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These are stories Report on Business is following Friday, Oct. 31, 2014.

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Bank of Japan stokes markets
The Bank of Japan shocked global markets today by boosting its stimulus measures in what it called "a critical moment" in its desperate battle to drive up inflation.

This came as the central bank also cut its outlook for economic growth.

Today's decision underscores the extreme uncertainty in global economies, and the divergence among central banks six years after the onset of the financial crisis.

Just this week, the Federal Reserve ended one of its stimulus measures amid an improving outlook. The European Central Bank, on the other hand, has already moved to fend off deflation. And today, Russia hiked its benchmark rate to 9.5 per cent.

The Bank of Canada is in the middle, doing nothing and sending no signal of what's to come.

"As one door closes, another one opens, as the saying goes, and while we may have seen the end of the Federal Reserve's bond-buying program for the time being and the ECB reluctant to step into the breach, it appears that the Bank of Japan has no such qualms, filling the void left the U.S. central bank as overnight they surprised the markets with the announcement of a fresh bout of monetary stimulus," said chief analyst Michael Hewson of CMC Markets in London.

The Bank of Japan said it would boost its bond-buying scheme aggressively, bringing it to some ¥80-trillion, or about $725-billion (U.S.) a year.

"We can say the Japanese economy is now at a critical moment in its process of getting out of deflation," central bank Governor Haruhiko Kuroda said at a news conference.

"The measures this time show the Bank of Japan's unwavering determination to exit deflation."

Japan has, of course, long grappled with deflation and is struggling to reach an inflation target of 2 per cent.

The move rippled through global financial markets, driving Tokyo's Nikkei, for example, up by almost 5 per cent and U.S. stocks to fresh intraday highs. Commodities and the Canadian dollar took it on the chin, the latter losing about a penny to sit below 88.5 cents U.S.

Hong Kong's Hang Seng climbed 1.3 per cent, while European and North American stocks are sharply higher.

In Europe, London's FTSE 100, Germany's DAX and the Paris CAC 40 were up by between 1.2 per cent and 2.3 per cent.

The S&P 500 and Dow Jones industrial average shot up by 0.9 per cent by mid-afternoon, as did Toronto's S&P/TSX composite.

"The Japanese central bank has taken the QE baton from the Fed and equity traders couldn't be happier," said market analyst David Madden of IG.

Global uncertainty
What we're seeing this week highlights the troubles of a global economy desperate to return to a pre-crisis state.

On Wednesday, the Fed took a new tack, while the Bank of Canada warned of the hit to the economy from the rapid plunge in oil prices.

Then yesterday brought news that the U.S. economy expanded in the third quarter at an annual pace of 3.5 per cent, meaning its chugging along rather than driving ahead.

Today, a fresh reading showed Canada's economy has stalled.

And the Eurostat statistics agency reported that the annual inflation rate among the countries that share the euro inched up this month to 0.4 per cent from 0.3 per cent, while unemployment held at a worrisome level of 11.5 per cent in September.

As always, that one number masks the lows of some countries, such as Germany at 5 per cent, and the crippling highs in others such as Spain and Greece, which are in the area of 25 per cent.

"The round of economic releases today was notably dismal, adding pressure to the ECB to do more," said senior economist Jennifer Lee of BMO Nesbitt Burns.

"Here's the lowdown … Deflation fears failed to be dampened in the euro zone as the advance reading for consumer prices showed a 0.4-per-cent rise from a year ago," she added.

"Yes, that was as-expected and up from September's 0.3-per-cent year-over-year rate but that doesn't hide the fact that it is miles from the ECB's 2-per-cent goal … The euro zone's jobless rate at least didn't deteriorate. It stayed at 11.5 per cent for the fourth straight month in September. Although that's off the highs of 12 per cent last year, it is still elevated. Very elevated."

Economy shrinks
Canada's economy is on the ropes.

Having flatlined in July, the economy contracted by 0.1 per cent in August, Statistics Canada said today.

As The Globe and Mail's David Parkinson reports, that's primarily because goods production declined by 1 per cent, pulled lower by the oil and gas industries and the manufacturing sector.

Services industries gained by 0.2 per cent.

The sour July and August showings follow six months of better performances, of 0.5 per cent and 0.3 per cent in May and June, respectively, for example.

"Though we were expecting a bounce-back in resources after they took a spill in the prior month, August saw production there slide further by 1.7 per cent," said Nick Exarhos of CIBC World Markets.

"That knocked over a tick from monthly GDP, though we expect activity there to rebound in the months ahead … The decline in output for August leaves our forecast for [the third quarter] tracking under 2 per cent, now below the Bank of Canada's 2.3-per-cent outlook."

Loonie to stay soft
And while we're at it, the outlook for the Canadian dollar, which slumped today, isn't looking much brighter.

"A vulnerable global growth pattern, materially lower oil prices, and an uneven domestic outlook are working against CAD," chief currency strategist Camilla Sutton of Bank of Nova Scotia said today, referring to the loonie by its symbol.

"Scotiabank Economics has pushed out its forecast for the first BoC interest rate hike to the first quarter of 2016; three quarters behind the Fed. Helping to mitigate the CAD negative story are: 1) a strengthening U.S. economy that should help to support Canadian exports and 2) flows into Canada seeking its Triple-A sovereign status. However, the risks have now tilted to CAD depreciation."

Ms. Sutton sees the Canadian dollar at about 88.5 cents, which is where it sits today, by the fourth quarter of next year, and at about 87 cents a year later.

CIBC World Markets, in turn, said in its latest forecast yesterday it expects the Canadian currency to sink below 85 cents in the third quarter of 2015.

"[Bank of Canada Governor Stephen] Poloz stepped away from forward guidance, but he'll find reasons to stay dovish enough to lag the Fed when it comes to rate hikes," CIBC said.

"A potential recovery in energy prices could allow the loonie to find some stability in the near term, leaving further weakness for when the Fed steps off of zero in the first half of 2015."

Imperial profit up
Imperial Oil Ltd. is in today with a sharp jump in third-quarter profit.

On one of the slower days for corporate results this week, Imperial posted a gain in profit to $936-million, or $1.10 a share, diluted, from $647-million or 76 cents a year earlier.

But what's flowing down from its upstream operations is lower, down by $72-million to $532-million.

"Earnings in the third quarter of 2014 reflected the impact of lower bitumen and synthetic crude oil realizations of about $200-million," the energy giant said.

"Earnings also decreased due to higher royalties along with higher energy and other operating costs totalling about $90-million. These factors were partially offset by higher liquids volumes of about $140-million, primarily due to incremental contribution from Kearl production, and the impact of a weaker Canadian dollar of about $85-million."

Profits from its downstream business, though, rose by $297-million to $343-million.

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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 4:00pm EDT.

SymbolName% changeLast
BNS-N
Bank of Nova Scotia
+1.21%51.78
BNS-T
Bank of Nova Scotia
+0.94%70.07
CADUSD-FX
Canadian Dollar/U.S. Dollar
-0.04%0.7382
CM-N
Canadian Imperial Bank of Commerce
+1.3%50.72
CM-T
Canadian Imperial Bank of Commerce
+1.13%68.67
IMO-A
Imperial Oil Ltd
+0.7%69.13
IMO-T
Imperial Oil
+0.15%93.43
KMI-N
Kinder Morgan
+1.05%18.34
PD-N
Pagerduty Inc
+3.18%22.68
PD-T
Precision Drilling Corp
+0.33%91.13
PDS-N
Precision Drilling Corp
+0.54%67.29

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