Demonstrators protesting against Greece's austerity measures clash with riot police in Athens, May 4, 2010PASCAL ROSSIGNOL
Stories Report on Business is following today:
Europe's troubles mount
The euro sank and global stock markets tumbled today as investors remained skeptical that the joint EU-IMF bailout of Greece will solve Europe's ever-widening debt crisis.
European stocks closed at a two-month low, with the troubles spreading to North American markets. There was also renewed pressure on Greek, Portuguese and Spanish debts.
"Concern about EU peripheral risk (now dubbed swiine flu to avoid an overused barnyard acronym for Portugal, Ireland, Italy, Greece and Spain) rampaged through markets like gorillas coming out of a cage," said David Watt, senior fixed income and currency strategist at RBC Dominion Securities. "[The euro]was flattened (a clear thumbs down from the market on the EU/IMF bailout package for Greece) and remaining outposts of resistance in risk sentiment waved the white flag and surrendered."
If investors wanted assurances today that the Greek austerity measures accompanying the €110-billion bailout would sail through, they didn't get it. Public sector workers, who will bear the brunt of the cutbacks, began a two-day national walkout, closing schools, hospitals and government offices, and storming the Acropolis.
Anxiety continued despite the efforts of the EU to assure markets the support package will be in place in time for a key payment on a 10-year Greek bond. Along with concerns that Greece will not be able to push through the austerity measures, markets are also closely watching the German government's efforts to get the public on side as it heads into regional elections.
"The agreement still needs to be ratified in the parliaments of each EU contributor, which presents German Chancellor Angela Merkel with a particularly tricky problem, being that Germany is by far the biggest contributor at 28 per cent, and plans to debate the package on [May 7] two days before the polls in North Rhineland Westphalia, where voters are vehemently opposed to any type of bailout," said CMC Markets analyst Michael Hewson.
Mr. Hewson today also noted the broader issue for the currency union as a whole: "What this crisis has done is underline the severe fault lines in the euro as a reserve currency, and the weaknesses of the European Central Bank as an arbiter of fiscal responsibility. As such it has cost the single currency a lot of credibility which it will struggle to regain, and there is a risk all this bailout has done is postpone the inevitable, and shift the focus to other euro zone countries with similar debt problems."
Read
David Berman's Market Blog: Dow, TSX bloodied and bruised
Markets slide on Greek debt woes
Greek protesters storm Acropolis
Europe's economic woes hitting home in Canada
Gwyn Morgan on bailouts of the dysfunctional and corrupt
Audio
Brian Milner explains the Greek debt crisis
Rating agencies under scrutiny
The world's major credit rating agencies could in time face a European competitor amid growing concerns over how they have treated the sovereign debt issue. Still recovering from criticism over their role in the finance crisis, they are now under intense scrutiny after several downgrades of European debt that roiled financial markets.
Michel Barnier, the European Internal Markets Commissioner, told the European Parliament today that he will probe the work of the ratings agencies and could even establish a European version.
""The power of these agencies is quite considerable not only for companies but also for states," Mr. Barnier said. "That's why I asked for responsibility to be assumed in the work they are doing." Read the story
Related: U.S. credit raters under the microscope
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Australian rates rise again
Australia's central bank hiked its key lending rate again today, the sixth move since last October. The Reserve Bank of Australia's overnight cash rate now stands at 4.5 per cent after rising a further quarter of a percentage point. "This is one of the difficult consequences of an economy that is recovering better than other advanced economies," Australia's Treasurer Wayne Swan told reporters.
Scotia Capital economists Derek Holt and Karen Cordes Woods noted that central bank Governor Glenn Stevens was on heightened alert for inflation. "Of greater note is that Stevens observed that rates have returned to levels that 'would be consistent with interest rates to borrowers being close to the average experience over the past decade or more,' thereby inciting debate over whether the RBA is done hiking. That may a premature judgment. Prior guidance had suggested an upper bound on rates as high as 5 per cent. Regardless, the central is in the fine-tuning stages of tightening while others dither about starting."
