Today's top stories from Report on Business :
EU pledges support for Greece
Stocks rose but the euro fell today after EU leaders meeting in Brussels pledged to support Greece as its debt crisis mounts. Markets were watching the economic summit closely for word on a bailout package, which didn't materialize in any concrete form as there were no details to the EU promise. The 16 countries in the euro currency union said they would take "determined and co-ordinated action" if that was necessary to keep the euro zone stable.
The burgeoning debt crisis in Europe, largely related to Greece, Portugal and Spain, has rippled through markets for weeks, pressuring the common currency and raising fears of a wider impact on the currency union and the broader global economy should a country default on its debt. "Unless there's further news out later this afternoon, the markets will consider the EU summit response as a disappointment," VTB Capital strategist Neil Mackinnon told The Associated Press.
Goldman Sachs Group this morning cut its outlook for the euro, warning investors what they risk holding the currency: "The related crisis in the euro zone - arguably the most threatening one since the euro came into existence - has once again exposed the problems of co-ordinating fiscal policy within a currency union. The plethora of issues raised likely justifies a permanently higher risk premium on investments in the euro zone and on the euro itself."
See
EU gives Greece support, no money
Audio: Eric Reguly on the Greek debt crisis
Marking a new phase in the global financial crisis
How Canada could gain from Greek crisis
Canada has become increasingly attractive to foreign investors looking for a haven from Europe's debt troubles because of its "superior" economic and fiscal outlook, CIBC World Markets said today. Economist Warren Lovely wrote in a research note that the Harper government has strong fiscal credentials, and economic growth should lead the G7.
"For a number of European countries, Greece and Portugal chief among them, a fiscal reckoning is at hand, sparking concerns of broader contagion on and off the continent," Mr. Lovely wrote. "We've long advocated the economic and fiscal merits of Canada. But as a sovereign debt crisis swirls, the nation's relative standing has strengthened further. Simply put, highly-rated Canada offers safe harbour in today's global debt storm." Read the story
Related : Economic outlook boosts Canadian dollar
Lower real estate fees could negate a change in rules
Lower real estate commissions could offset the changes in mortgage rules contemplated by Ottawa, Scotia Capital says. Two key developments have emerged this week. First, the Competition Bureau decided to challenge the rules governing the Canadian Real Estate Association's Multiple Listing Service, or MLS, by taking a challenge to the Competition Tribunal in a bid to strike down what it says are anticompetitive regulations. As well, The Globe and Mail reported today, Ottawa is studying new rules that would force commercial banks to use tougher criteria to evaluate mortgage borrowers, a move aimed at stopping home buyers from taking on more debt than they can handle.
While no allegations have yet been proven, a successful challenge by the Competition Bureau could well negate the effects of mortgage rule changes unless they are tougher than what markets envision, Scotia Capital economists Derek Holt and Karen Cordes wrote in a research note today.
"Indeed, the potential is there for home buying conditions to actually become easier over the next one or two years via sharply lower average commission rates that are more in keeping with choices south of the border," they said. "… Now of course the ultimate savings from lower commissions depend upon price incidence effects as others potentially swoop in to eat the lunch left behind by real estate agents. Maybe it's just a one-off adjustment that will drive home prices even higher if people take the pocketed savings and spend more than already record prices to buy a home. Or maybe they'll spend the pocketed difference on something else, though an offset at the macro level is that it means less spending for those earning lower commissions."
The bottom line, Mr. Holt and Ms. Cordes wrote, is that the Bank of Canada can't rely on Ottawa to cool "what we think is a house price bubble, even if the Canadian consensus is as unconvinced about its existence as the U.S. consensus once was."
Related
Ottawa weighs stricter mortgage rules
It's not the mortgages, it's the borrowers
U.S. report sees job creation
A White House report says the U.S. economy will probably create an average 95,000 jobs a month this year. "I can report that over the past year, this work has begun," President Barack Obama said in a letter to Congress as part of his economic update. "But to understand where we must go in the next year and beyond, it is important to remember where we began one year ago."
Citigroup launches pilot home project
Citigroup Inc. is launching a pilot project that would provide some relief to embattled home owners who are facing foreclosure. But there are strings attached. In a test in Texas, Florida, Illinois, Michigan, New Jersey and Ohio, the banking giant would allow home owners to remain in their homes for six months, but they must hand over the deeds to their properties. The Associated Press reported today that the program is aimed at dealing with homeowners who, in ever greater numbers, are simply choosing to walk away because they have little hope of prices rebounding.
