Stories Report on Business is following today:
Europe's troubles deepen
For Europe, there is no respite. The euro is falling again today, and there is renewed pressure on Greek, Portuguese and Spanish debts as markets remain unconvinced that the joint EU-IMF bailout of Greece will solve Europe's widening crisis.
The widening fears have hit global stock markets, particularly those in Europe, where some exchanges are down about 5 per cent.
If investors wanted assurances that the Greek austerity measures accompanying the €110-billion bailout would sail through, they didn't get it. Public sector workers, who will bear the brunt of the cutbacks, began a two-day national walkout, closing schools, hospitals and government offices, and storming the Acropolis.
Anxiety continued despite the efforts of the EU to assure markets the support package will be in place in time for a key payment on a 10-year Greek bond. Along with concerns that Greece will not be able to push through the austerity measures, markets are also closely watching the German government's efforts to get the public on side as it heads into regional elections.
"The agreement still needs to be ratified in the parliaments of each EU contributor, which presents German Chancellor Angela Merkel with a particularly tricky problem, being that Germany is by far the biggest contributor at 28 per cent, and plans to debate the package on [May 7] two days before the polls in North Rhineland Westphalia, where voters are vehemently opposed to any type of bailout," said CMC Markets analyst Michael Hewson.
Mr. Hewson today also noted the broader issue for the currency union as a whole: "What this crisis has done is underline the severe fault lines in the euro as a reserve currency, and the weaknesses of the European Central Bank as an arbiter of fiscal responsibility. As such it has cost the single currency a lot of credibility which it will struggle to regain, and there is a risk all this bailout has done is postpone the inevitable, and shift the focus to other euro zone countries with similar debt problems."
Rating agencies under scrutiny
Credit rating agencies, which were widely criticized for their role in the financial crisis, are now under intense scrutiny in Europe after several downgrades of European sovereign debt that have roiled the markets. Michel Barnier, the European Internal Markets Commissioner, today raised the possibility of launching a European rating agency, and said he would look into how the agencies function.
"I think we need to go further to look at the impact of the ratings on the financial system or economic system as a whole," Mr. Barnier told the European Parliament.
"The power of these agencies is quite considerable not only for companies but also for states. That's why I asked for responsibility to be assumed in the work they are doing," he said.
Australian rates rise again
Australia's central bank hiked its key lending rate again today, the sixth move since last October. The Reserve Bank of Australia's overnight cash rate now stands at 4.5 per cent after rising a further quarter of a percentage point. "This is one of the difficult consequences of an economy that is recovering better than other advanced economies," Australia's Treasurer Wayne Swan told reporters.
Scotia Capital economists Derek Holt and Karen Cordes Woods noted that central bank Governor Glenn Stevens was on heightened alert for inflation. "Of greater note is that Stevens observed that rates have returned to levels that 'would be consistent with interest rates to borrowers being close to the average experience over the past decade or more,' thereby inciting debate over whether the RBA is done hiking. That may a premature judgment. Prior guidance had suggested an upper bound on rates as high as 5 per cent. Regardless, the central is in the fine-tuning stages of tightening while others dither about starting."
Pending home sales rise in U.S.
Pending home sales in the United States jumped more than 5 per cent in March, the second increase in as many months, as buyers rushed to beat the April 30 expiry of a tax credit. "There will be a cooling period for a few months after April, given that the rush to beat the tax credit will be over," said BMO Nesbitt Burns economist Jennifer Lee. "Concerns about what happens after that are still at large, but if the economy is able to churn out some jobs, and is able to take the jobless rate lower (even at a painfully slow pace), that could be enough to stabilize the housing market." Read the story
BP shares continue to fall
Shares of BP PLC continued to sink today over fears of the cost of the environmental disaster in the Gulf of Mexico. BP's stock has plunged since a blast at the Deepwater Horizon drilling rig killed 11 workers and led to a massive oil spill in the Gulf. Since the explosion, the undersea well has been pumping out about 200,000 gallons a day, and BP and its joint venture partners have been scrambling to contain the damage as the slick heads toward the U.S. coast.
"BP is down heavily as the oil leak in the Gulf of Mexico shows no sign of abating," said CMC Markets analyst James Hughes. "It has denied responsibility for the rig explosion that caused the problems, but expects to meet the clean-up costs that are now being estimated in the tens of billions."
BP's stock had already lost almost 10 per cent as of yesterday, wiping out $17-billion (U.S.) in its market value, said UBS Securities analyst Jon Rigby.
"This appears to be discounting a massive and disproportionate direct, legal and reputational cost to BP," he said. "We also calculate that there is a further $4.5-billion of value lost in other companies directly involved in the spill ... Our sense is the fall in the share price is an overreaction. However, the uncertainty of the eventual issue, its cost, and who is responsible, plus the longer-term implications will make investors rightly cautious."
Suncor rebounds to profit
Suncor Energy Inc. this morning posted a first-quarter profit of $716-million or 46 cents a share, rebounding from a loss of $189-million or 20 cents a year earlier. But operating profit fell as fires at two upgraders cut production in the oil sands.
"While we were slower out of the gate than we'd hoped for this year due to upsets at our oil sands operations, the balance of the business performed well and oil sands production is firmly back on track," chief executive officer Rick George said.
UBS Securities Canada analyst Matt Donohue noted in a research report that a "difficult quarter" is now over, and results beat expectations. Read the story
Loblaw profit jumps
Loblaw Cos. Ltd. said this morning its "renewal program" is on track as it posted a jump of almost 26 per cent in first quarter profit to $137-million or 50 cents a share from $109-million or 40 cents a year earlier. Sales increased 3 per cent to $6.9-billion.
Canada's biggest grocery chain said its acquisition of T&T, which markets Asian groceries, pumped up sales to the tune of about 23 per cent.
Loblaw also said that upgrading its systems will affect financial results for the rest of the year, which Edward Jones analyst Brian Yarbrough told Reuters will be "the biggest risk over the months. Read the story
From today's Report on BusinessReport Typo/Error