Google to sell e-books
A three-way battle is shaping up over e-books. Google Inc. said it will soon begin selling books, entering the fray with Amazon.com and Apple Inc. According to the Wall Street Journal, a Google representative told a book industry event today that the Internet search giant plans in June or July to launch a service called Google Editions, designed to let users buy books they find through its existing book search tools.
The move places Google in direct competition with online heavyweights such as Amazon. Previously, Google had indirectly competed with Amazon in the market for electronic book readers because Google's Android operating system powers many of the e-readers challenging Amazon's Kindle, the market leader. Read the story
BP shares continue to fall
Shares of BP PLC are being hammered again this morning over the disaster in the Gulf of Mexico. BP's stock has plunged since a fire on its Deepwater Horizon drilling rig two weeks ago sparked the disaster and a massive effort to contain the oil spill.
"BP is down heavily as the oil leak in the Gulf of Mexico shows no sign of abating," said CMC Markets analyst James Hughes. "It has denied responsibility for the rig explosion that caused the problems, but expects to meet the clean-up costs that are now being estimated in the tens of billions."
BP's stock had already lost almost 10 per cent as of yesterday, wiping out $17-billion (U.S.) in its market value, said UBS Securities analyst Jon Rigby.
"This appears to be discounting a massive and disproportionate direct, legal and reputational cost to BP," he said. "We also calculate that there is a further $4.5-billion of value lost in other companies directly involved in the spill ... Our sense is the fall in the share price is an overreaction. However, the uncertainty of the eventual issue, its cost, and who is responsible, plus the longer-term implications will make investors rightly cautious."
Related: Owner of Gulf rig had safety concerns
Suncor rebounds to profit
Suncor Energy Inc. this morning posted a first-quarter profit of $716-million or 46 cents a share, rebounding from a loss of $189-million or 20 cents a year earlier. But operating profit fell as fires at two upgraders cut production in the oil sands.
"While we were slower out of the gate than we'd hoped for this year due to upsets at our oil sands operations, the balance of the business performed well and oil sands production is firmly back on track," chief executive officer Rick George said.
UBS Securities Canada analyst Matt Donohue noted in a research report that a "difficult quarter" is now over, and results beat expectations. Read the story
Loblaw profit jumps
Loblaw Cos. Ltd. is moving quickly to open longer and extend services in most of its almost 500 in-store pharmacies, a bid to take grab market share from its competitors under Ontario's proposed drug reforms.
"We see it as a big opportunity now for us to drive our drugstore business," president Allan Leighton said on a conference call with analysts today. "There's a huge amount of consumers out there who are going to be looking for improving service, and that's what we intend to do."
Shoppers Drug Mart Corp. has announced plans to scale back on pharmacy services in Ontario to offset a projected $1-billion hit to revenues next year under the proposals, which would cut generic drug prices in half.
Loblaw also said today it would more than doubled, to 200 from 84, the number of medical centres at its stores over the next few years.
The comments came as the country's biggest grocery chairn posted a jump of almost 26 per cent in first quarter profit to $137-million or 50 cents a share from $109-million or 40 cents a year earlier. Sales increased 3 per cent to $6.9-billion. Read the story
Pending home sales rise in U.S.
Pending home sales in the United States jumped more than 5 per cent in March, the second increase in as many months, as buyers rushed to beat the April 30 expiry of a tax credit. "There will be a cooling period for a few months after April, given that the rush to beat the tax credit will be over," said BMO Nesbitt Burns economist Jennifer Lee. "Concerns about what happens after that are still at large, but if the economy is able to churn out some jobs, and is able to take the jobless rate lower (even at a painfully slow pace), that could be enough to stabilize the housing market." Read the story
From today's Report on Business
Shaw wins battle of media titans
Australian mining tax riles sector