A trader works in the oil options pit on the floor of the New York Mercantile Exchange in New York City, May 20, 2010. Oil fell below $68 a barrel on Thursday to its lowest price in nearly eight months, under pressure from concern that the euro zone debt crisis will cut both risk appetite and demand for oil.MIKE SEGAR
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Stories Report on Business is following today:
Markets, dollar nosedive
World markets fell again today as the Dow Jones industrial average , the S&P 500 and the S&P/TSX composite index all followed European stocks on a downward spiral. Oil prices also slipped, and the Canadian dollar took a hefty dive, falling more than 2 cents to close at 93.65 cents U.S.
U.S. stocks are now in official correction territory from the beginning of the bull market in March of last year, with both the Dow and S&P 500 down more than 10 per cent from their highs of late. The Dow fell 3.6 per cent to 10,068.01, while the S&P 500 slipped 3.9 per cent to 1,071.59. The TSX fell 2.2 per cent to 11,405.95.
The euro initially fell but regained ground on fresh speculation that monetary authorities may intervene.
Investors are jittery over Europe's burgeoning debt troubles, and the effect they might have on global economic growth. That was exacerbated by Germany's decision earlier this week to ban naked short-selling on some stocks, bonds and credit default swaps.
IG Index chief market strategist David Jones noted, however, that today's developments weren't just about fears over sovereign debt crises: "Helping to sow the seeds that the global recovery may be stuttering was U.S. data ... showing a decline in leading economic indicators and a rise in initial jobless claims." Read David Berman's Market Blog
Did Merkel's plan backfire?
German Chancellor Angela Merkel is emerging as the crusader for financial reform, but global markets still have a severe case of the jitters days after Germany shocked investors with the short-selling ban.
"Global markets have continued to fall today as the fallout from the German authorities to decision to act unilaterally with respect to a short-selling ban has continued to unsettle the equity markets," said CMC Markets analyst Michael Hewson. "German Chancellor Angela Merkel's decision to play party politics with the financial markets in an attempt to rally support for the euro bailout package appears to have blown up in her face and sent the equity markets to six-month lows."
Ms. Merkel had pledged to deal with "destructive" behaviour in the markets, warning that "if we don't deal with this danger, then the consequences for us in Europe are incalculable."
Investors sell short by selling borrowed securities in hopes of buying them back later at a lower cost. The more controversial naked selling involves selling securities before ensuring they can be borrowed.
Germany's parliament votes tomorrow on its part of the $1-trillion support package by the EU, International Monetary Fund and European Central Bank.
"Tomorrow's vote in the German parliament has the potential to be a game changer in terms of the equity markets," added Mr. Hewson. "If the vote goes well then we could see a rally, but if the outcome is more uncertainty, then we could be gearing up for further falls."
In advance of tomorrow's vote, Ms. Merkel also pledged to push for a new financial tax at the upcoming G20 summit in Toronto, saying in a speech in Berlin that world leaders should send "a common signal of strength" at next month's gathering.
Ms. Merkel's cabinet has already unveiled a proposal for a new tax on banks, and, she said today, "we will lobby in Canada for the financial market to be taxed in addition to the levy." That puts her on a collision course with Prime Minister Stephen Harper and Finance Minister Jim Flaherty, who oppose such a global tax and have said repeatedly that Canada's banks should not be punished given how well they survived the financial crisis.
Read
Merkel to push financial reform at G20
Kevin Carmichael's Global View: Merkel leads pro-bank tax forces as G20 looms
Commodity-linked currencies hammered
As the Canadian dollar sank by more than 2 cents today today, Scotia Capital currency strategist Camilla Sutton noted that what began as a collapse in the euro "has now shifted to a collapse in the growth/risk trade."
Over the past five trading days, she said, the Australian dollar has slumped 7 per cent, New Zealand's currency is down 6 per cent, Mexico's peso has dipped 4 per cent and the Canadian dollar 3 per cent. Over the same period, the euro has slipped just 1.5 per cent.
"Initially, the market was fearing the ramifications on [the euro]and the currency became the cleanest way to play a negative euro zone view," Ms. Sutton said. "However, as the situation has escalated and austerity measures increase, the fear has shifted to the ramification for global growth. Accordingly, growth trades have come under tremendous pressure. While risk aversion and volatility remain high, these trades will be under pressure; however once risk aversion abates we would expect these trades to climb back."
Read
Loonie continues its sharp decline
Commodity-linked currencies vulnerable to global slowdown
NEB expects slightly higher energy prices
The National Energy Board today projected moderate increases in energy prices this summer, compared to last, though its report was prepared before the recent decline in oil prices.
"As the Canadian and global economies continue to recover, the demand for energy will return to previous levels," said NEB chair Gaétan Caron. "This has resulted in our expectation of moderately higher energy prices this summer over last."
The federal body forecast oil to average $75 (U.S.) to $85 a barrel over the next six years, and pump prices to average 95 cents to $1.10 a litre, though it notes gasoline costs can vary across the country.
