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These are stories Report on Business is following Tuesday, Oct. 25. Get the top business stories through the day on BlackBerry or iPhone by bookmarking our mobile-friendly webpage.

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Carney on hold Global troubles are washing up on Canada's shores, the turmoil feeding an increasingly uncertain outlook. Add to Europe's woes the slowing of the U.S. economy, and you've got a rather weak outlook, as the Bank of Canada noted today.

The central bank held its benchmark rate steady at 1 per cent, and cut its growth outlook for this year and next, The Globe and Mail's Jeremy Torobin reports. Governor Mark Carney and his colleagues cited several threats, including a "brief recession" in the euro zone.

"The outlook for the Canadian economy has weakened since July, with the significantly less favourable external environment affecting Canada through financial, confidence and trade channels," the Bank of Canada said. "Although Canadian growth rebounded in the third quarter with the unwinding of temporary factors, underlying economic momentum has slowed and is expected to remain modest through the middle of next year."

The central bank now projects growth of 2.1 per cent this year, 1.9 per cent next, and then a rebound to 2.9 per cent in 2013.

What all this means, of course, is that market players expect no rate from the central bank for quite some time.

"Our base case remains that the Bank of Canada will keep rates unchanged until the start of 2013," said senior economist Michael Gregory of BMO Nesbitt Burns. "If anything, today's announcement increases our conviction."

The central bank's forecast helped sap some of the strength of the Canadian dollar , which had been above parity before the morning announcement. The loonie closed at 98.4 cents U.S., down by 1.29 cents.

Flaherty hints at softer target Finance Minister Jim Flaherty is using new language to describe his target for erasing Canada's deficit, promising the books will be balanced "in the medium term," The Globe and Mail's Bill Curry writes.

The minister's use of the phrase, rather than repeating the budget 2011 pledge to balance the books by 2014-15, suggests Ottawa's hard target for balancing the books could be softened when he releases his fall economic update in a few weeks.

A bar too high? Tensions are running extremely high in Europe today, and markets are eagerly awaiting the outcome of tomorrow's make-it-or-break-it summit. All of which raises the question, has the bar been set too high?

Of course it has, and Europe's leaders have no one to blame but themselves. They set the stage for this, pumping the markets and promising first a Sunday summit to discuss a Grand Plan, and then a follow-up for tomorrow to finalize it.

But just as Rome wasn't built in a day - though by the looks of things it could collapse in one - Europe won't be rebuilt in a day. Too many divisions remain, and there doesn't appear to be enough firepower under discussion even if they do agree on something.

Already, the group's finance ministers have cancelled a pre-summit meeting and, warned Michael Hewson of CMC Markets, there's "not a chance" of a broad deal.

"The omens do not look good for broad agreement, after today's cancellation of tomorrow's finance ministers meeting," Mr. Hewson told me today. "[I]think tomorrow could well raise more questions that answers. Big concern is Italy - talk that Berlusconi's government could fall, and if that happens it could well add a massive layer of further uncertainty to the question."

As The Globe and Mail's Eric Reguly reports today, Prime Minister Silvio Berlusconi's government is on the brink of collapse over a deadlock with its coalition partner over economic reforms demanded by other EU leaders, notably Germany's Angela Merkel and France's Nicolas Sarkozy.

Italy is the region's third-biggest economy, and trouble there could mean chaos for tomorrow's summit.

As Derek Holt and Karen Cordes Woods of Scotia Capital point out, the outlook is far from certain.

"There is precious little that is new to point to by way of developments in Europe apart from the ongoing tensions concerning the extent to which Greek debt may be written down," the economists said today.

"Policy makers have a unified mandate to seek a 'voluntary' 60-per-cent writedown in contrast to ISDA's caution that there are limits to what constitutes a voluntary mark down (ie: without triggering a credit event that would invoke CDS coverage and potentially rock markets) and in contrast to push back from European banks," they said in a research report, pointing also to tomorrow's vote in the German parliament over the bailout fund.

"Tomorrow's vote in the Bundestag regarding the vague outline for EFSF plans will only be the first of several it seems as others including Finland and the Netherlands state their intentions to put the overall package of proposals coming out of this week's summit to another parliamentary vote. That could add at least several weeks of delays, amid greater uncertainty toward the outcome than the votes on the July proposals."

The group is looking at a far-ranging plan that would include shoring up the region's banks, a bigger-than-expected haircut for Greek debtholders of up to 60 per cent, and an enhancement of the euro zone's rescue fund, known as the EFSF.

"Financial institutions will not be too pleased at an outcome that hits the upper end of expectations but Greek banks are the ones most significantly at risk," said Elsa Lignos, senior currency strategist at RBC in London. "From a wider market perspective, it remains to be seen how far haircuts can be stretched before CDS is triggered."

Carl Weinberg, the chief economist at High Frequency Economics, is particularly glum, warning today that the other governments of the 17-member monetary union cannot "fix" Greece.

"Summit II - Son of the Summit? - is scheduled for tomorrow," he said. "Everyone expects something from this confab, but no one can be sure what. Governments hope to find a 'solution' to Greece's worries and an arrangement to 'ring-fence' the problem so that bigger, harder-to-digest problems do not emerge for bigger fiscal miscreants ... like Italy. The real problem is that once confidence has been lost in the faith and credit of governments to pay their debts, not even the mighty European Commission can bring it back."