GM to add second shift early
General Motors of Canada Ltd. plans to recall hundreds of workers earlier than expected to add a second shift at one of its Oshawa, Ont., assembly plants. The shift at the plant, which turns out the Chevrolet Canada and will add the Buick Regal, will be recalled in November instead of early next year. Read the story
Potash deal with China was 'compromise'
The chief financial officer of Potash Corp. of Saskatchewan has shed a bit more light on the deal signed earlier this week between Canada's major potash producers and China's Sinofert. Markets had been waiting to see what price had been set in the deal to sell 350,000 tonnes by Canpotex, the marketing for Potash Corp., Agrium Inc. and Mosaic Co. . But the group did not disclose the price. At a press conference in New York yesterday, Potash Corp. CFO Wayne Brownlee said the two sides agreed not to disclose the price but that the amount was "nothing to jump and down about."
Mr. Brownlee said it a compromise and that "the question was: Was there a way to save some face here for both sides?" The deal with Sinofert was short term, rather than the traditional annual agreements. And, noted Mr. Brownlee, "for sure you won't see us entering into long-term contracts at prices that we really don't like."
Earnings flow in
Canadian investors had several earnings reports to sift through today.
Shoppers Drug Mart Corp. boosted its fourth-quarter profit to $171.1-million or 79 cents a share from $166.5-million or 77 cents a year earlier. The drug store chain also increased its quarterly dividend by 5 per cent to 22.5 cents. "The amount of this increase is essentially in line with our rate of growth in reported net earnings and, as such, serves to maintain our dividend payout ratio at a sector-leading 33 per cent," chief executive officer Jurgen Schreiber said. Read the story
Manulife Financial Corp. , Canada's biggest insurer, rebounded in the fourth quarter to a profit of $868-million or 51 cents a share from a loss of almost $1.9-billion or $1.24 a year earlier. The results were roughly in line with forecasts. "We have improved margins, balanced our product portfolio, announced three attractive acquisitions and continued to demonstrate good investment results in the face of challenging market conditions," chief executive officer Donald Guloien said in a statement. Read the story
Sun Life Financial Inc. today posted a quarterly profit more than double that of a year earlier. The insurer earned $296-million or 52 cents a share, up from $129-million or 23 cents. In the latest quarter, the company benefited from the bounce in stock markets to the tune of $38-million after tax. Sun Life still warned of economic and market challenges ahead. Read the story
EnCana Corp. profit fell 41 per cent to $636-million or 85 cents a share in the fourth quarter from $1.08-billion or $1.43. EnCana, the country's biggest producer of natural gas, said that on a pro-forma basis, operating earnings fell 32 per cent to $373-million or 50 cents a share. EnCana split off its oil sands business in Cenovus Energy Inc. in the quarter. Cenovus also reported operating earnings of $152-million or 20 cents a share. The energy company said today it would begin paying a quarterly dividend of 20 cents a share. Read the story
Canadian Tire Corp. Ltd. posted a decline in profit to $96.2-million or $1.18 a share in the fourth quarter from $101.5-million or $1.24 a year earlier. The latest quarter ran 13 weeks of sales, compared to last year's 14. The retailer warned of headwinds this year in its financial services operations. "Our results were in line with our expectations for the year, and entering the fourth quarter, we were positioned to exceed our expectations had seasonal weather prevailed," chief executive officer Stephen Wetmore said. "However, we ended 2009 in one of our strongest financial positions in the last decade and are now focused on improving returns on retail assets and growing free cash flow." Read the story
Vampires and blue creatures helped push Cineplex Galaxy Income Fund to a blockbuster quarter and year. Fourth-quarter profit hit $9.5-billion in the quarter, and annual profit rose more than 80 per cent to $53.4-million. The theatre chain said in a statement that the second instalment in the Twilight vampire franchise and James Cameron's Avatar helped push box office revenue in the quarter to its highest ever. Read the story
Venezuela power company seeks divine intervention
Venezuela's energy crisis has led to some unique measures. President Hugo Chavez has already declared an energy crisis and businesses and consumers have been told they will face sanctions and higher prices if they don't cut back on electricity use. Now, the state-run power company Edelca is asking for God's help. In a letter obtained by The Associated Press, Edelca's chief Igor Gavidia has asked workers to attend a prayer meeting: "Clamour to God for the National Electricity Sector."
From today's Report on Business
Bernanke sets stage for higher interest rates
Boycott of oil sands fuel called 'greenwashing'
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