Public transport employees on strike shout slogans and walk behind a banner as they demonstrate outside the Greek finance ministry in Athens on April 27LOUISA GOULIAMAKI
Stories Report on Business is following today:
Greece's troubles spread
Fear and loathing is spreading through Europe's credit markets today as the debt crisis refuses to die and analysts predict it will only deepen. Not only did the yields on Greece's 10-year bonds surge to more than 9.5 per cent, well beyond what the government can afford, but credit default swaps related to Greece, Portugal and Spain all reached new highs, pointing to greater troubles for Europe's weak economies.
Standard & Poor's threw more fuel on the fire by cutting Portugal's credit rating, citing a limp economic outlook and "the amplified fiscal risks Portugal faces." And it downgraded Greece to junk status, while Italy had trouble with a bond auction.
European stocks fell and the euro declined again amid the new developments in a fast-spreading crisis. The fallout hit North American stocks and drove down the Canadian dollar .
"The situation in the Greek financial market has descended into chaos," Charles Stanley analyst Jeremy Batstone-Carr told The Wall Street Journal. "The European decision-making process has only exacerbated an already disastrous situation."
Last Friday, Greece sought to calm the markets by officially asking the EU and the International Monetary Fund for a bailout that could run to about €45-billion. But even that isn't working. Indeed, Goldman Sachs Group Inc. said in a research note today that the EU and IMF may have to lend the Greek government €150-billion over three years. And Citigroup Inc.'s chief economist warned that Greece will probably default on its debts, or bondholders will take a massive haircut, unless it gets very easy terms on the support package.
"Ten-year yields in the other weaker members (Portugal, Spain and Ireland) have all moved higher today ... highlighting the rising contagion risk," said Scotia Capital currency strategist Camilla Sutton. "Should the market push financing costs any higher, the governments and corporates of the weaker members will also suffer under the weight of higher interest rates. At the same time, safe haven flows are moving into the stronger European sovereigns, pushing yields in Germany, France, Switzerland, etc., lower."
Markets are unclear on the timing of a bailout, and worry it won't come in time. They also fear that events in Germany, which is heading into regional elections and where the public opposes a bailout, may not bode well.
"Investors are looking for the next weak link in the euro zone," Simon Ballard, credit analyst in London with RBC Dominion Securities, told The Globe and Mail's European correspondent Eric Reguly.
Separately, Greece's central bank government said the country should "surprise markets" by cutting its deficit more quickly. Prime Minister George Papandreou, meanwhile, called for "time and serenity" to "profoundly reform" the economy.
Read: Debt crisis spreads through Europe
Audio: Eric Reguly on why the party's over for Greece
Housing bubble in making?
Canadians should prepare themselves for "the possible impact" of a real estate downturn, Edward Jones analysts warn in a new report this morning.
Kate Warne and Craig Fehr noted in a report that the housing market in Canada escape the blowouts of countries such as the United States but "today's conditions in Canada share some characteristics of those countries prior to their downturns, leading us to take a cautious stance on housing investments."
Last week, Gluskin Sheff + Associates chief economist David Rosenberg also warned of a "looming real estate-related slowdown in Canada," citing the tremendous growth to date. And the Bank of Canada, in its monetary policy report last Thursday, also projected a marked slowdown in housing investment. Read the story
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Auto makers rebound
Detroit's auto makers continue to show signs of a rebound.
Ford Motor Co. said this morning it posted its highest quarterly profit in six years, earning $2.1-billion (U.S.) or 50 cents a share in the first quarter, rebounding from a loss of $1.4-billion or 60 cents a year earlier. Revenue surged 15 per cent to more than $28-billion. Notably, the auto maker, alone among the Detroit auto makers in not seeking bankruptcy protection at the height of the crisis, said its U.S. sales soared 37 per cent and its North American operations were profitable. It also announced plans to increase North American production in the current quarter.
Ford's earnings came as General Motors Co. plans this morning to unveil plans to pump hundreds of millions of dollars into several North American plants, including its engine facility in St. Catharines, Ont. The $200-million investment in St. Catharines, to produce the next generation of V8 engines, and another $400-million at a plant near Buffalo, form the bulk of about $850-million it's spending to upgrade five engine and component plants, The Globe and Mail's auto writer Greg Keenan reports.
Companies increasingly attracted to China
The world's companies are looking increasingly to China as a growth engine as its economy powers ahead and it becomes a coveted market.
As Ford reported its earnings this morning, it noted an 84-per-cent increase in Chinese sales. It's not alone:
- Japan's Mitsubishi Motors Corp. said today its sales in China surged more than 60 per cent in the first quarter from a year earlier.
- Mazda Motor Corp. also noted today that demand for its vehicles was weaker in all of its prime markets, but for China.
- Bayer AG, the big German drug manufacturer, said this morning its Chinese sales are up 28 per cent, and it expects the market to grow quickly over the next 10 years. Eager for a greater slice, it plans to introduce about 20 products in China over the next five years.
- Sharp Corp., the electronics manufacturer, also today reported strong sales growth in China.
- Navistar International Corp., the largest truck maker in the United States, said this morning its sales in China of heavy trucks more than doubled over five years, and it's nearing a deal with China's Jianhuai Automobile Group for a joint venture.
Europe's banks returning to health
The major U.S. banks aren't the only ones returning to health. Better results from Europe today also signal the sector rebounding. Driven by record investment banking profits, Germany's Deutsche Bank topped analysts' estimates with a quarterly profit of €2.8-billion. Like its U.S. rivals, it was pumped up by its securities unit.
Separately today, Britain's Lloyds Banking Group rebounded to a quarterly profit, faster than expected, while Sweden's Swedbank also posted a first-quarter operating profit for the first time in more than a year.
Goldman before Senate committee
The hearing room of a Senate subcommittee in Washington was packed this morning as Fabrice Tourre, the man at the centre of the allegations against Goldman Sachs Group Inc., vowed to defend himself in court against the accusations levelled by the Securities and Exchange Commission.
"I deny categorically the SEC's allegations," the Goldman executive director told the hearing,. "I will defend myself in court against this false claim."
Mr. Tourre and other officials are testifying today, giving evidence on the runup to the crisis. Chief executive officer Lloyd Blankfein will also testify. Goldman has denied the SEC allegations related to subprime mortgage securities.
Nexen profit dips
The struggling Long Lake oil sands project is on the verge of breaking even and should start seeing positive cash flow later this year, Nexen Inc. said today. After years of missed deadlines and operating problems, chief executive officer Marvin Romanow said the project is steadily improving and should more than double output by the end of this year.
His commends came as Nexen posted a dip in first-quarter profit of $185-million from $259-million in the fourth quarter. Read the story
From today's Report on Business
Ottawa to restrict insurers' online sales