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Japan uncertainty roils markets The crisis in Japan swept through global financial markets today, driving down stocks and commodities and roiling currencies.
In Asia, Tokyo's benchmark Nikkei plunged a further 10.6 per cent as some of Japan's biggest manufacturers, from auto makers to electronics and power companies, were hit on the market. Other global exchanges also sank, including the Toronto Stock Exchange , the Dow Jones industrial average and the S&P 500 . They later pared their losses.
"Commodity prices fell for the sixth straight session on Tuesday, with the CRB now down almost 7 per cent from last week's peak," said BMO Nesbitt Burns deputy chief economist Douglas Porter.
"At the very least, the global growth outlook has taken a shave from the recent series of unfortunate events. In tandem, the TSX is now almost back to square one for the year (+0.8 per cent), almost erasing in seven sessions the gains of the first two months of the year. Resource companies have been the hardest hit in the past two weeks on the chillier global growth outlook."
The Canadian dollar was also hit, at one point sliding by more than 2 cents, though it regained some of that lost group.
Recent events, said Scotia Capital currency strategist Camilla Sutton, are all negative for the loonie.
"Japan is the third largest economy in the world and the combination of the earthquake, followed by a tsunami and now the rising nuclear threat is undeniably negative for Japanese and global growth," Ms. Sutton said.
"[The Canadian dollar]is a notably pro-cyclical currency, performing well during periods of global growth and underperforming when global growth fades."
Amid the turmoil, what's happening in currency markets today could cause Japan additional trouble.
"The Japanese currency continues to get pushed higher by yen repatriation flows to pay for rebuilding, while stock markets look set to plummet across the globe this morning after the Nikkei again fell hard in trading today, dropping to 18 month lows," CMC Markets analyst Michael Hewson said before trading began in Europe.
"The last thing Japan needs now is a strong yen which would hamper the exports it needs to try and rebuild what is already a highly indebted public sector economy."
- Nuclear fears spark global selloff
- Oil prices plunge on radiation fears
- Japanese production disruptions threaten global supply chains
- Nuclear renaissance melts down over Japan disaster
RBC cuts mortgage rates Royal Bank of Canada is cutting mortgage rates in a move that economists say relates to the crisis in Japan, The Globe and Mail's Tara Perkins reports today.
The bank cut rates on its seven- and 10-year fixed-rate mortgages by 0.15 per cent, while the five-year rate was cut by 0.10 per cent and the seven-year rate by 0.20 per cent.
UBS downgrades uranium stocks UBS Securities Canada is taking a dimmer view of major uranium companies today in the wake of the nuclear troubles in Japan.
Analyst Brian MacArthur cut his 12-month price target on shares of Cameco Corp. and Uranium One , whose stocks took a drubbing yesterday.
Mr. MacArthur cut his target on Cameco shares to $42 from $47, and on Uranium One to $4.80 from $6.70.
"While the situation is dynamic, we believe that pricing in the uranium spot market, which is relatively illiquid, could come under pressure in the near term due to sales from financial players and/or deferrals," he said. "Over the long-term we note that current uranium demand is relatively inelastic given it is base load power."
He rated Cameco shares a "buy" and Uranium One "neutral."
Yesterday, The Globe and Mail's Richard Blackwell reports, Cameco chief executive officer Jerry Grandey said investors overreacted and were "largely driven by emotion." He expects no significant impact on the uranium company.
Fed holds the line The Federal Reserve, to no one's surprise, made no policy change this afternoon, but the central bank did give a nod to the better economic outlook.
The Federal Open Market Committee again held its key rate at its historic low, and promised to keep it there for some time.
The U.S. recovery is on "firmer footing," the Fed said, and conditions in the labour market seem to be improving, though gradually. It also noted the rise in commodity prices.
"Commodity prices have risen significantly since the summer, and concerns about global supplies of crude oil have contributed to a sharp run-up in oil prices in recent weeks. Nonetheless, longer-term inflation expectations have remained stable, and measures of underlying inflation have been subdued."
The upshot, said Paul Ashworth, chief economist at Capital Economics in Toronto is that "unless inflation expectations or underlying inflation start to rise, the Fed will not be responding by tightening policy any time soon."
Added Sal Guatieri, senior economist at BMO Nesbitt Burns: "We still expect it to keep policy rates steady until January, following, in the chairman's words, 'a sustained period of stronger job creation.'"
- U.S. economy gaining traction: Fed
- Fed's 'firmer footing' a ways from 'mission accomplished'
- Fed QE naysayers stand up to be counted
Mutual fund inflows best since early 2008 Canadian mutual funds chalked up net sales of $5.87-billion in February, a jump from January's $3.05 billion, the Investment Funds Institute of Canada said today. In RRSP season since the beginning of the year, the group added, net sales were $8.92-billion, twice last year's $4.46-billion.
Strategist George Vasic of UBS Securities Canada noted that February marked the best monthly sales showing since February 2008.
