These are stories Report on Business is following Tuesday, Oct. 4. Get the top business stories through the day on BlackBerry or iPhone by bookmarking our mobile-friendly webpage.
Dollar sinks, stocks roiled Investors are in a sour mood again this morning as euro fears and a general sense of gloom roil global stock and currency markets.
"The US$ index is stronger this morning as risk aversion dominates markets," said Benjamin Reitzes of BMO Nesbitt Burns. "Ongoing worries about Europe, talk of a bigger haircut on Greek debt (probably inevitable), Goldman Sachs calling for recession in Europe, and a brewing U.S.-China trade war are all weighing on markets. Also, Deutsche Bank said that it will not hit its 2011 profit target … but that shouldn’t come as a surprise."
The Canadian dollar sank below 95 cents (U.S.), and stocks tumbled in Asia and Europe, setting the stage for another weak opening in North America. Oil prices fell and gold rose.
"Looking ahead to the U.S. open we are expecting the Dow to start around 110 points lower," said David Jones, market strategist at IG Index in London.
"Wall Street saw a very weak finish to the U.S. session on Monday with indices diving 100 points in the final 10 minutes of trading. Investors face the prospect of yet another jittery day. With August lows under threat, a move below here could prove the catalyst that kicks off a sharper lurch lower."
As The Globe and Mail's David Parkinson reports, Canada's benchmark index, the S&P/TSX composite , slipped into bear market territory yesterday, down more than 20 per cent from its April high.
In Asia today, Tokyo's Nikkei slipped 1.1 per cent, and Hong Kong's Hang Seng 3.4 per cent. In Europe, London's FTSE 100, Germany's DAX and the Paris CAC 40 were down by between 3 per cent and 3.7 per cent by about 8:30 a.m. ET.
Dow Jones industrial average and S&P 500 futures also fell.
Playing most into the market fears are concerns that Greece is headed for a default. It has already missed its deficit targets for 2011 and 2012 and sees a continuing recession, while leaders of the euro zone have been unable to persuade investors they have the situation in hand. Fears are pressuring bank shares.
Where the loonie is concerned, a rising U.S. dollar, lower commodity prices and general angst are all ganging up to push the currency lower, said George Davis, the chief technical analyst at RBC Dominion Securities.
There are, however, "resistance levels" at which he'd expect traders to buy the Canadian dollar, and they're well below parity, first at 93.84 cents and then at 92.14 cents.
He also cited a "very high correlation" between the S&P 500 and the loonie. When the S&P sells off, as it did yesterday, so goes the Canadian dollar.
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I'll gladly pay you Tuesday ... The finance ministers of the embattled euro zone have put off an €8-billion bailout payment to Greece until mid-November as they review an agreement they made in July with debt holders, taking the situation right down to the wire and threatening to upset markets even further.
But that's okay, according to Greece's Finance Minister Evangelos Venizelos, who said today Greece can make it through until then. I feel so much better.
It's looking more and more like private debt holders will be taking a bigger hit than the 21-per-cent they agreed to in July because, according to the chief of the 17-member monetary union, the finance ministers are looking again at whether they should share more of the pain. Thus, they delayed their meeting originally scheduled for mid-October.
"This was somewhat of a surprise given that markets had been led to believe that Greece would run out of money on the 14th October," said CMC Markets analyst Michael Hewson.
"It was also hinted that Europe may have to revisit the details of the debt exchange program which currently stands at 21 per cent."
Separately today, the Reuters news agency takes an in-depth look at the despair among the Greeks who are suffering under the government's harsh austerity measures.
- Despair and resignation in Greece as more pain looms
- Today's key developments in Europe's debt crisis
In the eye of the storm European banks are in the eye of this particular storm because of credit risks, notably the France-Belgium banking group Dexia, whose shares plunged today, forcing governments to promise to back up the institution.
“We are going to take action concerning our banks, and the decision taken so far is to act with a guarantee,” said Belgium's Finance Minister Didier Reynders.
While the governments promised action, Reuters quoted sources as saying the most likely solution will be to break the bank into two, with its troubled operations put into a so-called bad bank and its stronger units sold.
Deutsche Bank hit Germany's giant Deutsche Bank issued a profit warning today and unveiled plans to slash 500 jobs. It also said in a statement that it would take impairment charges related to Greek debth of about €250-million.
"The intensifying European sovereign debt crisis led to sustained uncertainties among market participants in the third quarter and thus to significantly reduced volumes and revenues in particular the corporate banking and securities (CB&S) corporate division," the bank said.
"... The bank expects that against this background as well as ongoing market turbulence the planned pre-tax target of €10-billion from its core businesses is no longer achievable for 2011."
It said, however, it still expects a third-quarter profit and "a robus earnings level" for the year.
U.S.-China tensions escalate Trade tensions between the United States and China are heating up in the wake of a U.S. Senate vote yesterday to debate a bill aimed at countries that hold their currencies at low levels. That means China. If it all came to pass, the U.S. government could punish such nations with duties.
Chinese officials hit back today, warning such a move could only hurt. And it didn't sugar coat the warning of a trade war.
"In the context of a sluggish global economy and weak confidence, an external environment where all countries work together to tide over difficulties through concerted efforts is of critical importance," the People's Bank of China said.
"At this juncture, the vote by the U.S. Senate cannot help address the problems of insufficient savings, trade deficit or high unemployment in the U.S.; on the contrary, it might seriously affect the progress of China's reform of the exchange rate regime and might also result in a trade war that no one would like to see," the central bank said in a statement posted on its website.
"From the perspective of the U.S. experiences, politicizing economic issues does not help solve the problems per se, but would rather complicate the problems, and adversely impact economic recovery and market confidence."
Awaiting the iPhone The world's most popular smart phone gets a makeover today, and so does the company that designed it, The Globe and Mail's Omar El Akkad writes.
Apple is expected to unveil the new iteration of the iPhone at an event in California. Like its predecessor, the iPhone 5 will be the centre of the technology world's attention for the foreseeable future – indeed, most tech blogs have been full of speculation for weeks about what features the new phone will come with.
The company is expected to take what is already a blockbuster product and make it a little slimmer, a little faster and a little more versatile. Perhaps the most groundbreaking new feature expected in the new iPhone is a more robust set of voice-powered controls.
Headlines of note
In Economy Lab Now that Ontario has smart meters, the policy challenge is: how can we use them to generate benefits for the average Ontario electricity consumer? Frances Woolley examines the issue.
In International Business Denmark’s new centre-left government has opted to spend and work its way out of the economic crisis in sharp contrast to the austerity models that have emerged in many other European countries, Clare MacCarthy of The Financial Times reports.
In Globe Careers Managers must be careful not to encourage the wrong sort of rivalry and they need to pick their moment to take spats public, Andrew Hill of The Financial Times writes.
From today's Report on Business
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- Canadians unfazed by pension funding woes
- Carney touted for top global banking job
- David Milstead's Vox: HP stock is cheap, but not cheap enough