Larry MacDougal
Stories Report on Business is following today :
Quadra strikes deal with China
China's quest for global resources continues unabated. Canada's Quadra Mining Ltd. QUA-T announced today it has reached a deal to sell 50 per cent of two copper projects in Chile to China's State Grid Corp. Together, Vancouver-based Quadra and State Grid, the world's biggest public utility, will develop and run the Sierra Gorda project and the Franke Mine in Chile. The deal for the two projects, which are together valued at almost $1-billion, comes amid projections of a copper shortage in China. Read the story
Separately today, Petro China joined with Royal Dutch Shell PLC in a $3-billion (U.S.) bid for Arrow Energy in Australia. Reports from Australia said the move marked China's first in the country's coal and gas industry.
When will China abandon peg?
China's central bank is sending stronger signal that Beijing will abandon its currency's peg to the U.S. dollar, but there's no indication of timing, and other officials warn not to expect any fast rise in the currency. China's exchange rate policy has drawn criticism for other countries and Beijing has been under pressure to let the yuan rise. On the weekend, the Financial Times reports, Zhou Xiaochuan, the governor of the People's Bank of China, said the unofficial dollar peg is temporary, a "special" policy amid the global crisis. The newspaper said this was the strongest hit to date from a senior Chinese official that Beijing will abandon the peg that has been a fixture of the country's exchange rate policy since the height of the crisis. Still, the country's commerce minister, Chen Deming, told Reuters in an interview that any rise in the currency will be over time and that pulling back from the emergency crisis measures does not mean that all stimulus, such as its exchange rate policy, will soon end.
Canadian dollar hits seven-week high
The Canadian dollar continues to shine on the global stage. The dollar is strengthening again this morning, up from Friday's close of 97.19 cents, as commodities gain, the U.S. dollar pulls back somewhat and Canada's financial and economic picture brightens. Indeed, Bloomberg News said today that the loonie is eclipsing the Australian dollar as the commodity currency of choice. Its economy is recovery, its banks are strong, and its fiscal policy, backed up by Finance Minister Jim Flaherty's budget last week, is deemed impressive. "Options show demand for the right to sell the so-called Aussie and buy the Canadian dollar reached the highest last month in almost a year," the news agency said. "A measure of traders' expectations for price fluctuations indicates the loonie is the most secure bet relative to the Australian dollar since July as the global recovery shows signs of wavering." Read the story
Global economy rebounding
The world's leading central bankers say growth in the global economy is now "robust" and that governments should start to focus on their budgets. Jean-Claude Trichet, the European Central Bank chief who chaired a two-day meeting at the Bank for International Settlements in Basel, also told reporters today that while monetary officials can now start pulling back on their emergency measures, that doesn't mean interest rates will soon begin rising again. "I would say that at the global level, the sentiment is that growth continues to be positive obviously and with a number of corrections at the global level, global growth has been confirmed to be robust," Mr. Trichet said, according to wire service reports. "… The market is improving, so that we can phase out the non-conventional measures without over-interpretation of this phasing out, and without this influencing the market sentiment, and without giving the signal that we are changing the monetary policy stance." Read the story
Europe discusses currency-wide fund
Europe is considering starting up its own version of the International Monetary Fund. A so-called European Monetary Fund would involve the 16 nations that now use the euro as their common currency, a spokesman for the EU said today. The impetus, he stressed, is not to bail out Greece, but rather to spot trouble and head off crises. The EU's economic and monetary affairs commission, Olli Rehn, plans to brief the group's executive tomorrow. There's even a tentative time-frame - the end of June - for a blueprint. It's not clear how this could affect the IMF but the plan would be to "reinforce economic co-ordination and country surveillance" on the continent. The euro has been under extreme pressure because of the debt troubles of several member countries.
Separately today, Portugal, another of Europe's problem children, said it hopes to pay down some of its massive debts by raising €6-billion over four years by privatizing state-owned companies. Finance Minister Fernando Teixeira dos Santos said the government also plans to curb public sector wage hikes, overhaul welfare and cut back on tax breaks.
And, reports from Europe say, the leaders of Germany, France and Luxembourg are plotting to curb how derivatives are used in country finances. Talks among German Chancellor Angela Merkel, French President Nicolas Sarkozy and Luxembourg's Prime Minister Jean-Claude Juncker follow the controversy over how such derivatives helped mask Greece's mounting debt troubles. A spokesman for Ms. Merkel told reporters today that the group plans to put its plan to the EU's executive.
Read
EU eyes creating its own crisis fund
Greece kicks off global rescue tour
Portugal to privatize companies, cut debt
The next European country set for debt watch: France
Iceland still strives for Icesave deal
Iceland still hopes to strike a deal with Britain and the Netherlands over compensation related to a failed Icelandic online bank, despite the rejection of an earlier agreement in a referendum Saturday. Iceland's central bank chief, Mar Gudmundsson, told the Reuters news agency that "there's obviously a lot of resentment in Iceland regarding the whole issue and there's already a better offer on the table from the Dutch and the British. Britain and the Netherlands want compensation for bailing out their citizens who had deposited money in the Icesave bank.
New home market rebounds
The market for new homes in Canada is rebounding. Housing starts in February rose 6.1 per cent, Canada Mortgage and Housing Corp. said today, a bigger-than-expected gain the equivalent of 196,700 annualized. Starts are now up 76 per cent from the low reached during the recession, BMO Nesbitt Burns economist Robert Kavcic said in a research note, adding that while much of February's gains were driven by condos in Ontario, starts on singles, a key measure for the housing industry, rose for the tenth month in a row. "While February's gain in housing starts was likely exaggerated somewhat by unseasonably warm weather, the underlying trend of a sharp rebound in Canadian residential construction activity is unmistakable," he said.
Added TD Securities economics strategist Ian Pollick: "It appears that the new homes market is slowly coming back to life and may finally be benefiting from the resurgence in overall housing market activity. However, we caution that the pace of advance will likely be hard pressed to eke out similar gains later in the year, mainly as a result of enthusiastic buyers attempting to close transactions ahead of the regulatory (new mortgage rules) and tax (HST) changes coming into effect mid-2010. As such, this report likely overstates the true strength of the recovery in new residential housing, though it is safe to say that housing still remains a bright spot in Canadian economic activity." Read the story
AIG sells Alico business
American International Group, the U.S. giant bailed out by the government, is selling its foreign insurance business to MetLife Inc. for $15.5-billion (U.S.). The sale of its Alico subsidiary follows a deal last week to sell AIA to Prudential PLC as the insurer raises funds to pay back a huge infusion by the Federal Reserve Bank of New York. "Both sales give AIG greater flexibility to move forward with our restructuring and rebuilding efforts," chairman Harvey Golub said.
From today's Report on Business
The reality of Ottawa's foreign ownership changes