The NEB also projected that global oil demand will rise 1.8 per cent this year, slightly above the historical norm.
It did note that its oil forecast could be affected by the "ongoing financial market challenges, the impact of government stimulus programs on economic growth, weather and geopolitical events."
Author and economist still sees oil prices topping $100 this year
Why Canada is a haven
Scotia Capital economist Derek Holt says Canada is no longer the "embarrassing mess" it was in the 1990s. Rather, he says in a research note today, it is a haven amid a global debt storm.
Mr. Holt says he was recently in Asia, where he was asked repeatedly why Canada is outperforming other economies. His answer: "Because it cleared the decks after its downward debt and inflation spiral of the 1980s and '90s ... From corporate to government balance sheets, Canada cleaned house long before 'deleveraging' entered the world's lexicon. It had to. The country had enormous problems in the past, but Canada deleveraged in the 1990s. Better situated today with solid balance sheets to cope with the exit pains sweeping through much of the rest of the world, the country sidestepped the worst pains sweeping globally since 2007."
He recalled a scathing Wall Street Journal editorial in the mid-1990s and warnings from credit rating agencies and foreign investors. But, he said, "Canada learned and repaired itself while Europe and America set out along the ruinous path toward their overleveraged economies and far sharper exit worries of today."
The country, he added, has "become a safe haven against global sovereign debt worries blowing up all over the place" and "in a world where boring is the over-indebted global norm of bland convergence, Canada now looks exciting."
Japan's economy continues to grow
Japan's economy continues to expand, growing in the first quarter at an annual rate of 4.9 per cent. It marked the fourth consecutive quarter of growth in the world's second-largest economy. Japan's economy is being pushed by exports, which surged 6.9 per cent from the fourth quarter, and notably shipments to China.
Canadian jobless claims fall
The number of Canadians collecting regular jobless benefits fell in March for the sixth month in a row. People receiving Employment Insurance benefits fell more than 24,000 from February, dropping in most provinces, with the biggest declines in Ontario, Quebec and Alberta, Statistics Canada said today.
Though more than 668,000 unemployed workers remain on benefits, the federal statistics gathering agency said, "nearly half the increase in beneficiaries that occurred during the labour market downturn has been offset by declines since June 2009 when the number of beneficiaries peaked." Read the story
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U.S. claims unexpectedly jump
In the United States, however, the number of workers claiming initial jobless benefits unexpectedly rose last week, retracing the recent declines of late. The U.S. Labor Department said today initial claims surged by 25,000 to 471,000. The report was more cause for concern as the United States seeks to ease its jobs crisis.
But BMO Nesbitt Burns economist pointed out that these numbers are volatile, and it is better to look at the four-week moving average, which is down. And, she noted, the number of Americans receiving regular or emergency benefits, or extended claims, is now below 10 million for the first time since November 2009.
CPPIB posts strong gain
The Canada Pension Plan fund is now back to the same financial position it was in before the financial crisis. The CPP Investment Board said today it posted a 14.9-per-cent return in its latest fiscal year as it rebounded from the steep losses of a year earlier. Its assets rose by $22.1-billion to $127.6-billion, and, said chief executive officer David Denison, "unlike many other investors, we did not suffer from capital or liquidity constraints last year." Read the story
Teck to push ahead with Aqqaluk
Teck Resources Corp. said today it plans to push ahead with developing a deposit at its Alaska Red Dog zinc mine after talks related to water permits with the Environmental Protection Agency in the United States.
"Our discussions with EPA have been constructive, and after carefully considering the environment, our employees and local communities, we are proceeding with Aqqaluk," the company said in a statement.
Environmental and Aboriginal groups are appealing some conditions of Teck's water discharge permit, though the company said it now has all permits necessary to develop the deposit at Red Dog, the biggest zinc concentrate mine in the world.
"In response to the appeal, EPA has withdrawn five contested limitations in the permit and has stated its intent to conduct an updated permit proceeding once certain procedural matters are addressed," the company said.
Porter to delay IPO pricing
Porter Aviation Holdings Inc. is delaying the pricing of its initial public offering until next week. Porter, which operates out of Billy Bishop Toronto City Airport, had planned to unveil the details today. But, an industry official told The Globe and Mail's Brent Jang, the upstart airline will amend its preliminary prospectus next week to include its first-quarter results. Porter plans to sell up to 20 million shares at between $6 and $7 each. Read the story
China punishes thousands
China announced today that it has taken action against thousands of officials for abusing funds from its massive stimulus program. Hao Mingjin, a Ministry of Supervision deputy minister, told reporters in Beijing that more than 3,000 officials, including mayors and others, were slapped with penalties, some life in prison. The Associated Press reported the abuses included taking bribes and embezzling.
From today's Report on Business
Retreating prices put rate hikes on back burner
China signs up to develop Saskatchewan energy assets