These are stories Report on Business is following Tuesday, Jan. 24, 2012. Get the top business stories through the day on BlackBerry or iPhone by bookmarking our mobile-friendly webpage.
Markets slip Greece is holding the markets hostage yet again today.
European finance ministers are meeting again today, and talks between Athens and its private creditors have hit yet another roadblock, again raising the spectre of a messy default.
"Global equities are in the red this morning on concern that a hard default by Greece is a rising threat," said Derek Holt and Dov Zigler of Scotia Capital. "European benchmarks are off by just over 1 per cent, and Dow futures are pointing to a modest drop at the open."
Tokyo's Nikkei climbed 0.2 per cent, but European markets slipped, followed by North American stocks.
No Greek deal in sight As Luxembourg's prime minister put it last night, "it's obvious that the Greek program is off track."
Talks between Athens and its private bondholders have hit yet another roadblock, with no deal in sight as the country heads toward a March deadline and Europe's finance ministers hold firm, but push for an agreement.
"It now appears that any deal might not be concluded until Feb. 13, despite Greek finance minister Venizelos insistence at the end of last week that a deal was in its final phase," said CMC Markets analyst Michael Hewson.
"It would appear that last night's rejection by European finance ministers of the private creditors so-called line in the sand of a 65-per-cent to 70-per-cent haircut, and a 4-per-cent coupon hasn’t really impacted sentiment that much. EU officials want the creditors to accept a coupon of 3.5 per cent on their exchanged 30-year Greek bonds. With this issue unresolved the latest talks about a second Greek bailout are also unlikely to make much progress either, given that the two are contingent on each other."
The fear is that failure in these talks will result in a messy bankruptcy.
"A failure of the restructuring process would result in a hard default for Greece," said Carl Weinberg of High Frequency Economics. "That would be a catastrophe."
Separately today, Standard & Poor's downgraded some French banks.
- Greece clings to hope of debt deal
- Spain easily raises $3.3-billion in debt sale
- Euro zone service sector sees surprise upturn
- Never mind the debt crisis, Iceland wants in on the EU
CN hikes dividend Canadian National Railway Co. boosted its quarterly dividend by 15 per cent today as it posted a hefty gain in fourth-quarter profit.
The railway earned $592-million or $1.32 a share, diluted, in the quarter, compared to $503-million or $1.08 a year earlier. Revenue climbed 12 per cent to a record $2.4-billion, The Globe and Mail's Brent Jang reports.
CN hiked its quarterly dividend to 37.5 cents, and signalled a stronger outlook for this year.
“Although the economic recovery may be affected by global uncertainty, CN believes the gradual improvement in the North American economy will continue in 2012," said chief executive officer Claude Mongeau.
"Despite significant headwinds from additional pension expense of about $120-million in 2012, CN is aiming to achieve a growth of up to 10 per cent in diluted earnings per share (EPS) over adjusted diluted EPS of $4.84 for 2011. CN also expects to generate 2012 free cash flow in the order of $875-million, which is in line with 2011 excluding major asset sales."
CN is Canada's biggest railway, and the industry's most efficient, and today's earnings come amid a fight that now involves CN, its rival Canadian Pacific Railway Ltd. and CP's activist shareholder Bill Ackman of Pershing Square Capital Management LP.
Mr. Ackman wants to put CN's former chief, Hunter Harrison, at the helm of CP, which is pushing back as the two head toward a proxy fight. But as The Globe and Mail's Mr. Jang and Jacquie McNish report, CN is in a fight of its own, blocking Mr. Harrison's pension payouts and accusing him of ignoring the restraints of his retirement agreement.
Semtech to acquire Gennum California's Semtech Corp. has struck a $500-million deal for Canada's Gennum Corp. , marking the marriage of two big players in the semiconductor industry.
Semtech is offering $13.55 a share for Gennum, an established player founded in 1973 and based in Brutlington, Ont., with offices across the globe.
Semtech said it expects annual savings of some $15-million through the deal. There is a break fee of more than $19-million, and Semtech has the right to match rival bids.
RBC to launch impact fund Royal Bank of Canada is setting up its own impact fund, in what appears to be the first major move by a Canadian financial institution in this space, The Globe and Mail's Tara Perkins writes.
Impact or social finance is essentially finance with a social or environmental goal.
Canada is just beginning to dabble in social finance, a concept that the British government and capital markets players have been working on for more than a decade.
Retail sales rise Not that it matters all that much at this point, but Canadian retailers chalked up gains in November as they joined America's Black Friday sales.
Retail sales in Canada increased by 0.3 per cent in November, Statistics Canada said today, marking the fourth month in a row of gains. In straight volume terms, sales were up by 0.5 per cent.
It was not an across-the-board win, however. Increases came in seven of the 11 groups measured, representing 65 per cent of the total.
"One surprise was in autos, where a drop in unit sales did not translate into a decline in nominal sales," said chief economist Avery Shenfeld of CIBC World Markets.
"Elsewhere, sales were mixed, but there appears to have been an impact from Canada adopting the U.S. 'Black Friday' tradition, generating big gains in general merchandise and clothing, which might come at the expense of December activity. Over all, a decent report, but not particularly surprising."
India eases up, Japan holds the line Like China, India is beginning to shift its focus toward economic growth.
Having hiked interest rates aggressively to fight inflation, the Reserve Bank of India held its key rate at 8.5 per cent today, but but cut the reserve requirements for commercial banks by half a percentage point.
Today's move shows the central bank still has its eye on rising prices, but is giving a nod to growth in an uncertain global climate.
The Bank of Japan, in turn, also held its key rate steady. And while it cut its growth forecasts for last year and this year, it boosted its outlook for 2013.
"The Bank of Japan left interest rates steady and made no changes to its quantitative easing efforts," said Benjamin Reitzes of BMO Nesbitt Burns.
"The bank downgraded its 2012 growth forecast to 2 per cent from 2.2 per cent previously, reflecting increased concern that the European crisis along with the strong yen will weigh on exports. The BoJ seems content with its current policy stance. Unless the outlook deteriorates further, the bank could refrain from more easing."