These are stories Report on Business is following Tuesday, July 12. Get the top business stories through the day on BlackBerry or iPhone by bookmarking our mobile-friendly webpage.
Europe in turmoil The euro zone is in disarray today. Its finance ministers have again failed to ease market fears, politicians are pointing fingers, and there's open talk of an eventual breakup of the 17-member monetary union. Bond yields spiked again today, and credit default swaps soared, though markets bounced back somewhat after reports of the European Central Bank buying Italian bonds.
At the heart of the crisis is an absolute failure by Europe's leaders to come up with any answer to the 14-month-old troubles that began with Greece and spread like a virus through the periphery countries and now into the bigger economies.
"Continued policy paralysis and discord amongst EU leaders about how best to deal with the sovereign debt crisis continues to undermine the single currency," said CMC Markets analyst Michael Hewson.
"With Germany opposed to anything that could pass for a move towards a fiscal transfer union, efforts to head off an imminent crisis appear stymied," Mr. Hewson said today in a research note.
"Bond yields in Spanish and Italian 10 year paper have soared with Spanish yields pushing above 6 per cent for the first time since the inception of the euro, and Italian yields pushing above 5.7 per cent. This move higher in yields wasn't helped by reports that a Spanish regional government had a budget deficit more than twice as large as previously thought, raising new concerns over the true state of regional finances in other Spanish regions."
Finance ministers from the euro zone met yesterday, and released a statement last night promising to what's necessary to ease the crisis. That would include easier terms on loans and extended maturities, but the lack of real detail and timelines only added to the worries.
Today, Reuters reports, some investors are now betting that the euro zone will eventually collapse. Such comments have been heard before, of course.
It doesn't help that politicians are bickering among themselves.
"I am now convinced, after 14 months, that no matter what Greece does - and we have proven ready to live up to our responsibilities - if Europe does not make the right, collective, forceful decisions now, we risk new, and possibly global, market calamities due to a contagion of doubt that will could engulf our common union," Greece's Prime Minister George Papandreou said in an open letter to the chief of the euro zone. "Strong and visionary European leadership is needed."
- Italy races to forefront of Europe debt crisis
- Debt a blow to the Greek ego
- Investors bet on euro zone breakup
- In debt race, bond buyers wager on U.S.
Moody's cuts Ireland Ireland has joined the ranks of the basket cases whose sovereign debt is rated as junk.
Moody's Investors Service today cut its rating by two notches to Ba1, warning that, like Greece, the Irish may also need a further bailout. Ireland now joins Greece and Portugal for junk honours.
"The key driver for today's rating action is the growing possibility that following the end of the current European Union/International Monetary Fund support program at year-end 2013, Ireland is likely to need further rounds of official financing before it can return to the private market, and the increasing possibility that private sector creditor participation will be required as a precondition for such additional support," the rating agency said, according to Bloomberg News.
Analyst proposes RIM split An analyst at RBC Dominion Securities had some food for thought in advance of the annual meeting of Research In Motion Ltd. tonight: Split the BlackBerry maker in two.
"RIM's organization, like its handsets, needs modernization," Mike Abramsky said today in a research report titled "Split the Berry.
"By acting now, splitting RIM into network and handset businesses may target opportunities and unlock significant shareholder value."
Citing the pressure from Apple Inc. , maker of the iPhone, and Google Inc. , whose Android system has been gaining market share, Mr. Abramsky said the BlackBerry maker's valuation in the market "reflects low sentiment regarding RIM's turnaround prospects."
But he stressed the "intrinsic value" of RIM's core "crackberry" at its 68-million loyal subscribers around the world.
"Splitting RIM's two distinct businesses - the BlackBerry and RIM Smart Devices - may allow each to more quickly expand and innovate, would separate each business from different market forces, and could make each more attractive to potential acquirers," Mr. Abramsky said.
"We estimate that breaking up RIM may equate to $50-56 a share in value, based on the service business valued at $37-40 a share and RIM's handset business at $13-16 a share ... With the shift to the post-PC world, RIM's two business - the service and handsets - increasingly operate within two different market structures with different market forces."
