Market Buzz – Weak Chinese Data & U.S. Monetary Policy Worries Weigh on Global Stock Indices

Posted by KeyStone Financial

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logo mainU.S. stock indices ended down for the week as concerns over Chinese manufacturing data and a possible end to QE3 startled investors. The S&P500, which is up over 15% since the start of the year, posted its first weekly loss since mid-April. China’s manufacturing PMI fell to 49.6 from 50.4 in April, missing the consensus estimate of 50.5. Officials in China blamed the lower consensus numbers on weak global demand and declining domestic consumption. The poor performance from the world’s second largest economy continues to weigh on commodities and commodity investors as China has been a leading force behind strong energy and metals demand over the past decade. The effects of the weak data from China were felt abruptly in Asia, and particularity in Japan, where the Nikkei index which fell 7.3% on Thursday, its largest one day decline in 2 years.

Also weighing on investor’s minds were recent comments from the U.S. Federal Reserve Chairman, Ben Bernanke, who told congressmen this week that the American economy had improved relative to a year ago. One would expect that a long awaited recovery in the U.S. economy would be a boost to capital markets but many investors feel that the Federal Reserve may look to end their aggressive monetary stimulus, otherwise known as QE3, in the wake of better economic performance. We would strongly disagree with proponents of the idea that Bernanke would want pull his foot off the monetary stimulus pedal so quickly after only modest signs of improvement in the U.S. economy. It appears to be the U.S. government’s plan to continue to encourage a stronger export market in order to drive more jobs back into the American manufacturing engine. A quick end to monetary stimulus would mean a rather quick increase in long-term interest rates and in the U.S. dollar exchange rate which would put the brakes on U.S. export growth.

In spite of the jitters felt throughout the rest of the world, Toronto’s main index held firm trading roughly flat and ending the week at 12,667 points. Canada’s resource sectors remain largely under pressure with stocks in mining and oil & gas continuing to languish. Although overall the TSX index continues to produce lackluster returns and TSX Venture is outright bankrupting investors, KeyStone has continued to discover and recommend individual stocks which are producing outstanding investment returns in a challenging market. Lots more HERE & Below

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4/30/2013
INVESTMENT COMPANY – INDUSTRIAL BUSINESSES – WELL POSITIONED FOR ADDITIONAL ACQUISITIONS IN 2013 WITH AN ESTIMATED $35 MILLION IN NET CASH AND CONSISTENT PERFORMANCE FROM EXISTING BUSINESSES

In March, KeyStone recommended a profitable small-cap company that is benefiting substantially from the resource development taking place in Northern British Columbia and with no direct exposure to commodity prices. This stock has already generated our clients a return of almost 50% in only 2 months and we just reiterated our BUY recommendation this week after they released outstanding Q1 financial results. Not only does this stock trade at around 4 times earnings, but it remains well positioned to continue to benefit and grow from the resource and infrastructure development expected to occur in Northern BC over the next 5 years.

To find out more about this exciting company and several others, go to our website (www.keystocks.com) and become a client of KeyStone’s small-cap and dividend growth stock research.