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European tensions mount The markets see Europe as a financial powder keg this morning. They're looking well past Ireland, which hasn't even settled the details of its bailout yet, to Portugal and Spain.
The euro is under extreme pressure, borrowing costs for Portugal and Spain are surging, markets are awaiting details of Ireland's austerity plan after another downgrade by Standard & Poor's, Irish bank stocks are sinking, and Portuguese unions are striking.
"Concerns about Portugal, and more importantly Spain, following the route of Ireland has investors running scared with Spanish debt spreads blowing out to record highs above 230 points," said CMC markets analyst Michael Hewson.
"The continued political turmoil in Ireland appears to have become almost secondary as fears about a Spanish contagion roiled investors, as fears rise that European leaders are starting to lose control of the situation, in what could fast become a slow motion train wreck."
Spain, of course, is the major concern. While Ireland, Portugal and Greece, which started Europe's debt crisis, are not insignificant, Spain is a far bigger economy whose troubles would take a far bigger toll.
Scotia Capital currency strategist Camilla Sutton said she doesn't believe Europe will blow up, but the markets are certainly concerned about that possibility.
BMO Nesbitt Burns economist Benjamin Reitzes noted today that there may not even be enough money in the pot for a Spanish rescue package, should it come to that, which would raise the stakes in the debt crisis markedly.
"Portugal is the next weakest sovereign and the storm clouds are already building," Mr. Reitzes said.
"If the trouble can be contained there, only 6.1 per cent of the euro area economy, the region should eventually prevail. If Spain (11.6 per cent) is sucked into the storm, the current bailout fund may not be large enough."
- Portugal, Spain hit by investor fears over debt
- Spain gets a taste of the bond 'vigilantes'
- Investors target weak euro zone banks
- EU needs 'courage' to make investors share risk, Merkel says
- Should euro weaklings just default?
Ireland to unveil plan The rescue package for Ireland could reach €85-billion, or the equivalent of about $115-billion U.S., Ireland's Prime Minister Brian Cowen said today.
That's still to be decided in talks with Dublin's saviours, the European Union and the International Monetary Fund, Mr. Cowen said amid growing doubt that that amount will be enough.
"The government is completely in denial about the amount of money they'll have to borrow, Constantin Gurdgiev of Trinity College Dublin told The Associated Press.
Markets are still awaiting details of a harsh austerity to be unveiled today by Mr. Cowen's government.
German confidence rises Well, at least the Germans are happy. Confidence among German businesses, measured today by the widely watched Ifo institute index, surged to its highest level since reunification.
Germany is, of course, Europe's economic powerhouse and a key factor in any talks about bailing out its weaker neighbours.
There has been talk that Germany could grow increasingly fed up with the debt crisis and quit the euro zone, but some observers reject that, as well as talk that the monetary union itself could fall apart.
"A strong pillar like Germany leaving of its own accord would be rather unlikely as it would be a technical nightmare to go back to the old deutsche mark, and again eventually result in domestic contagion as the loss of a strong euro zone member would undermine the remaining members in the eyes of the financial market," said Scotia Capital currency strategist Sacha Tihanyi.
"Unfortunately the group of countries involved in the euro zone are trapped in a tight embrace of mutually assured destruction should any major player opt for the nuclear option and exit the currency bloc."
What some Fed members think It appears that some policy makers at the Federal Reserve aren't all that put out by the idea of a softer U.S. dollar, which, of course, helps juice the economy by making exports cheaper.
The U.S. central bank has been the target of criticism, partly from those who say its recent quantitative easing program - a $600-billion (U.S.) plan to drive down longer-term interest rates through purchases of longer-term Treasuries - is debasing the greenback.
The Fed has defended its plan in rare aggressive style, saying what has become known as QE2 is meant to spur lending and borrowing, in turn giving the recovery a push.
But minutes of the Fed's Nov. 2-3 meeting, where the policy-setting panel agreed to the program, show that some of committee members believed the plan could drive down the value of the U.S. dollar, Globe and Mail Washington correspondent Kevin Carmichael reports today. But, the minutes released yesterday indicated, that sat well with some of the panel members.
"Most expected these changes in financial conditions to help promote a somewhat stronger recovery in output and employment while also helping return inflation, over time, to levels consistent with the committee's mandate," the minutes showed.
The U.S. dollar indeed softened in the run-up to the plan, on simple speculation, but now of course is firming because of Europe's debt troubles.
In the battle between quantitative easing and Europe's debt crisis, said BMO Nesbitt Burns economist Michael Gregory, the latter won out where the greenback was concerned.
Cameco in China deal Cameco Corp. has struck a long-term deal with China to supply 29 million pounds of uranium concentrate through 2025.
Cameco, one of the largest uranium producers on the planet, said in a statement today that the deal with China Guangdong Nuclear Power Holding Co. marked a major step for the company in the world's fastest growing uranium market.
"China Guangdong Nuclear Power has 14 nuclear power units currently under construction and is commencing preliminary work on another nine units," said chief executive officer Jerry Grandey. "This deal leaves us well positioned to serve the company's growing uranium requirements."
From today's Report on Business
- Flaherty pressed about changes to Bank Act
- Scotiabank's stake helps seal deal for DundeeWealth
- Teachers unloads Maple Leaf stake
- Bombardier boosts C series sales team
And, read our Streetwise blog and Your Business section.