RIM has promised better times ahead.
- Tough questions expected at RIM annual meeting
- Is RIM burying good news?
- Glass Lewis keeps heat on RIM board
- Under fire, RIM agrees to review executive structure
- Putting RIM back on the winning track
Trade deficit narrows Canada ran a trade deficit in May for the fourth month in a row, though it narrowed to $814-million, as the strong Canadian dollar and softening demand in the United States took their toll on exports.
The deficit narrowed from $857-million a month earlier.
Exports climbed 1.2 per cent, slightly outpacing the 1.1-per-cent gain in imports, Statistics Canada said today.
The rise in exports was the result of a 1.5-per-cent gain in volumes, while prices dipped 0.3 per cent. That was led by machinery and equipment, and auto-related products. In volume terms, imports actually fell, by 1 per cent, though prices increased 2.1 per cent.
"The strong Canadian dollar and persistent softness in U.S. demand continue to be headwinds for exporters, with trade expect to weigh on GDP growth for the second straight quarter," said Benjamin Reitzes of BMO Nesbitt Burns . "However, with auto production expected to rebound in [the third quarter] Canada should see some improvement in its trade performance."
As far Canada's trading partners, its surplus with the United States narrowed slightly to $3.7-billion from $4-billion, as exports inched up 0.1 per cent and imports climbed 1.1 per cent. Exports to other countries, though, increased 4.4 per cent, largely because of stronger trade with the EU.
"The robust gains in two-way autos trade and a double digit rise in imports from Japan suggest that supply-chain disruptions could be gradually easing," noted economist Emanuella Enenajor of CIBC World Markets.
In the United States, surging energy prices pushed up imports, leading to the fattest trade deficit in more than two and one-half years. The U.S. recorded a deficit of $50.2-billion (U.S.), up from just shy of $44-billion.
- Canada's trade deficit shrinks in May
- Kevin Carmichael's Economy Lab: Behind trade numbers, U.S. factories are chugging along
Molson, NHL win legal fight The Ontario Court of Appeal has upheld a $375-million sponsorship deal between Molson Coors Brewing Co. and the National Hockey League, The Globe and Mail's David Shoalts reports today.
Rival brewer Labatt was the loser, as the court upheld Molson's appeal of a lower court decision that rejected the agreement between the NHL and Molson for the league's North American rights beginning with the 2011-12 season.
Labatt had argued the NHL improperly broke off a sponsorship agreement with them for the league's Canadian rights to strike the deal with Molson.
Gaz Métro to acquire Vermont utility Canadian gas distributor Gaz Métro Limited Partnership has edged out rival bidder Fortis Inc. for control of Vermont's biggest power utility, Central Vermont Public Service Corp. , The Globe and Mail's Bertrand Marotte reports.
The deal today boosts Gaz Métro's presence in the key U.S. market.
The Vermont utility had previously reached a deal with Fortis, but said today it has killed that agreement in favour of the better bid from Gaz Métro, a cash deal worth about $472-million (U.S.) or $35.25 a share.
"Our philosophy is to rely on experienced local management and provide them the capital they need to grow and thrive," Gaz Métro chief executive officer Sophie Brochu said in a statement.
- Gaz Métro wins Vermont utility
- Tim Kiladze's Streetwise: Canada is oversaturated with power companies
In International Business today Inflation in Britain fell unexpectedly in June, while the trade gap widened, pointing to more weakness in the economy and providing support to those in the Bank of England who want to keep interest rates at a record low, Reuters reports.
In Economy Lab today Toronto has topped Vancouver to become most expensive city in the country to live in because of its relatively high rental accommodation costs, The Globe and Mail's Tavia Grant reports.
From today's Report on Business
- Boyd Erman: Magna shareholders still waiting for the payoff
- Miners look for pay dirt in mergers, acquisitions
- Why a national energy strategy makes sense
- BCE put on hot seat at hearing on Web pricing