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Believe it when you see it Has the bar been set too high for this weekend's EU summit?
Probably. But what's more important is that markets are being fed rumour and speculation, with vague reports about what to expect. All of which could lead to a fairly big disappointment when markets open Monday after the meeting in Brussels.
Even the chief of the European Commission, Jose Manuel Barroso, seemed to manage expectations today, though he did suggest something meaningful would come out of the meeting.
“Even if we do arrive at a political decision on everything that’s on the table, which I hope we will, that doesn’t necessarily mean that there will not then have to be an implementing phase,” he told reporters.
Notable here is that this has happened time and time again since the debt crisis in the euro zone began about two years ago. There's no question the leaders of the monetary union are working toward something, and some details are likely to emerge Sunday because they know they have to do something, probably along the lines of bank recapitalizations, a bigger haircut for Greek bondholders, and more money for the rescue fund known as the EFSF.
But with 17 governments involved and a history of letdowns, one should take everything with a grain of salt.
"The tensions within Europe are clearer behind the most played up headlines and continue to point toward disagreement on fundamental issues such as whether or not to pursue Greek hair cuts (Germany yes, France no) that would crystallize balance sheet markdowns and have Greek debt labeled in default by rating agencies," said Derek Holt and Karen Cordes Woods of Scotia Capital.
"That the latter is inevitable has seemed clear for months as rating agencies have been remarkably lucid on the issue of 'voluntary' restructuring in pointing toward a deterioration in the original indenture terms."
The latest round began yesterday with reports that France and Germany, the two key players at the table, had agreed to boost the euro bailout fund to €2-trillion. Other reports suggested that was wrong, and, in the end, who knows? A report in The Financial Times indicated it could be more like €1-trillion.
"A source called the €2-trillion number too simplistic, said the debate was still ongoing and there will be no deal until Friday," said Elsa Lignos, senior currency strategist at RBC in London.
"But while Germany plays down the final plan, French President Sarkozy said the unprecedented crisis will lead them to 'take important, very important decisions in the coming days.' If they can’t agree on how to describe it, we would guess they haven’t yet agreed what 'it' is. Some form of plan is taking shape with bank recaps, a leveraged EFSF (likely using the insurance model) and higher haircuts for Greece but we may well need to wait past Sunday to get the full details."
France's Nicolas Sarkozy and Germany's Angela Merkel were scheduled to speak today in advance of the summit.
Greece shuts down The backdrop to all of this is a massive two-day general strike that began today in Greece, where unions and others are protesting the government's austerity measures, set to be voted on tomorrow.
Public transport, hospitals, schools and other services have been crippled, and tear gas can be seen in the streets of Athens, The Globe and Mail's Eric Reguly reports from Greece.
Prime Minister George Papandreou has appealed for Greeks to get onside with fighting the fiscal crisis, but, as today's strike shows, that's not going to happen. Unemployment in Greece is 16.5 per cent, and many say they're having trouble making ends meet.
Early estimates put the number of protesters in the tens of thousands. One police officer said he expected 50,000 to take part in the Athens demonstrations and some protesters said the number could rise in the afternoon. The shopping streets around Syntagma Square were packed with protesters. All stores were closed, their facades protected by metal shutters.
Markets buoyed So you might wonder, perhaps, why investors are in such a better mood this morning, particularly when they know they could be disappointed come Sunday night? As one analyst suggested today, it may be a "glass-half-full" approach.
"My instincts don't trust the equity market reaction to Europe's ongoing headline-of-the-minute charades, but that’s what is motivating a strong risk rally into the North American open," said Scotia Capital's Mr. Holt.
Tokyo's Nikkei gained 0.4 per cent, and Hong Kong's Hang Seng 1.3 per cent, while European stocks also moved higher. London's FTSE 100, Germany's DAX and the Paris CAC 40 were up by between 0.8 per cent and 0.9 per cent by about 9 a.m. ET.
"The US$ index is weaker this morning, with the greenback losing ground against nearly every currency on the board amid a rally in global equities," said Benjamin Reitzes of BMO Nesbitt Burns. "... Commodity prices are mixed, not seeing the same positive sentiment as equities: WTI crude oil is up 0.4 per cent to $88.65, gold is down $3 to $1,655, base metals are mixed (copper is down 0.8 per cent), and grains are higher."