House price gains to pull back, CREA says House price gains are likely to "recede" starting next month as shorter mortgage terms keep some buyers out of an already softening market, the Canadian Real Estate Association says.
February sales slipped 1.6 per cent compared to January across the country, Globe and Mail real estate writer Steve Ladurantaye reports today, and were 5.9 per cent lower than a year ago. CREA said the average resale price in the month was $365,674, up 5.8 per cent from January's $343,675.
The Federal government wiped out 35-year amortizations earlier this year, and they will be unavailable by Friday. That makes mortgage payments higher, which could keep some buyers sidelined as the spring market begins.
"Canada's housing market is re-establishing its comfort zone after having experienced strong bouts of volatility over the last three years," said senior economist Pascal Gauthier of Toronto-Dominion Bank.
"Although sales are expected to ease in most parts of the country as interest rates rise - the Prairies could be the exception - activity should be strong enough to provide a floor under home prices. By the same token, better availability of new and existing units will provide more balanced markets than seen in pre-recession years. This will make hard for home values to outpace general inflation over the next couple of years."
Productivity rises Labour productivity in Canada is picking up as businesses boost their output at a faster pace.
Labour productivity in Canada climbed 0.5 per cent in the fourth quarter, gaining on the third quarter's 0.4-per-cent increase, Statistics Canada reported today. For last year as a whole, productivity, or real GDP per hour worked, rose 1.4 per cent, the fastest since 2005.
At 0.9 per cent, the gain in output among businesses eclipsed that of hours worked, which rose 0.4 per cent.
Productivity still lags that of the United States, where businesses saw an increase of 0.6 per cent in the fourth quarter and 2.8 per cent for all of 2010.
"Given its close ties with the U.S., Canadian businesses have the opportunity to learn from the productivity powerhouse," said economist Diana Petramala of Toronto-Dominion Bank.
"A strong Canadian dollar provides a nice opportunity to import the same innovation, and productivity- boosting machinery and equipment that seems to be working for U.S. businesses. We think that Canadian businesses will seize the opportunity and improvements in Canadian labour productivity will extend into 2011."
Nasdaq eyes NYSE Nasdaq OMX Group Inc. is moving ever closer to launching its own bid for NYSE Euronext , reports this morning say.
Nasdaq is reported to be in talks with banks to put together financing for a bid, which would be hostile given the proposed marriage of NYSE and Duetsche Boerse AG.
Snooki Inc. Stopping at the gas station today, I did a double take when I noticed that Snooki is gracing the cover of Rolling Stone.
Which got me thinking about how this "party girl/budding veterinary assistant" became, as the magazine notes, a reality TV superstar, best-selling author, a celebrity with an appearance fee that demands $20,000 (U.S.), and the owner of a jewellery line, with plans for a spinoff show.
There's probably not much here in the way of lessons for would-be entrepreneurs looking to become self-made men and women, but it is a fascinating business tale.
Snooki, of course, is Nicole Polizzi, the pouf-haired, tiny star of Jersey Shore, a reality show that you probably don't want your little kids watching. Or reading the article, for that matter, in which she talks about booze and sex.
She certainly has ambitions, telling Rolling Stone contributing editor Erik Hedegaard that "What I'd like is to turn out like Jessica Simpson, with her whole brand. She makes millions ... I'm trying to build an empire, because after this I can't get a normal job. I mean, how do I go and sit behind a desk?"
Boyd Erman's Morning Meeting Nasdaq, facing a tough slate of options as rivals merge, is still looking at a bid for NYSE Euronext. But it's also considering trying to do something with London Stock Exchange Group PLC, which is planning to combine with TMX Group Inc., Streetwise columnist Boyd Erman reports today.
In Economy Lab today
Higher food prices are here to stay, even in Canada where a strong loonie has helped protect consumers from rising costs, the Conference Board of Canada says.
Britain's Office for National Statistics is overhauling its inflation basket, the items it checks to monitor changes in consumer prices. The agency says the changes reflect how technology is changing society, but in reading today's announcement there's a distinctly romantic feel to it.
In Personal Finance today
Stuck in a contract and can't get out? Consumers are going to great lengths to part ways with their health clubs and cellphone providers, writes Dakshana Bascaramurty.
The latest tricks for ripping off consumers include fake virus warnings on personal computers. Dianne Nice offers some tips on how to avoid being scammed.
Getting a raise? Preet Banerjee shows what can be done with that money if you commit to saving some of it, rather than blowing it.
From today's Report on Business
- Oil producers in Libya face political conundrum
- Boyd Erman: LSE a weakling against TMX? Numbers don't back it up
- MLSE auction part of larger trend
|TSX-I S&P/TSX Composite||14,805.44||
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|CAD/USD-I Canadian Dollar/U.S. Dollar||0.896||
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|SPX-I S&P 500||1,946.16||
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|NDAQ-Q NASDAQ OMX Group||41.95||
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|DJIA-I Dow Jones Industrials||16,804.711||
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|CCO-T Cameco Corp.||19.73||
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