India's central bank hikes rates India's central bank hiked interest rates by another quarter of a percentage point today, but that appears to be it for now.

The Reserve Bank of India has been focused on inflation, but is turning its attention to the global turmoil and the potential impact on the economy.

"The tone of the accompanying statement was more dovish with a greater emphasis on downside risks to growth and signs of optimism that inflation pressures will start to ease in coming months," said analysts at RBC's emerging markets group after the central bank hiked its key rate to 8.5 per cent from 8.25 per cent.

"As a result, the RBI's current assessment is that there is a 'relatively low' chance that further rate hikes will be required at the next policy meeting in December. Nevertheless, further rates hikes can not yet be ruled out if inflation fails to fall as quickly as the RBI hopes. In contrast to previous statements, the RBI is now clearly increasing its focus on risks to the growth outlook. Growth risks are now considered to be 'undoubtedly significant' and 'need to be given due consideration.'"

Netflix sinks Shares of Netflix Inc. plunged by about 35 per cent today following the company's disastrous report on subscribers in the third quarter.

Netflix profit and revenue both climbed rapidly in the quarter, but more than 800,000 left after the company boosted prices and unveiled a plan to separate DVD rental operations from video streaming, though it later changed its plan. Netflix also forecast some money-losing times ahead early next year, The Globe and Mail's Susan Krashingsky reports.

The stock has fallen from grace, to put it mildly, having shed more than $10-billion (U.S.) in value since its midsummer night's dream.

"We believe the NFLX model is unsustainable, as the company faces rising costs that it hoped it could pass onto its (subscribers), who appear unwilling to do so," Janney Capital Markets said in a research note, according to Reuters.

In its letter to shareholders yesterday, chief executive officer Reed Hastings and CFO David Wells boasted of having the opportunity to have the best streaming video subscription service in the world, though they noted that the past few months had been "difficult" for shareholders, employees and subscribers.

"While we dramatically improved our $7.99 unlimited streaming service by embracing new platforms, simplifying our user-interface, and more than doubling domestic spending on streaming content over 2010, we greatly upset many domestic Netflix members with our significant DVD-related pricing changes, and to a lesser degree, with the proposed-and-now-cancelled rebranding of our DVD service," they said.

"In doing so, we've hurt our hard-earned reputation, and stalled our domestic growth. But our long-term streaming opportunity is as compelling as ever and we are moving forward as quickly as we can to repair our reputation and return to growth."

Railways see pockets of improvement Canada's two largest railways say they're starting to see pockets of improvement that should allow them to cruise to solid finishes in 2011, The Globe and Mail's Brent Jang reports.

Canadian National Railway Co. today posted a $659-million profit in its third quarter, up 19 per cent from $556-million a year earlier. The country's largest railway saw its share profit increase to $1.46 from $1.19.

For Canadian Pacific Railway Ltd. , profit slipped by just over $10-million from a year earlier to $186.8-million or $1.10 a share, while revenue climbed to $1.3-billion.

BP rebounds BP PLC heralded a "turning point" today as the energy giant continued to rebound from the massive oil spill in the Gulf of Mexico with sharply higher profits.

BP's profit climbed to $4.9-billion (U.S.) in the third quarter from $1.8-billion a year earlier, and revenue jumped more than 30 per cent to almost $98-billion.

BP also said it plans to divest some $15-billion more in assets than it had previously planned, bringing its asset sales to $45-billion by the end of 2013.

"BP was severely tested by the Deepwater Horizon accident," said chief executive officer Bob Dudley.

"It is now over a year since the well was finally sealed and we have continued to respond with a strong sense of corporate responsibility."

Salaries to rise Most Canadian workers will still see higher salaries next year, despite a rocky global economy, but pay hikes won't return to the pre-recession heyday.

Employees will get average salary increases of 3.1 per cent in 2012, the Conference Board of Canada said in its compensation outlook to be released today, The Globe and Mail's Tavia Grant reports today.

Business ticker

In Economy Lab The idea that a healthy lifestyle substantially decreases demand on the health care system has been repeatedly shot, stabbed, and poked at with sharp sticks, but it won't just die. Chris Auld looks at the issue.

In International Business Barack Obama, faced with 14 million unemployed workers and a jobless rate that won't budge, is tackling the U.S. economic crisis by focusing on where it began: the housing market. The Globe and Mail`s Steve Ladurantaye reports.

In Globe Careers At some point in our careers, we're likely to be asked to speak in public, and it's essential to be able to communicate with confidence when we're thrust into the spotlight. The Globe and Mail`s Dianne Nice reports.

From today's Report on Business

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Tickers mentioned in this story

Study and track financial data on any traded entity: click to open the full quote page. Data updated as of 28/03/24 11:52am EDT.

SymbolName% changeLast
BP-N
BP Plc ADR
+0.43%37.62
CNI-N
Canadian National Railway
+0.66%132.52
CNR-T
Canadian National Railway Co.
+0.32%179.21
CP-N
Canadian Pacific Kansas City Ltd
-0.1%88.37
CP-T
Canadian Pacific Kansas City Ltd
-0.31%119.71
NFLX-Q
Netflix Inc
-1.38%605.09

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