Go to the Globe and Mail homepage

Jump to main navigationJump to main content

Business Briefing

Even David Rosenberg is ‘throwing in the towel’ on the Canadian dollar Add to ...

These are stories Report on Business is following Tuesday, Dec. 10, 2013.

Follow Michael Babad and The Globe's Business Briefing on Twitter.

Rosenberg on dollar
It’s worth noting that even David Rosenberg is giving up on the loonie.

Mr. Rosenberg is a bearish fellow who’s recently been bullish on many things, one of them, until today, being the Canadian dollar.

Quoting John Maynard Keynes on changing his mind, the chief economist at Gluskin Sheff + Associates did just that, after spending some time in his daily research notes on a spirited defence of the currency.

“I was only willing to wait so long before throwing in the towel on my long-held positive Canadian dollar view,” Mr. Rosenberg said.

“But the break below 94 cents (a 40-month low) in the past week was the marker I set aside, and so I think we have to respect what the market is signalling to us despite all the fiscal and political positives here which are already well known in place.”

Mr. Rosenberg’s decision comes in the wake of other observers, who have marked down their forecasts for the loonie, as the dollar coin is known in Canada, most famously Goldman Sachs Group Inc.

Goldman projects the loonie will erode to 88 cents U.S., and is recommending shorting the currency. It cited, among other things, Canada’s current account deficit.

Mr. Rosenberg isn’t sure about that.

“There is no credible evidence to suggest this is a reason for any developed world currency movements, up or down,” he said today.

“Besides, the latest Q3 data-point actually showed a mild narrowing in the deficit.”

Nor is he convinced it’s about the price of oil, which has perked up. Nor, does he believe, is it about the Federal Reserve because it’s a well-known fact that incoming chief Janet Yellen is a dove who will continue an easy-money policy.

Nor is it about the Canadian economy.

Rather, he points largely to the Bank of Canada’s stance under its new governor, Stephen Poloz, and its focus on inflation, which, at 0.7 per cent, stands at less than half the level of the central bank’s 2-per-cent target.

“Insofar as years of a lofty CAD have played a role in this ultra-low inflation backdrop, the bank seems to be sanctioning some weakness in the currency to put a floor under the situation,” Mr. Rosenberg, referring to the currency by its symbol.

“So it is therefore no surprise that even with the loonie underperforming for most of this year, the last leg lower, a near 3-per-cent slide since right before the last BOC meeting, has been the one to really break the technical and bring the loonie down into a new and lower range.”

It’s worth knowing why, Mr. Rosenberg added, to identify the “catalysts” for the eventual shift.

“It will be a reversal in the [consumer price index] downtrend and an end to the dovish talk out of the central bank.”

GM taps Barra
GM has named its first woman chief executive officer.

Mary Barra, 51, now an executive vice-president, will replace Dan Akerson, 65, who announced today he’s stepping down in mid-January, speeding up his plans because of a family illness.

Ms. Barra has more than three decades worth of experience at the auto maker, which, remember, is born again after slipping into bankruptcy protection to be rescued by U.S. and Canadian governments.

“With an amazing portfolio of cars and trucks and the strongest financial performance in our recent history, this is an exciting time at today’s GM,” Ms. Barra said in a statement.

Kellogg deals blow to province
Kellogg Co. is shutting down a cereal operation in London, Ont., at the end of next year, yet another blow to the manufacturing sector in the Canadian province, The Globe and Mail's Eric Atkins reports.

Southern Ontario has seen plants close and workers laid off amid a strong Canadian dollar, though one which has weakened of late, that have driven up costs.

The plant employs 509 unionized workers, who are members of the bakery, Confectionery, Tobaco Workers and Grain Millers local 154G.

Last month, HJ Heinz said it would close its factory in Leamington, Ont., putting about 740 people out of work.

Canada Goose stake sold
U.S. private equity player Bain Capital is taking control of Canada Goose, with plans to expand the popular brand globally.

Terms of the deal weren’t disclosed today, but Canada Goose is selling a majority stake.

“With this investment, we’re able to amplify what has driven our success for the last 15 plus years: delivering the best and warmest jackets to the rest of the world – all proudly made in Canada,” said chief executive officer Dani Reiss.

Lululemon dips
Shares of Lululemon Athletica Inc. slipped today after an initial gain in the wake of the company’s change at the top.

As The Globe and Mail’s Marina Strauss reports, the yoga-wear retailer has named retailing veteran Laurent Potdevin as its next chief executive officer, while founder Chip Wilson quits his post as non-executive chairman.

Mr. Potdevin, late of TOMS Shoes, replaces Christine Day, who announced plans to retire from the post last summer. He’ll take over in the new year.

Mr. Wilson, in turn, will walk away from the chairman’s job before next summer’s annual meeting, to be replaced as chairman by Michael Casey, who’s now the board’s lead director.

Governments slash jobs
Canadian governments are slashing jobs with notable speed, one of the reasons behind the weaker showing in the labour market.

“Restraint at all levels of government has hit this sector hard,” senior economist Benjamin Reitzes of BMO Nesbitt Burns said of the public administration category.

“With the federal government and most provinces still looking to balance the books, don’t expect a comeback anytime soon.”

His research today shows that public sector employment declined by a record 5.3 per cent in November from a year earlier. That’s almost 52,000 jobs.

Referring to Friday’s report from Statistics Canada on how the jobs market fared last month, Mr. Reitzes noted that overall employment rose by a “meagre” 1 per cent over the course of the 12 months. In fact, so far this year, employment is up by just 147,900 for the poorest showing since 2001, excluding the recession period.

“Not quite weak enough to argue for rate cuts, but this hardly the stuff of a firm underlying economy,” he said.

In November alone, the Canadian economy created about 22,000 jobs, and the unemployment rate held firm at 6.9 per cent for the third consecutive month.

Consider that job creation in Canada has averaged 13,400 a month this year, well down from last year’s 25,400.

“Note that total employment is up only 1 per cent year over year, but when you exclude public administration, that rises to 1.4 per cent: Better but still not great,” Mr. Reitzes said on the 12-month reading.

BlackBerry slips
Shares of BlackBerry Ltd. regained some ground today, though are plumbing depths not seen in a decade.

Stock of the troubled smartphone maker initially slipped before perking up 3.8 per cent to close at $5.97 (U.S.).

These are levels that are the lowest in more than 10 years, or, adjusting for splits, since late September of 2003.

BlackBerry now has a new interim chief executive officer who’s bent on improving its fortunes, but it hasn’t done much for the stock.

Streetwise (for subscribers)

Economy Lab

ROB Insight (for subscribers)

Business ticker

Follow on Twitter: @michaelbabad

 
  • CADUSD-FX
  • GM-N
  • K-N
  • LULU-Q
  • BBRY-Q
Live Discussion of CADUSD on StockTwits
More Discussion on CADUSD-FX
Live Discussion of GM on StockTwits
More Discussion on GM-N
Live Discussion of K on StockTwits
More Discussion on K-N
Live Discussion of LULU on StockTwits
More Discussion on LULU-Q
Live Discussion of BBRY on StockTwits
More Discussion on BBRY-Q

In the know

Most popular video »

Highlights

More from The Globe and Mail

Most Popular Stories