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Today's top stories from Report on Business :
Fed holds stance steady
The Federal Reserve today held its benchmark lending rate at an historic low near zero, and held its stance, with only minor tinkering to the widely watched statement that accompanied its decision. Economists had been watching to see if the U.S. central bank would change its wording in any major way. But, as Scotia Capital noted, the statement was "dovish" while markets "had been looking for a more hawkish bias to materialize." Policy makers continued their language of late, promising to hold rates at their low for an "extended period." For the second consecutive meeting, one Fed member, Thomas Hoenig, who heads the Federal Reserve Bank of Kansas City, dissented, feeling the time is past for that same language. The Fed also said it will, as planned, end its purchase program for mortgage-backed securities by the end of March. The central bank said:
"Information received since the Federal Open Market Committee met in January suggests that economic activity has continued to strengthen and that the labour market is stabilizing. Household spending is expanding at a moderate rate but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit. Business spending on equipment and software has risen signficantly. However, investment in nonresidential structures is declining, housing starts have been flat at a depressed level, and employers remain reluctant to add to payrolls." Read the story
Flaherty watching housing market
Finance Minister Jim Flaherty says he's not concerned by the booming real estate market but he is "watchful." Mr. Flaherty told a business audience in London today the government has already tightened mortgage standards and "if we have to take more steps, we will," Dow Jones reported.
Mr. Flaherty also spoke at some length about the Canadian dollar , which has been moving ever closer to parity with its U.S. counterpart. Both Mr. Flaherty and Bank of Canada Governor Mark Carney have in the past raised concerns over the strong dollar and how it could affect the economic recovery. Today in London, however, the finance minister appeared more at ease with the level of the loonie. In fact, yesterday he told Bloomberg Television that the dollar is now at a competitive level, which could be tested "if it appreciated to, you know, really an uncompetitive level, but that isn't anticipated."
And as other countries have, Mr. Flaherty also said he hopes the Chinese yuan will soon rise: "There was movement in the Chinese currency before the crisis. There has not been of late. The issue with China has not been whether the currency has been allowed to move but how much and how quickly. Given we are moving out of crisis, I think we will see a renewal of flexibility in that currency."
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Canadian dollar jumps, well above 98 cents
China pushes back on currency criticism
Flaherty urges others on deficits
Mr. Flaherty also used the occasion to urge other governments to get a handle on their finances. Canada is seen as a stable country in which to invest as its fiscal policy is deemed among the best of its peers, particularly given the projections from the recent federal budget. "We look forward to other developed nations in the world showing their plans to move out of deficit towards balanced budgets over time," he told reporters in London.
Manufacturing shipments rise
Canada's manufacturing sector appears to be fending off the dollar's strength. Manufacturing sales in January rose 2.4 per cent from December, marking the fifth increase in a row and far better than economists had projected. Notable, too, was the broad-based nature of the gains, spreading across 17 of 21 industries measured. "This is undoubtedly a very strong report, and it suggests that the manufacturing sector is continuing to fire on all cylinders, defying the adverse impact of the strong Canadian dollar and the weak U.S. economy," said TD Securities economist Millan Mulraine. "And with the very strong gains in real shipments, we expect the manufacturing sector to remain a key source of support for the Canadian economy. Nonetheless, we expect activity to moderate somewhat in the coming months."
Labour productivity surges
Labour productivity in Canada is bouncing back, with its best showing in more than a decade. Productivity in the fourth quarter rose 1.4 per cent, Statistics Canada said today, its first gain since the third quarter of 2008 and its fastest growth rate since the first quarter of 1998. That came as Canadian businesses expanded their output while working hours remained the same. Canada's poor record on productivity has long been a source of concern to economists because of its impact on living standards. "That doesn't quite erase the dreadful performance of the last 3-plus years, which had seen productivity essentially stagnate," said BMO Nesbitt Burns deputy chief economist Douglas Porter. Read the story
Toyota officials apologize
Toyota Motor Corp. officials told a Commons committee hearing today that they should have notified Transport Canada about safety issues sooner than they did, apologizing to Canadians over the troubles that led to the auto maker's huge recalls. They also told MPs they were looking for a way to resolve the problems with sticky gas pedals before telling the government. "In retrospect, it would have been good to have had a discussion about it," said Toyota Canada's managing director Stephen Beatty, adding the company has complete confidence in the fixes it has put in place.
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Toyota apologizes to Canadian car owners
Toyota's top U.S. executive to testify
How Toyota strayed from the quality control path and lost its way
GE expects to boost dividend
General Electric Co. says it expects to increase its dividend as profit rises next year. Chief financial officer Keith Sherin told a conference today that "we are not putting a number on it, but we do expect to grow the dividend in 2011." The industrial conglomerate slashed its dividend in early 2009 to 40 cents U.S. from $1.24. "With the company expected to earn roughly $23-billion over the next two years, and substantial improvement to the leverage ratio at GE Capital, and vastly improved capital market conditions, it seems totally appropriate for GE to re-evaluate its dividend payout ratio," analyst Joel Levington of Brookfield Investment Management Inc. told Bloomberg News.
S&P takes Greece off watch
Standard & Poor's took Greece off credit watch today, the rating agency's thumbs up for the government's plans to resolve its debt troubles after it warned it could downgrade the country's debt. Backing the embattled country's austerity measures, S&P held Greece's credit rating at BBB+ and put a longer term negative outlook on the country. That "indicates further downgrade potential if the government fails to address negative deviations from its budgetary consolidation path or implement the currently planned structural reforms, credit analyst Marko Mrsnik told Dow Jones. Read the story
Facebook outpaces Google in week
Facebook is running hard against Google. The wildly popular social network hit an "important milestone" last week, according to Experian Hitwise, passing Google to become the most visited site in the United States for the week. Hitwise, which samples Internet users and uses that for consultations with clients, said yesterday the market share of visits to Facebook.com last week was up 185 per cent from the same week a year earlier, compared to Google's increase of 9 per cent. Facebook has hit number one before on specific days, including Christmas Eve, Christmas Day and New Year's Day, as well as the March 6-7 weekend.
Junk bond maturity points to financial troubles
A New York Times report today cites fears over looming junk bond maturities. While markets now focus on growing government debts, 2012 marks the start of a three-year period that will see more than $700-billion (U.S.) in corporate junk bond debt come due, the newspaper said. Analysts, according to the report, worry that this flood in riskier, high-yield debt will result in a glut in credit markets. They fear some corporations will have trouble refinancing, which in turn could spark default and bankruptcy, leading to job cuts and a pullback in spending by consumers. "An avalanche is brewing in 2012 and beyond if companies don't get out in front of this," Kevin Cassidy, a senior Moody's Investor Service credit officer, told the newspaper. Read the story
From today's Report on Business
Shakeup at WestJet as CEO Sean Durfy quits
How Captain High Liner beat the dollar odds