These are stories Report on Business is following Wednesday, Oct. 24, 2012.
How the wealthy fret
I guess this should come as no surprise, but Americans in the top ranks of the wealthy aren’t as troubled by the pending U.S. election and the flagging economy as their poorer cousins. They are, however, fretting more than the just-plain-millionaires.
The latest survey by Spectrem Group breaks down wealthy American business owners into three groups: The mass affluent, who are worth $100,000 (U.S.) to $1-million, the millionaires, at $1-million to $5-million, and the ultra-high net worth, or UHNW, at $5-million to $25-million.
According to the report, 96 per cent of the mass affluent are worried about the election, compared to 72 per cent of the millionaires and 80 per cent of the UHNW.
When it comes to the feeble economic rebound, all of the mass affluent are fearful, compared to 74 per cent of the millionaires and 81 per cent of the UHNW group.
“After years of coping with a lacklustre economy, mass affluent business owners are deeply worried that they wouldn’t survive another economic decline,” said Spectrem president George Walper.
There are more than 35 million households in the United States whose net worth tops $100,000
The group’s research comes from 1,500 households in the mass affluent group, 1,200 in the millionaire category, and 500 in the top ranks.
Facebook surges on earnings
Facebook shares surged by more than 20 per cent today after the social network's latest quarterly results buoyed the hopes of investors looking for movement on the mobile front.
As The Globe and Mail's Omar El Akkad reports, Facebook illustrated that late yesterday as its third-quarter results slightly topped the expectations of analysts.
Investors have wanted signs of a mobile strategy for some time now. And, yesterday's earnings showed, mobile ads now represent 14 per cent of the company's revenue.
“We should be able to reach more people on mobile than desktop – for us, that isn’t really controversial,” said chief executive officer Mark Zuckerberg. "We're just getting started."
Facebook earned $311-million (U.S) or 12 cents a share in the quarter, when share-based compensation is removed from the calculation. Revenue climbed 32 per cent to $1.26-billion.
Facebook now boasts 1 billion users, 600 million of them taking advantage of mobile.
"What is different for Facebook vs. Google or Yahoo, in our view, is that the Facebook user experience, ad formats, and ad pricing may actually be better on mobile devices than on the PC," said analysts Justin Post and Joyce Tran of Bank of America Merrill Lynch, who raised their raised their revenue and earnings forecasts for the company, and their price target on the stock.
"In our opinion, FB's early right rail PC ads were lower quality and never optimized the user experience, so the mobile transition could be easier for Facebook," they added, referring to the company by its Nasdaq stock symbol.
"Per FB, mobile users are more engaged with the FB platform than non-mobile with 70-per-cent likelihood of using FB on a given day."
While its stock is still well below the initial public offering price of $38, it's a huge rebound for a company whose IPO came in with such a thud.
"What investors have for the first time since the FB IPO is fundamentals acceleration with a reasonable valuation," added analysts at Citigroup Global Markets.
"Further, two of the biggest FB risks (Zynga dependency and mobile monetization) appear to have been downsized. And we’ve still seen zero contribution from newer initiatives."
- Mobile ad revenue boosts Facebook's results
- Subscribers only: Facebook, Netflix send investors another friend request
Euro woes mount
The embattled euro zone is sinking ever deeper into crisis, as new reports highlight the debt and broader economic troubles plaguing the 17-member monetary union.
According to fresh data released today by Eurostat, government debt as a percentage of gross domestic product continues to climb, in some countries to extreme levels.
The key debt-to-GDP measure for the euro zone as a whole rose in the second quarter to 90 per cent, from 88.2 per cent in the first three months of the year, the statistics agency said.
For the full 27 countries of the European Union, it rose to 84.9 per cent from 83.5 per cent.
Compared to a year earlier, the ratio climbed from 87.1 per cent in the euro zone and 81.4 per cent in the EU.
But it is the currency union in particular where the troubles lie, and notably its most troubled members.
Greece, for example, posted the highest ratio, at 150.3 per cent, followed by Italy at 126.1 per cent, Portugal at 117.5 per cent and Ireland at 111.5 per cent.
Compared to the first quarter, Greece also had the dubious distinction of posting the highest increase despite its massive cutbacks as the measure climbed 13.4 percentage points.
The lowest levels, by the way, were in Estonia, at 7.3 per cent, Bulgaria at 16.5 per cent and Luxembourg at 20.9 per cent.
