These are stories Report on Business is following today. Get the top business stories through the day on BlackBerry or iPhone by bookmarking our mobile-friendly webpage.
What's driving U.S. home sales? Analysts were impressed yesterday when the latest reading on the U.S. real estate sector showed pending home sales, or signed sales contracts, climbed 4.3 per cent in August to its best showing since April. U.S. housing was the epicentre of the meltdown, and while coming back the outlook is still for weak growth.
Chief economist David Rosenberg of Gluskin Sheff + Associates parsed the numbers, and asks today if sales sparked by record foreclosures are driving the increase.
"What caught our eye was the huge 24-per-cent jump in sales in the West - taking pending home sales back to October 2009 levels," Mr. Rosenberg said in a research note. "We also noticed a large 14--per-cent monthly jump (on a seasonally adjusted basis) in resale sales in the West, when the data were released a few weeks ago. It seems that attractively priced foreclosure sales could be driving the recent gains in existing/pending home sales. While encouraging, we don't believe fundamentals are driving the recent gains in home sales and once the flurry of foreclosure sales dies down, we could be in for much weaker numbers."
Potash fires back after report Potash Corp. of Saskatchewan warns that a report on the impact of a takeover by BHP Billiton understates the loss of revenue to the Saskatchewan government.
"The board of directors of PotashCorp would encourage the government of Saskatchewan to continue to remain open to reviewing alternative bids on a fact-based approach, rather than the speculative approach taken by The Conference Board of Canada's report," the resource giant said in a filing late yesterday as it continues to fend off BHP's hostile $38.6-billion (U.S.) bid.
Yesterday, a report for the province by the Conference Board said the impact of a successful takeover on tax and royalty revenues could cost Saskatchewan $2-billion (Canadian) over 10 years, and up to $5.7-billion if BHP runs both existing and new mines at full capacity.
Potash Corp. noted in the filing that the report assumes BHP would not operate full out "in direct contradiction of previous BHP public statements." The company says it believes all "potential interested parties" should, as a starting point, commit to:
Supporting offshore sales through Canpotex, the marketing arm of Potash Corp., Agrium Inc. and Mosaic Co.
Buying potash on an arms-length basis, for their own needs.
Supporting the "continued profit maximization strategies" of existing management, and the ongoing capital spending plans.
- Saskatchewan talks tough on Potash bid
- Broken promises mark foreign mining deals
- Read our ongoing coverage of the battle for Potash
Bank of Japan unveils new measures Japan's central bank surprised investors today by taking its key lending rate to virtually zero and announced a fresh round of stimulus aimed at buying ¥5-trillion, or about $60-billion (U.S.), in assets such as government bonds. The Bank of Japan said in a statement it would the benchmark rate at today's level "until it judges ... that price stability is in sight." The move temporarily pushed down the yen, whose strength is hampering the economy.
"The Bank of Japan did more of the sort of thing that has been utterly futile through the past two decades," said Scotia Capital economists Derek Holt and Gorica Djeric. "It cut - yes cut - its overnight call rate from 0.1 per cent to a range of 0 per cent to 0.1 per cent thus restoring its past zero interest rate policy (ZIRP), and established another $60-billion (¥5-trillion) fund to purchase government bonds (70 per cent), and with the remaining 30 per cent going toward purchasing commercial paper, exchange traded funds and REITs.
"The rate cut isn't intended to motivate Japanese businesses and consumers to borrow more; rather, Governor Shirakawa noted that it is a complementary move to providing additional liquidity into markets that affords the BoJ the flexibility to allow the target to stray below 0.1 per cent ... Such policy actions won't do a thing to motivate additional borrowing and lending in an environment of interest insensitive demand for money."
The Reserve Bank of Australia also surprised markets somewhat today, holding its key rate steady at 4.5 per cent.
- Japan adopts zero rate policy
- Economy Lab: Bank of Japan enters last-resort territory
- Threat of currency war highlights rates issue
- Economy Lab: In the trenches of the global 'currency war'
EU presses China European officials met in Brussels today with China's Prime Minister Wen Jiabao, and added their voices to mounting pressures on Beijing to allow its currency to appreciate.
"We noted that the evolution in terms of the effective exchange rate, also vis-a-vis the euro, was not exactly what we would have hoped ourselves," European Central Bank chief Jean-Claude Trichet told reporters. "This exchange-rate flexibility is very, very much in the interests of China."
Dollar above 98 cents The Canadian dollar shot above 98 cents U.S. today, driven by a weaker U.S. dollar and higher prices for commodities such as oil and gold .
Scotia Capital currency strategist Camilla Sutton noted the softness of the greenback, but also for a general renewed appetite for risk in the markets.
Separately today, economist David Rosenberg said precious metals are in "a full-fledged bull market," and will remain there until monetary authorities begin to pull back from their economic stimulus measures, David Rosenberg says.
"Even if we are due for a technical pullback, the precious metals complex is in a full-fledged bull market, and not until the world's central banks have the gusto to start tightening monetary policy, then rest assured that ultra-low gold leasing rates will keep the trend in prices on an upward trajectory," the chief economist of Gluskin Sheff + Associates said today in a research note.
As gold hit yet another fresh high today, Mr. Rosenberg noted that silver has also been on a roll.
"Silver, without much fanfare, is performing even better, with burgeoning global demand for solar panels and batteries providing some extra torque from the already solid investment-related buying activity."
October not so frightening There's this thing about October and stock markets. But, BMO Nesbitt Burns notes, it's not as bad as those jitters may warrant, but, of course, for a couple of exceptions. Economist Robert Kavcic says of the S&P 500 :
"Stocks escaped an unusually difficult month in September, and are now entering a seasonally strong part of the year. Still, October often strikes fear thanks to some infamous meltdowns. For example, a 22-per-cent beating in 1987 (market crash) and a 17-per-cent drop in 2008 (financial crisis). However, even with those outsized losses, average returns for the month are still a solid 0.6 per cent, and 64 per cent of Octobers have been positive dating back to the end of WWII."
That's for the S&P 500. For the S&P/TSX composite , returns for October are -0.7 per cent.
Kerviel gets jail, must repay losses Jérôme Kerviel, the 33-year-old at the centre of Société Générale SA's 2008 trading scandal, was sentenced today to three years in jail and ordered to repay the bank €4.9-billion to cover a trading loss. That's about $6.8-billion U.S. Mr. Kerviel, who was dubbed the rogue trader to beat all rogue traders, will appeal the decision by the Paris judge, who rejected his argument that his bosses had looked the other way when he made bets of up to €50-billion.
"The absence of proper supervision on the part of the bank should not have been interpreted as a tacit green light to engage in wild speculation," the judge said.
What the equivalent of a payment that large? Reuters calculates it at the equivalent of:
- Monaco's GDP
- 16 per cent of SocGen's market value
- 3.2 per cent of France's 2010 deficit
- The cost of about 20 Airbus A380 double-decker planes
"Jérôme is disgusted," Mr. Kerviel's lawyer told the media, according to reports. "This ruling says the bank is responsible of nothing and that Jérôme Kerviel is responsible for the excesses of the banking system."
From today's Report on Business
- Canadian CEOs fall short in overseas experience, study finds
- Fortress hopes Olympic lure sells Whistler shares
- Quebec liquor board targets sales abroad
- Overcoming the stress of investing an inheritance
And, read our Streetwise blog and Your Business section.