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Euro leaders scurry Europe's leaders are scurrying to get a handle on their crisis, and meeting hither and yon. Coupled with a ban by some countries on short selling some stocks, this appears to buoying the hopes of investors. But it would be unwise to place long-term bets on the euro zone because all that its leaders ever seem to do is scurry and meet.
In Italy today, the government was holding an emergency session aimed at new measures that could include some tax hikes and changing the retirement age for women, according to reports. New measures are expected to be unveiled at some point today.
Separately, German leader Angela Merkel and her French counterpart Nicolas Sarkozy also plan another meeting early next week to try to come up with other solutions.
The short-selling ban helped boost markets today, and the euro, the currency shared by the 17 countries of the monetary union, was bolstered by the announcement of the Merkel-Sarkozy meeting.
"The single currency stabilized across the board on news that Angela Merkel and Nicolas Sarkozy will meet in Paris next week to discuss the current crisis," said CMC Markets analyst Michael Hewson.
"With Sarkozy ordering French ministers to come up with a new budget plan by next week the pressure is on to try and stem the tide of fear permeating through Europe, amidst concerns about France's rising debt-to-GDP ratio."
Europe's leaders have been unable to calm fears over their debt crisis, leading many observers to complain about a policy vacuum and a lack of co-ordinated action aimed at long-term stability. Most meetings to date, and short-term measures such as boosting the size of their bailout fund, seem to calm things down for days, or in some cases just hours, at most. The group has generally been divided.
Today begins with some of the fears eased, but the markets have been exceptionally volatile and it's still anyone's game at the moment.
"Somewhat calmer markets today, though equity market volatility continues in Europe - at least it's to the upside," said Benjamin Reitzes of BMO Nesbitt Burns.
"France, Spain, Italy and Belgium banned short selling of financial stocks in an effort to stabilize the hard-hit sector. Regulators were concerned that short sellers were spreading false rumours to drive down bank shares. Rumours or reality, the strain in Europe's banking sector has increased markedly over the past month."
- Italy eyes tax hikes as cabinet meets on crisis
- U.S. retail sales gain in July
- EU races to calm chaotic markets
- 'Naive' EU short-selling ban questioned
- Follow our Market Blog
Indicators grim The actual economic news from Europe today is bleak.
The French economy flatlined in the second quarter, pulled down by wary consumers, according to France's statistics agency. Despite the fact that GDP stalled in the quarter, the government is sticking to its guns and pledging to meet its deficit-reduction targets.
"No one should doubt our determination to respect the deficit targets that the president of the republic has fixed," the country's finance minister said in a radio interview.
Separately, indicators from Greece showed the country where the debt crisis began continues to sink into the muck.
GDP contracted 6.9 per cent in the quarter, compared to a year earlier. And across the euro zone, industrial production slipped.
Yesterday, Greece reported depressing jobless numbers, showing the unemployment rate rose in May to 16.6 per cent. It has been climbing steadily since its most recent low of 6.6 per cent in May 2008.
"The overnight economic data were uniformly weaker, contributing to concerns about slowing global growth," said BMO's Mr. Reitzes.
"Europe saw some of the softer data, with French real GDP growth flat in Q2, versus expectations of a 0.3-per-cent gain. A sharp decline in consumer spending was the only area of weakness. Part of the drop was due to the expiry of government car purchase incentives. Even so, the decline is worrying as households have been strong contributors to growth over the past year and that needs to continue as government spending cuts flow through. Meantime, euro area June industrial production unexpectedly fell 0.7 per cent, highlighting that the entire region had trouble in the early summer months."
Retail sales buoy hopes In the United States, however, a report on retail sales showed U.S. consumers still have some spunk left in them, a good sign for a stalling economy.
Retail sales rose 0.5 per cent in July, while June's gain was revised upward today. That suggests consumer spending will rebound at an annualized pace of about 2 per cent in the current quarter, after a weak showing in the last quarter, said senior economist Sal Guatieri of BMO Nesbitt Burns.
"After flatlining in the spring, the American consumer is showing a pulse," Mr. Guatieri said. "Don't write off the American consumer (or economy) just yet. Firmer employment in July likely boosted sales, and lower jobless claims point to better job growth in August. Recent declines in oil prices and interest rates will remove the sting from the equities pullback. The solid July retail sales report should help allay recession fears."
Dissent at Fed doesn't look to ease The dissent in the ranks of the Federal Reserve isn't likely to ease any time soon, based on the comments of one of its members today.
The U.S. central bank meeting earlier this week wasn't notable only because the Fed said it would hold interest rates low for two more years, but also because three members of the policy-setting panel dissented to a change in language, which could have ramifications going forward.
Previously, the Fed had said it would hold rates at emergency levels for an "extended period," which is generally taken to mean up to six months. But at the latest meeting, it changed that to say it expected rates to hold at their lows until mid-2013.
Today, Narayana Kockerlakota, the president of the Federal Reserve Bank of Minneapolis, and one of the dissenters, gave his reasons on his website.
"I believe that in November, the committee judiciously chose a level of accommodation that was well calibrated for the prevailing economic conditions," he said.
"Since November, inflation has risen and unemployment has fallen. I do not believe that providing more accommodation - easing monetary policy - is the appropriate response to these changes in the economy. Going forward, my votes on monetary policy will continue to be based on the evolution of the data on PCE inflation and its components, medium-term PCE inflation expectations, and unemployment."
Clearwater gets bid A battle of sorts may be shaping up on the high seas.
Canada's Clearwater Seafoods Income Fund said today it has become the target of a $97-million takeover bid by Cooke Acquaculture Inc., a family-run business that has grown over the years to now boast operations in New Brunswick, Nova Scotia, Newfoundland and Labrado, PEI, Maine, Spain and Chile.
Clearwater, a seafood company based in Halifax, said Cooke already holds more than 20 per cent of the fund's units and almost 11 per cent of the voting rights. It's offering $3.50 a unit.
But Clearwater Fine Foods Inc. holds the equivalent of more than 48 per cent of the voting rights and "they are not interested in selling any of their securities in the fund."
Friendly skies Cathay Pacific Airways is taking pains to assure its customers that two crew members who were photographed in a - um, compromising - situation weren't photographed that way while they were in flight. Which is comforting indeed.The airline went so far as to get rid of the employees in question.
I'll let this statement issued today by chief executive officer John Slosar speak for itself:
"I can confirm that two members of our crew shown in compromising situations in photographs published recently in Chinese-language daily newspapers are no longer employees of the company.
"I can also report that we have found no evidence to suggest that the incidents happened on any of our flights while airborne.
"We will now produce a report of our findings and pass it to our regulator, the Hong Kong Civil Aviation Department. We will continue to co-operate with the CAD as required.
"I know that many people were disturbed by the damage this incident caused to the reputation of our cockpit and cabin crews, all of them serious safety and service professionals, and to the airline itself."
The two members of the flight crew involved are believed to be a pilot and a flight attendant. Privacy laws prohibit the airline from releasing certain details, despite the fact that, according to Mr. Slosar, "I appreciate that some people wish to know more details of our findings." Yeah, I'll bet they do.
In International Business today Forbes magazine has opened a lawsuit against a firm in Russia's Dagestan region that published an unlicensed "special edition" of the magazine on how to do business there. Thomas Grove of Reuters reports from Moscow.
From today's Report on Business