Aerial photo shows a plume of ash rising from the volcano in southern Iceland's Eyjafjallajokull glacier, Monday, April 19, 2010Jon Gustafsson
Stories Report on Business is following today :
Goldman, Greece fears weigh on markets
The Securities and Exchange Commission and Mother Nature are delivering a one-two punch to global markets this morning. Fears related to the SEC's civil fraud charges against Goldman Sachs Group Inc . picked up where they left off Friday, when the allegations against the Wall Street giant hit everything from stocks and bonds to currencies and commodities. Stocks and commodities such as oil and gold fell again in morning in the wake of the allegations that Goldman has denied and pledged to fight.
The Wall Street Journal also reports today that regulators are now probing other mortgage deal at some of Wall Street's biggest companies.
"The market seems to be running to the safety of the [U.S. dollar]today as equities and commodities are all suffering, in line with Friday's price action," said Scotia Capital currency strategist Sacha Tihanyi. "The impact of the SEC's charge against Goldman Sachs has been sharp and has shaken global equity markets that had been making consistent gains since the beginning of February. These gains had provided a supportive global environment for risk-seeking trades across the currency and commodity space."
Also playing into the markets today are heightened concerns over Greece's debt crisis as the volcanic ash from Iceland has shut down much of Europe's air travel, forcing a delay in talks between Greece, the EU, the European Central Bank and the International Monetary Fund over an aid package. Greek borrowing costs spiked again this morning at a crucial point in the saga.
"Volcanic ash cloud spewing from Iceland continues to wreak havoc on Europe, not only because its airspace has now been closed for the longest period since WWII but also because it delayed talks between Greece, the EU, the IMF and the ECB which were set to begin today and have now been postponed until April 21, although officials will begin discussions today via telephone," Scotia Capital economists said in a research note. "The timing of these talks are important as Greece is set to pay back €8.5-billion bonds maturing May 19 and market financing costs have become prohibitive."
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An interview with author Gregory Zuckerman
Airlines push to open airspace
Like Iceland's volcano and the passengers stranded around the globe, the world's airlines are fuming over the closure of airspace, while officials warn the overall economy is at risk. Germany Economic Minister Rainer Bruederle said in a statement today that he is convening a meeting of industry leaders in Europe's biggest economy as badly needed imports dry up. "If chains of economic value are disrupted for a long time in a globalized world, we would have a serious situation, because many of our industrial sectors depend on transport by air," he said, adding the hit to the economy is significant.
The airlines, in turn, are pressing governments to lighten up, citing test flights they ran yesterday. The International Air Transport Association, the global body, called for the use of safe corridors. "These were decisions based on theoretical models," its chief executive officer Giovanni Bisignani told reporters today in Paris, according to Bloomberg News. "But the losses and chaos are not theoretical. When in a few weeks this situation is solved it will be a very embarrassing story for Europe."
More than 80,000 flights have now been cancelled, the news agency noted, quoting a Lufthansa spokesman as saying that "we're appealing to the government day and night to get an easing of the ban, but frankly there's not much more we can do but keep knocking on the door."
Estimates vary, but some put the cost to the airlines at about $300-million (U.S.) a day. Air France-KLM alone said it is losing about €35-million a day, and British Airways said its hit is in the area of £20-million. European airline stocks are feeling the effects.
While airlines have been hit the worst, the airspace shutdown is having a far broader impact today. Reuters reports that shares of food producers such as Nestle, Parmalat and Damisca fell because they are scrambling to maintain supplies without air cargo, and that Kenya's currencies has been hit as flower exporters lose millions of dollars a day.
Read
Volcano impact hits business far and wide
Volcano poses threat to Europe's economy
Citigroup posts $4.4-billion profit
Citigroup Inc. jumped today after the U.S. bank giant rebounded to a first-quarter profit from a massive loss in the fourth quarter of last year, and far surpassed its profit of a year earlier. Citigroup earned $4.43-billion (U.S.) or 15 cents a share, compared to the year-earlier profit of $1.59-million. Revenue rose 3.7 per cent. Chief executive officer Vikram Pandit said the company was proud of the results but is still "cautious about the environment, given the uncertain economic recovery and high unemployment in the U.S." Analyst William Fitzpatrick of Optique Capital Management noted in an interview with Bloomberg that "credit conditions have improved fairly dramatically, and investment-banking revenues are even stronger than everyone had anticipated." Read the story
Toyota agrees to hefty U.S. fine
Toyota Motor Corp. agreed today to pay a record $16.4-million (U.S.) fine, the biggest permitted by law in the United States, for what the government said was failing to notify authorities about sticky gas pedals for almost four months. Today was the deadline for the auto maker to either agree or contest the penalty, and the company agreed, U.S. Transportation Secretary Ray LaHood said in a statement this morning. "By failing to report known safety problems as it is required to do under the law, Toyota put consumers at risk," Mr. LaHood said, adding the fine was the largest civil penalty against an auto maker ever by the National Highway Traffic Safety Administration. Toyota is repairing all affected vehicles and has said repeatedly it is committed to safety.
Investors are loving Canada
Investors are pumping more and more money into Canada.
Foreign investors purchased an additional $6.7-billion in Canadian securities in February, all in bonds, while shedding equities, though in small amounts, Statistics Canada said today.
Separately, Bloomberg News said today that international funds poured $2.7-billion (U.S.) into Canada over the past year, lured by forecasts for profit growth and "the best dividends relative to global equities on record." Profits among companies listed on the Toronto Stock Exchange's benchmark index are forecast to rise 42 per cent this year, compared to 24 per cent for those on the S&P 500, analysts estimates compiled by the news agency showed. And, it noted, funds tracked by EPFR Global in Cambridge, Mass., bought almost $550-million in Canadian stocks in the eight weeks ended March 31.
"It's a way to play in North America that you probably won't get burned on," Michael Mullaney, a manager at Fiduciary Trust Co. in Boston, told Bloomberg. "It's a safe way to diversify away from your U.S.-based holdings without going to the riskier emerging markets."
Another money manager, Peter Sorrentino of Huntington Asset Advisors in Cincinnati, told the news agency he's acquiring stock in Suncor Energy Inc. , in turn cutting back on holdings of Exxon Mobil Corp.
"Canada is a more stable environment at this time and they have what India and China need: raw materials, energy, along with rational government and a stable currency."
International investors have been lured by a strong economy compared to Canada's G7 counterparts, what is seen as sound fiscal policy and its resource-based stocks, and have pushed up the Canadian dollar to around parity with the U.S. currency.
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Seafood in high demand
It's not just Canada's oil, wood and potash that the world wants, but seafood too. The Reuters news agency reports today that Maersk Line, the biggest container shipper on the planet, has begun a route from Halifax to Rotterdam to satisfy growing tastes in Europe for live shellfish. Maersk and partner Aqualife have worked jointly for a few years to establish transport lines for seafood, the news agency said, and the Halifax operation is made up of 20 water tanks in a refrigerated container. "It is a very exclusive product because the value of the lobster and crabs and mussels is high," Thomas Eskesen, the senior director of the Maersk refrigerated cargo unit, told Reuters. "Now is the right time to go for Halifax."
Aqualife, in turn, said that over time a Canada-Europe lobster route could be worth a lot of money. North American lobster exports to Europe are worth the equivalent of almost $245-million (U.S.) a year, it said, with about 3,400 tonnes of live lobster coming from Canada's east coast.
Related: Lumber prices at highest in three years
From today's Report on Business
Potash Corp.'s Bill Doyle dims hopes for new mines
Markets watch for Bank of Canada signals
Limited impact seen from new mortgage rules