Today’s Eurostat report came amid new, disappointing economic readings, in the form of Markit’s purchasing managers’ index for the euro zone, which slipped in October
"Advance readings on the European PMIs were weaker than expected with the euro zone’s manufacturing PMI unexpectedly falling 0.8 points to 45.3 in October, while the services PMI ticked only a shade higher to a reading of 46.2, adding to concerns that the region’s economic slump could be deepening with both measures remaining clearly in contraction territory to start the quarter," said Carl Campus of BMO Nesbitt Burns.
The 50 mark in a PMI separates contraction from expansion, so what today’s reading shows is that in what is already an environment of contraction, it’s getting worse.
It’s also the worst showing in years. And it’s not just in the troubled nations, but in Germany as well, for example, whose latest reading on business confidence also slumped. Germany is Europe’s economic engine, and deeper troubles there are a particular concern.
"After Germany's PMI signalled rising optimism by climbing to the highest reading since March it fell back down again in the October print against expectations for an improvement," said Derek Holt and Dov Zigler of Bank of Nova Scotia.
"This shifts the picture away from perhaps signalling a more optimistic turning point back to renewed concerns over accelerated economic weakness," they said in a research note.
"This was reinforced by a deterioration in German business confidence. The reading weakened because of reduced confidence in near-term conditions while longer-run expectations remained unchanged at the weakest level since May 2009. If Europe is settling its affairs, then either Germans don't believe it or they are increasingly of the view that they'll take their lumps for the sake of bailing out more ineptly managed neighbours at the expense of their own competitiveness."
- Euro zone rot spreads to Germany, China mending
- Read the Eurostat report
- Blue chip woes signal global slowdown
- Manufacturing data show China making slow, steady recovery
Message sinks in
The Bank of Canada says its repeated warnings about the perils of elevated household debt could finally be sinking in.
Noting that consumer spending has been “moderate” of late, the central bank said today it's cautiously suggesting that Canada’s credit binge could be ebbing, The Globe and Mail's Kevin Carmichael reports.
“It is possible that the elevated level of household debt is beginning to induce a more cautious attitude among Canadian households,” the central bank says in its third-quarter monetary policy report.
Teck profit slumps
Canada’s largest diversified miner is feeling the pinch of the global economic slowdown, The Globe and Mail's Pav Jordan reports.
Teck Resources Ltd., one of the world’s largest exporters of coking coal used in steel production and a key supplier to China, pledged on Wednesday to defer some $1.5-billion in capital it had expected to spend this year and next year, and said its third quarter profit was slashed by more than half.
Teck reported third quarter profit of $349-million, or 60 cents a share, compared with $742-million, or $1.26 a share in the same quarter a year ago.
Rogers profit slips
Rogers Communications Inc. profit slipped 5 per cent in the third quarter to $466-million, The Globe and Mail's Rita Trichur reports.
Profit per share, diluted, came in at 90 cents for the media giant. That compares to a profit of $491-million, or 87 cents a share, during the same period last year.
On an adjusted basis, meanwhile, profit rose to $495 million or 96 cents a share compared to $489-million or 90 cents.
Revenue rose 1 per cent to $3.17 -billion.
Markets await Fed
The Federal Reserve is scheduled to make its pronouncement this afternoon, though observers expect Ben Bernanke and his colleagues to stand pat after the big announcements of the last meeting in September.
That was when the U.S. central bank unveiled another asset-buying program - known as QE3 because it marked the third round of quantitative easing - and pledged to hold its benchmark Fed funds rate near zero through to mid-2015.
Little change is expected today.
“After pressing harder on the monetary gas pedal in September, the Fed will likely stay in cruise control for a few months to monitor the effectiveness of recent policies,” senior economist Sal Guatieri of BMO Nesbitt Burns.
“With the unemployment rate trending lower and the expansion picking up some, there is little urgency for additional monetary fuel.”
Square heads for Canada
Square, the mobile technology that shook up the payment industry and attracted big-name customers such as Starbucks Corp., is coming to Canada, The Globe and Mail’s Omar El Akkad writes.
The company, founded by Twitter founder Jack Dorsey, said today its first expansion outside the United States will be north of the border.
Less than three years old, Square builds a small piece of hardware that connects to a headphone jack and allows a smartphone or tablet to collect and process credit card data. Using the hardware, customers can easily set up a credit card payment system without purchasing any additional devices.