Dow Jones industrial average and S&P 500 also gained.
"The gains are being driven by a report yesterday in the Guardian newspaper that Germany and France agreed to boost the size of the EFSF to €2-trillion," Mr. Reitzes said.
"The Financial Times is reporting that German Finance Minister Schaeuble said the bailout facility’s capacity could be increased to as much as €1-trillion. If either of those stories is true that would be a step in the right direction for Europe. The generally upbeat tone comes despite Moody’s downgrading Spain two notches to A1 from Aa2 late yesterday. Moody’s maintained a negative outlook on the rating, and cited weak growth prospects and exposure to market stress as reasons for the downgrade. S&P and Fitch already downgraded Spain earlier this month, so the move was largely expected."
Wi-LAN stalks Mosaid Wi-Lan Inc. really wants to get its hands on Mosaid Technologies Inc. , boosting its bid for the company to $42 cash from $38.
"The Revised Offer is higher than Mosaid shares have traded in more than 10 years prior to the announcement of Wi-LAN’s intention to make the offer," the Ottawa-based company said.
Wi-Lan added that has "no intention" to further revise its bid. I really don't know why companies say this.
Morgan Stanley beats Morgan Stanley beat analysts' estimates today with a hefty accounting gain and more money from trading leading to a rebound in third-quarter profit.
Morgan Stanley earned $2.2-billion (U.S.) or $1.15 a share, compared to a loss of $91-million or 7 cents a year earlier.
"Morgan Stanley effectively navigated turbulent markets while consolidating our market share gains with Institutional clients," said chief executive officer James Gorman.
- Morgan Stanley posts $2.15-billion profit
- U.S. consumer banks on the mend
- BNY Mellon profit rises 5 per cent
- Citigroup posts third-quarter profit gains
U.S. consumer prices climb Energy and food prices continue to push up inflation in the United States but core prices remain tame.
Prices rose in September by 0.3 per cent from a month earlier, the U.S. Labor Department said today, though so-called core inflation, which excludes volatile items, inched up just 0.1 per cent.
The overall annual rate now sits at 3.9 per cent, the highest in about three years. The annual core rate is at 2 per cent.
"Overall, headline inflation should now have peaked and will drop below the core rate in the second half of next year," said Paul Ashworth, chief U.S. economist at Capital Economics in Toronto.
Youth unemployment troubling The International Labour Organization paints a troubling picture of the world's youth today, warning of a "scarred generation" amid high unemployment.
"In the current context of economic instability, young men and women face increasing uncertainty in their hopes of finding a decent job," the group said in a new report. "There is no doubt that the global economic crisis has further exposed the fragility of youth in the labour market. At the end of 2010, there were an estimated 75.1 million young people in the world struggling to find work – 4.6 million more than in 2007."
The report said an actual drop in the number of unemployed youth was because of young people dropping out of the search for a job.
"For many youth who did manage to find work, the job found is less than ideal," the report added. "... By the end of 2010, as much as half of working youth were in part-time employment in Canada, Denmark, the Netherlands and Norway, while in Australia, Iceland, Ireland, Slovenia, Sweden and the United Kingdom, the share was 1 in 3."
In Economy Lab Federal Reserve Chairman Ben Bernanke has been keeping an eye on how Bank of Canada Governor Mark Carney has been fighting the financial crisis, The Globe and Mail's Kevin Carmichael writes from Washington.
In International Business It is conceivable - if unlikely - that the euro zone will find ways to manage its emergency. It is inconceivable that it will cure the illness, partly because members are in denial about its nature and partly because it is a chronic condition. Martin Wolf of The Financial Times examines the issue.
In Globe Careers After months in which part-time jobs and self employment represented the bulk of job creation, a new survey points to a welcome trend toward increased professional hiring in Canada, The Globe and Mail's Wallace Immen reports.
In Personal Finance Merchants use a variety of tricks to make us buy stuff we don’t need. Here’s how to recognize a few of them.
From today's Report on Business
- Bay chief working fast to revamp retailer
- Ottawa urged to create Asian trade strategy
- Lazaridis rallies BlackBerry app army
- Neil Reynolds: The sad demise of the one-income family