecutive profitable quarter for the second quarter of its 2013 fiscal year. Results were buoyed primarily by sizeable loan growth, mainly in equipment financing and general commercial loans, which more than offset a modest decline in net interest margin.